4. ANALYSIS
Updates and background for this project (Digest)
INTRODUCTORY COMMENTS
4.1 The purpose of this study is to test certain assumptions that underlie the current intestacy distribution regimes and also much of the academic literature regarding intestate succession. The principal assumption is that an intestate would have wanted to allocate his or her estate in a particular way, depending on which members of the family survive. So, for example, if an intestate is survived by a spouse and children, he or she would have wanted the estate to be distributed between the spouse and children but with certain preferential arrangements being made for the spouse. Another assumption is that an intestate’s distribution preferences might be different depending on the size of the estate. So, for example, it is assumed that the intestate would prefer children to benefit more from a substantial estate. Another conclusion, often drawn in the literature, is that intestate estates should be treated differently because they are, on the whole, smaller than testate ones.
4.2 The present study tested the underlying assumptions of the rules of distribution by undertaking a survey of probate files in order to identify testators’ actual preferences for distribution of their estates and to compare characteristics of testate and intestate estates. The following discussion explores these findings against the background of past studies in the field and analyses their implications for the current law of intestate succession. Limitations of the present study and directions for future research and reform are also discussed.1
DISTRIBUTIVE PREFERENCES
4.3 The following paragraphs approach the task of discerning the distributive preferences of persons who have not made a will, by reference to the current rules of distribution in NSW and the issues raised in the Law Reform Commission’s Issues Paper 26.
Where a spouse or partner but no issue survive
If the intestate is not survived by any issue, should the surviving spouse/partner be entitled to the whole of the estate?
4.4 In NSW, the surviving spouse or partner is entitled to the whole of the intestate’s estate in the absence of surviving issue. This is also the case in Queensland, ACT, SA, Tasmania and Victoria.2 In contrast, the report of the English Committee on the law of intestate succession in 1951, asserted that if an intestate leaves a spouse and one or both parents but no issue, then the intestate would wish that a fixed sum and one half of the remaining estate should be given to the spouse, and the remainder be given to the parents.3 This view is still accommodated in the distribution regimes in WA and NT which allocate a portion of an intestate estate to parents or siblings if the intestate is survived by a spouse or partner, but not issue.4
4.5 According to distributive preferences in this study, in 100% of cases where the testator was survived by a spouse and not issue, the testator gave the entire residue of the estate to the spouse. This result aligns with the findings of some comparative wills studies in which the deceased distributed his or her property consistently with rules that gave the whole estate to the surviving spouse.5 A limitation of this finding is that it is not known whether or not the testator had parents or siblings at the time of making the will, except in those cases in which there were substantial bequests or substitutionary clauses.6
Where a spouse or partner and issue survive
In principle, should the deceased’s estate be divided between a surviving spouse and issue?
4.6 In NSW, if one or more issue and spouse or de facto partner survive, the spouse or partner is entitled to a prescribed amount from the estate, personal chattels and a proportion of the remaining estate, with a right to obtain the intestate’s interest in the shared home. The issue are entitled to the rest.7 However, the results of the study do not follow this pattern. Spouses inherited the entire residuary estate, to the exclusion of the children, in 75.2% of the cases. A mere 2.3% shared the residue between spouse and children. It is evident that sharing the residuary estate between the spouse and children is not a common preference.
4.7 As an aside, it should be noted that 14 (8.4%) testators made substantial bequests to their children and 148 (88.6%) named children as heirs within substitutionary clauses, indicating that children in these estates did receive consideration, though the interests of the surviving spouse were preferred.
4.8 A deviation from the pattern of current intestacy law to favour the surviving spouse as opposed to the surviving children is supported by previous research.8 The Albertan review of Surrogate Court files in 1999 found that the spouse received more than 90% of a testator’s estate in 73.1% of cases and the entire estate in 69.7% of cases. Additionally, Sussman, Cates and Smith (1970) conducted a study in Ohio and found that an overwhelming majority named the spouse as the sole heir of the residuary estate. The authors also pointed out that surviving children in intestacies often signed over their share of inheritance to the surviving parent. It was not possible to investigate this phenomenon in the current study.
