A common misconception in relation to estate law is that if a person does not leave a valid Will, all their assets will be “taken by the government” upon their death. Rest assured, this is not the case; state legislation prescribes how an estate is to be distributed in these circumstances, known as an intestacy. Generally speaking, intestacy laws direct that the estate is to distributed among family members, beginning with partners and children, then siblings, parents and so on if there are no partners or direct descendants.
But don’t rest too easy, for there is a kernel of truth in this misconception. What happens when there are no family members left to share in an intestacy? In that instance, intestacy laws do, in fact, direct that an estate passes to the Crown. This is known as bona vacantia, and the government may use such funds as it sees fit.

Bona vacantia can occur in a number of ways, the most obvious being a person dying intestate and having no living relatives to whom the estate can be distributed. However, with the use of testamentary trusts increasing in popularity, there is also the risk of a bona vacantia estate upon the end (or vesting) of a testamentary trust if improperly planned. Take the following example:

Sophie died in 1958, followed by her sister, Diana, in 1959. They left Wills on identical terms, the effect of which was as follows:
1. Each estate was held upon trust to pay the income to their brother-in-law, William, during his lifetime.
2. Upon the death of William, the estates were to be distributed equally between three of their friends, provided that they were living at the date of William’s death.

William died in 2010. Regrettably, none of the three friends survived him. This resulted in an intestacy in both estates – under the intestacy rules, Sophie’s estate was distributed to Diana’s estate. However, Diana was the last of her family to die, so there was no next-of-kin to whom her estate could be distributed. As such, her estate (which was not insubstantial) was payable to government coffers.

While Sophie and Diana’s situation was somewhat anomalous, it does illustrate the importance of good estate planning and, critically, planning for the worst case scenario. Today, drafting of testamentary trusts is a much more comprehensive exercise and charitable organisations, for example, will often be named as beneficiaries in the event that all individual beneficiaries have died before the trust vests. But sophisticated planning techniques are best utilised by the thoughtful will-maker – the person who has considered for whom they should make provision, and how might their wealth best be passed down.  

Interestingly, claims can be made against bona vacantia estates. Such claims need to be appropriately justified – for example, a person who died without a valid will may have been paying for the living or medical expenses of a close friend, who was reliant on those payments. That friend might then make a claim to the government solicitor for provision to be made for them out of the bona vacantia estate. There is, of course, no guarantee that such a claim will be granted. It often takes a lifetime of hard work to accumulate and maintain one’s wealth. I have yet to meet any individual who has the wish to leave their hard-earned assets to the state!

Whether an estate is to be held as a testamentary trust, or whether it is distributable outright to beneficiaries, a key consideration for any will-maker must be “what happens if my beneficiaries die before me?”.  And good estate planner will be able to advise you and craft your wishes into a document that gives effect to your intentions, even if the worst case scenario comes to pass.