01/12/2011

The deceased was born in Hungary in 1918 and lived there for many years.  She migrated to Australia and died in 2007.  She had been an orphan in Hungary.  Her mother died in 1922 and her husband pre-deceased her by many years.  At the time of her death she had not remarried, was not in a de facto relationship, had no children and no relatives in either Australia or Hungary.

In her Will she had made a number of specific bequests but had not included a residue clause. 

A residue clause acts as a catch-all safety net and is designed to deal with any assets that are not otherwise dealt with under the Will.  It is dangerous to omit a residue clause because you can never be sure that your Will deals with all the assets you may own on your death.

Even if you believe all your assets are dealt with elsewhere in the Will a residue clause may be needed if, for example, after the Will you acquire more assets, or if some of the bequests in the Will fail, say, because the beneficiary of the bequest has pre-deceased you.

The deceased’s Executor found that after distributing the bequests there was still $300,000 in her estate and there was no-one entitled to it under the Will.  The deceased was partially intestate.

The Executor therefore had to ask the Probate Court to declare that the residue of the estate ($300,000) was payable to the government under s.61B(7) of the Probate and Administration Act 1898 (NSW). [Had he not done so he could have been in breach of his duties as Executor and been guilty of an offence as well as potentially personally liable for unpaid estate amounts.]

The court pointed out that just because a deceased had no spouse, children or near relatives a court is not obligated to give to the government any estate assets that no other person is immediately entitled to.  However in this case the court found the necessary conditions to do so.

Note that the legislation governing this case has since been repealed.  But before you get too excited, note that the current legislation can be found at s.136 of the Succession Act which states:

"If an intestate dies leaving no person who is entitled to the intestate estate, the State is entitled to the whole of the intestate estate."

If you don’t want your estate to end up in government coffers make sure you have a professionally drafted Will.

If you have any questions in relation to this article, please contact TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222.