4.9 Interestingly, interview studies, in which a respondent was asked to rank their hypothetical “dispository wishes”,9 have also found that the spouse’s interests are favoured over sharing the estate between the surviving spouse and lineal kin. Fellows, Simon and Rau (1978) surveyed 750 persons living in Alabama, California, Massachusetts, Ohio and Texas, and found that a majority of respondents wanted to leave their entire (hypothetical) estates to a surviving spouse.10
Presence of joint property
4.10 The survey has also revealed that a large majority of testators did not own joint property when they died. Only 12% of estates with wills contained joint property, the majority of which were held in common with a spouse through marriage (83.1% of joint property cases) and were usually held by a deceased male (78.9% of cases). This suggests a number of things. First, that in many cases where a male predeceases a female spouse, the property will have been held jointly and distribution will have occurred by survivorship without the need to go to probate. Secondly, that joint ownership with a spouse may mean that a will need not be written at all. A will may be needed only when the property cannot be transmitted upon death to the surviving spouse as jointly owned property.
Effect of the size of the estate
As estate size increases, is the deceased more likely to divide it between a surviving spouse and issue?
4.11 Previous research has shown that as the size of the estate increases, there is a greater likelihood that both the spouse and children will be provided for in wills.11 This is thought to be because larger estates have a greater capacity to provide for both the spouse and children’s interests. However, the results of the current study do not support this proposition. Division of an estate between spouse and children is not only uncommon in general, but in larger estates as well. The greater size of the estate does not lead to a greater likelihood that the testator will share the estate between the surviving spouse and children. This may be because the majority of the testators’ children are adults and may therefore be independent. It may also suggest that the testator expects the spouse ultimately to pass the estate on to the issue of their relationship. This is borne out by the preference for benefiting the issue of the relationship if the spouse or partner predeceases the testator. Understandably, the average testator appears to be more concerned with the surviving spouse whose financial wellbeing is likely to be intertwined and dependent on his or her own.
Where a spouse or partner and issue of a previous relationship survive
4.12 There is a caveat to the suggestion that surviving spouses should inherit to the exclusion of children. In 43.7% of cases where there were children of a previous relationship, the spouse received the entire residuary estate, whereas in 31.3% of cases children of a previous marriage inherited the residue. In the 7 estates (43.7%) where the spouse was excluded, only 2 files indicated joint tenancy between the testator and spouse. In 5 cases (31.3%) the spouse was not taken care of by way of joint property or through the estate.
4.13 The results indicate an increased trend toward making some provision for the testator’s children where there are children from a previous relationship. This may reflect two possibilities. The first is that in cases where there are children from previous relationships, testators demonstrated increased concern that the children would not be provided for by the current spouse, and thus were more likely to provide for them explicitly within the will. The second is that surviving spouses may have held independent assets from their previous relationships, so that testators did not consider their welfare to be dependent on benefiting from the estate.
4.14 Previous research also demonstrates that the presence of children from a previous marriage alters the distribution pattern.12 The Albertan review of Surrogate Court files (1999) found that in these circumstances only 29% of testators gave their entire estate to the spouse, another 29% gave the estate to their children and 25.8% shared the estate between the spouse and children. Moreover, a commissioned attitude survey investigating English intestacy law in 1995 found that the people interviewed clearly preferred that a distribution regime favouring the spouse to the exclusion of the children, should not apply to cases where there were children from a former marriage.13
Where the issue only survive
If one or more issue, but no spouse or de facto partner, survives the intestate, should those issue be entitled to the whole of the intestate estate?
4.15 The current intestacy law, which provides that, in the absence of a surviving spouse or partner, the issue are entitled to the whole of an estate, is supported by the results of this study. The data from this study indicate that in 94.0% of cases children received a substantial portion of the residuary estate; other parties were beneficiaries to some extent in only 18.1% of files. The other beneficiaries named were direct descendants of the testator, involving either children and/or grandchildren, or their spouses. Of the 14 cases (4.5%) where children were excluded from residuary provision, 3 estates left substantial bequests to the children and 1 case involved the children in substitutionary clauses. Only a very small quantity of cases did not make provision for the children and their nuclear family. This is in accordance with research reported by the Albertan review of Surrogate Court files (1999) in which 76.5% of unmarried (divorced, widowed or never married) testators gave their entire estate to their children.14
Where other next of kin survive
If the intestate dies without a spouse or partner and without issue, which next of kin should be entitled to the estate?
4.16 If a parent or parents survive the intestate, but no spouse or issue, then they are entitled to the whole of the estate. If parents are also not available, then the estate goes to the relevant next of kin. Brothers and sisters take first, then grandparents and finally aunts and uncles. The issue of brothers and sisters of the intestate are entitled to take the share of their deceased parent. The question whether this order is appropriate was examined by looking at those cases where the nuclear family, that is, children, grandchildren and children-in-law, were not available.
4.17 The data indicates that the majority of testators provide for siblings and the siblings’ children. This is further supported by representation clauses, in the majority of cases, giving the residue to children of a deceased sibling. It appears that testators generally think one generation ahead: nieces and nephews represent siblings; grandnieces and grandnephews represent nieces and nephews. So representation to the issue of siblings, rather than just the children of siblings, seems to be justified in the general scheme.
4.18 The ‘other family’ category received very little consideration, a mere 10.1% distributing the residuary estate to uncles, aunts, parents, cousins or in-laws. In contrast, close to a third of estates named parties unrelated to the deceased as the primary heirs, so that 15 residuary estates were allotted to friends and some to charities. So, beyond bestowing a residuary estate upon a surviving spouse, issue or parents, it appears that most people favour giving to siblings and, to a lesser extent, other family members. This has been supported by previous research. Glucksman (1976) found that in cases of no surviving spouse or issue, a sample of testators from New Jersey favoured distributing the residuary estate between collaterals, particularly siblings.15
4.19 Finally, beyond spouse, issue, parents and collaterals it appears that deviations represent individual preferences of a testator that cannot be adapted to a statutory default regime. Dunham (1963) also found similar results from a sample in Illinois, when there were neither surviving spouse nor issue.16
CHARACTERISTICS OF TESTATE AND INTESTATE ESTATES
4.20 The average age at death in intestate cases was 60 years, considerably younger than the age at death in testate cases (81.2 years). Additionally, the value of intestate estates is significantly lower (between $100,000-200,000) than the value of testate estates (between $300,000-400,000). These results are reinforced by previous research in which testators have been found to be older, wealthier and have larger estates than those who die intestate. The difference between the two groups threatens generalisations extended from testators to those who die intestate.17 The two populations may have different distributive preferences, potentially affected by age, estate size and wealth.
Age of the deceased
4.21 It should be noted that age is a confounding variable in the current study. Since the mean age of testators is 81.2 years, there is a difference of 21.2 years between testate and intestate cases, a difference large enough to be a generation gap. In a majority of testate cases parents, grandparents and aunts and uncles will most likely have predeceased the testator, skewing distributive preferences in favour of siblings, their family, friends and even charities. Preferential treatment of parents over siblings and other family cannot be assessed from the available data. This means that potential distribution of one who dies unmarried and childless could indeed favour parents or grandparents, since they are more likely to be available, over siblings and other family when compared to the average testate cases.
Size of the estate
4.22 It should be noted that the size of the estate in intestate cases was uniform whether there was a spouse or not. However, when compared to the 5 testate cases in which the spouse and children shared the residuary estate, the median value of the estate was the same as the median value of estates in intestate cases. This suggests that smaller estates are more likely to be divided between the surviving spouse and children. Further research into this possibility is needed.
LIMITATIONS
Differences between testators and intestates
4.23 There is an important disadvantage to using wills studies, as distinct from interview studies in which distributive preferences are investigated through responses to hypothetical scenarios, involving the presence or absence of potential beneficiaries. As previously mentioned, there are considerable differences between persons with and without wills. Testators tend to be older (45 years or more), have larger estates, a larger income and higher educational attainment, though there does not appear to be a gender difference, that is, males are not more likely than females to have made a will, and vice versa.18 The validity of drawing conclusions from testators that can be generalised to intestates is threatened by these differences. Intestacy laws should represent common distributive preference, so investigation within a more representative sample may be necessary.
4.24 Consequently, it is constructive to note that looking at interview studies or wills of a still living sample of testators, may prove fruitful in understanding distributive preferences of younger unmarried and childless persons when parents, grandparents, aunts and uncles are still available. Interview studies are able to investigate a more wide-ranging, and thus younger, sample. Furthermore, a close correspondence between testate wills and distributive preferences on hypothetical scenarios has been taken as support for the validity of interview studies.19
4.25 Fellows, Simon and Rau (1978), in their survey of persons from a variety of American states, found that respondents preferred both parents and siblings to share in the estate and 41% disinherited siblings when two parents were presumed to be alive, while only 29% did so when respondents were asked to presume that only one parent survived.20 This is at odds with what was found in this study, presumably because of the older age of testators. The favouring of siblings as beneficiaries, in the absence of a surviving spouse and children, may not be found if younger age groups were better represented in the sample.
Effect of legal advice on preferences
4.26 It is useful to take into account the effect legal advice may have on the distribution of an estate. Wills are most often written with the advice of a lawyer and as such, the effect of legal advice on arriving at a distributional preference is an important factor to take into account when framing intestacy statutes.21 Indeed, experimental evidence suggests that when participants believe a default to be premised on better information than their own, they tend to switch over to it as a preference.22 This means that legal advice may change default distributive preferences. This is important to consider when comparing wills studies with interview studies. Obviously, wills studies will often involve some form of legal advice and this will effect subsequent distributive preferences.
Overrepresentation of female testators
4.27 A further limitation of the study, linked to the restriction wills studies place on sample characteristics, involves the overrepresentation of female testators. Years at death ranged from 1980-2004, the median year being 2004. In 2004, there were a total of 45,881 deaths in NSW, 22,430 being female (48.9%) and 23,451 male (51.1%).23 This should be compared to a female to male division in the sample of 55.5% female deceased to 44.5% male deceased. Since males die younger than females, it is possible that the wills of many male testators did not reach probate as often as wills of widowed female testators, as joint property passed directly to the usually female surviving spouse, thus bypassing probate. The sample of wills then does not represent the population of deaths in 2004, presenting a larger number of widowed females and a lesser number of male testators predeceasing a surviving spouse. This does not affect the validity of the findings since joint property would pass directly to the surviving spouse in intestate cases as well.
Very small estates
4.28 It should also be mentioned that wills involving elections to administer, that is, estates below the value of $15,000,24 were excluded from the sample, possibly leading to under-representation of estates of a smaller financial value and potentially skewing the results. Using only those wills that have been formally proved is an obvious limitation.25 This may have led to an underestimation of the tendency of testators to share smaller estates between the surviving spouse and children. This may have significant implications when it is considered that intestate estates tend to be of a smaller value than testate ones.
Changes to the composition of families
4.29 The sample in this survey represents a specific cohort. Recent trends in Australia’s population mean that the family structure of future cohorts will be significantly different. Fertility and marriage rates are decreasing as the childbearing age increases.26 The lowest total fertility rate ever recorded in Australia was recorded in 2000.27 If this level were to be sustained over an extended period the next generation would be 16% smaller than the current generation of childbearing age. The implication then, is that over time, there will be a rise in the number of testators who were never married. Furthermore, there will be fewer children per family.
4.30 Australian divorce rates are increasing, and although remarriage rates are decreasing,28 there is the potential for a greater number of children from a previous marriage in future cohorts. This possibility lends greater value to the finding that the presence of children who are not also the children of a surviving spouse changes distributive patterns that favour giving all to the spouse.
4.31 These issues are particularly important when one considers that intestates, as previously mentioned, die younger than testators. So investigation of distributive preferences in the face of no surviving spouse or issue is particularly important. Future research investigating the changing trends and their impact upon distributive preference will be vital in maintaining appropriate intestacy laws that reflect common ‘dispository wishes’.29
Footnotes
1. See para 4.23-4.31.
2. NSW Law Reform Commission, Uniform Succession Laws: Intestacy (Issues Paper 26, 2005) at para 3.22.
3. England, Report of the Committee on the Law of Intestate Succession (Cmd 8310, 1951) at 5, 12-13.
4. Administration Act 1903 (WA) s 14(1) Table It 4; Administration and Probate Act 1969 (NT) Sch 6 Pt 1 It 3.
5. A Dunham, “The method, process and frequency of wealth transmission at death” (1963) 30 University of Chicago Law Review 241 at 252-253; Alberta Law Reform Institute, Reform of the Intestate Succession Act (Final Report No 78, 1999) at 192.
6. See para 3.8.
7. NSW Law Reform Commission, Uniform Succession Laws: Intestacy (Issues Paper 26, 2005) at para 3.28-3.59.
8. Law Reform Commission of British Columbia, Statutory Succession Rights (Working Paper 35, 1982) at 373; M B Sussman, J N Cates and D T Smith, The Family and Inheritance (Russell Sage Foundation, USA, 1970) at 289.
9. M L Fellows, R Simon & W Rau, “Public attitudes about property distribution at death and intestate succession laws in the United States” [1978] American Bar Foundation Research Journal 319 at 324.
10. M L Fellows, R Simon and W Rau, “Public attitudes about property distribution at death and intestate succession laws in the United States” [1978] American Bar Foundation Research Journal 319 at 359.
11. England, Report of the Committee on the Law of Intestate Succession (Cmd 8310, 1951) at 7.
12. Alberta Law Reform Institute, Reform of the Intestate Succession Act (Final Report No 78, 1999) at 193; S M Cretney, “Reform of intestacy: the best we can do?” (1995) 111 Law Quarterly Review 77 at 92.
13. S M Cretney, “Reform of intestacy: the best we can do?” (1995) 111 Law Quarterly Review 77 at 92.
14. Alberta Law Reform Institute, Reform of the Intestate Succession Act (Final Report No 78, 1999) at 194.
15. J R Glucksman, “Intestate succession in New Jersey: does it conform to popular expectations?” (1976) 12 Columbia Journal of Law and Social Problems 253 at 276.
16. A Dunham, “The method, process and frequency of wealth transmission at death” (1963) 30 University of Chicago Law Review 241 at 254.
17. M K Johnson and J K Robbenolt, “Using social science to inform the law of intestacy: the case of unmarried committed partners” (1998) 22 Law and Human Behavior 479 at 484; A Dunham, “The Method, Process and Frequency of Wealth Transmission at Death” (1963) 30 University of Chicago Law Review 241 at 248; M B Sussman, J N Cates and D T Smith, The Family and Inheritance (Russell Sage Foundation, USA, 1970) at 288.
18. M K Johnson and J K Robbenolt, “Using social science to inform the law of intestacy: the case of unmarried committed partners” (1998) 22 Law and Human Behavior 479 at 484.
19. M K Johnson and J K Robbenolt, “Using social science to inform the law of intestacy: the case of unmarried committed partners” (1998) 22 Law and Human Behavior 479 at 494.
20. M L Fellows, R Simon and W Rau, “Public attitudes about property distribution at death and intestate succession laws in the United States” [1978] American Bar Foundation Research Journal 319 at 347.
21. M K Johnson and J K Robbenolt, “Using social science to inform the law of intestacy: the case of unmarried committed partners” (1998) 22 Law and Human Behavior 479 at 483.
22. A J Hirsch, “Default rules in inheritance law: a problem in search of its context” (2004) 73 Fordham Law Review 1031 at 1077.
23. NSW Registry of Births Deaths and Marriages, “Deaths: Total number of deaths registered in New South Wales” <http://www.bdm.nsw.gov.au/deathsStatistics.htm> (as at 15 December 2005).
24. Wills, Probate and Administration Act 1898 (NSW) Part 2, Division 4.
25. A Dunham, “The method, process and frequency of wealth transmission at death” (1963) 30 University of Chicago Law Review 241 at 247.
26. Australian Bureau of Statistics, Population Feature Article, “Marriages and Divorces in Australia in 2003” (September 2004) <http://www.abs.gov.au>.
27. S A Khoo and P McDonald, The Transformation of Australia’s Population 1970-2030 (UNSW Press, Sydney, 2003) at 41.
28. Australian Bureau of Statistics, Population Feature Article, “Marriages and Divorces in Australia in 2003” (September 2004) <http://www.abs.gov.au>.
29. M L Fellows, R Simon and W Rau, “Public attitudes about property distribution at death and intestate succession laws in the United States” [1978] American Bar Foundation Research Journal 319 at 324.
