Wills

Making a Will

What is a Will?

A Will is a document which sets out the wishes of the person (known as the “Testator”) with respect to:

• the distribution and management of their property after death;
• the appointment of the person or persons to carry out their instructions contained in the Will (known as the “executor")

What are included in estate assets?

It is important to appreciate what assets are included in an individual's estate and can be dealt with by a will. Assets owned jointly cannot be dealt with by a will because they pass automatically to the surviving joint owner by law. This usually includes the family home owned on a joint tenancy basis, and other property owned jointly, such as bank accounts, term deposits and shares held in joint names.

Any life insurance policies will usually be paid directly to the owner of the policy, and this is not always the person insured - you should check the details of any policies to confirm the owner. You can make arrangements for the insurer to pay any proceeds to a nominated beneficiary or to your executor to deal with as you provide for in your will.

In terms of superannuation, the rules of your superannuation fund will set out how any death benefits are paid by the trustee, unless you make a binding death nomination in relation to who would receive any death benefit. We deal with this elsewhere, but note that binding death nominations can only be made to a number of specific beneficiaries. Also note that the taxation of any superannuation benefit will depend on whether those beneficiaries are dependents or otherwise and you should consider this in your planning.

What if you die without a will?

If you die without a will you are deemed to have died "intestate". In that situation your assets are distributed according to the "laws of intestacy" within each of the different state or federal jurisdictions and these can differ substantially from your own intentions. These rules differ, but consider the following asset disposition under one of the State provisions:

If you are survived by:

A spouse and no children – the total estate passes to the surviving spouse

A spouse and children - if the total estate is worth more than $100,000 then the surviving spouse is entitled to all your personal chattels (including motor vehicles), the right to purchase your home on certain conditions and $100,000 plus half of the remaining balance of the estate. Your children are entitled to share equally in the remaining half of the estate.

Parents only – the parents share the estate equally if both alive, and

None of the above, and only have surviving brothers and/or sisters – the brothers and/or sisters share any estate equally (if a brother or sister has died before you and is survived by children, then those nieces or nephews take their parent’s share).

You can see from this example that this asset distribution could lead to substantial problems in many situations - particularly where a surviving spouse with children has almost half of your solely owned assets placed in trust for your children and being managed (for a fee) by, for example, the Public Trustee.

What happens to a Will in the event of a marriage?

A will is automatically revoked by a marriage or re-marriage. Consequently, if you die without having made a new will after your current marriage, or your will is made without specific reference to a forthcoming marriage, your estate will be distributed according to the law of intestacy in your particular state.

Foreign Wills

In most circumstances, a will which is prepared in another state or country, which satisfies the laws of that state or country, will be valid and enforceable in Australia. There may be exceptions however, and that's why we always recommend specific legal advice when dealing with a foreign will or foreign assets.

It is often the case, if you have foreign assets, that you will receive tax advice to the effect that those assets should be dealt with in separate wills - as this allows more flexibility to deal with your tax position. If that is a case, you need to ensure that your legal advisers in both countries work together to ensure that there are no conflicts in terms of the treatment of assets, and that the wills are reviewed regularly to ensure that they remain compatible.

Free Wills - "there is no such thing as a free lunch"

You will often hear or see advertisements offering "free wills" - usually by Trustee companies, but sometimes by local solicitors. The indirect "sting in the tail" is that these normally involve the company or organisation being appointed as your executor, and able to charge fees in carrying out their later role. These fees can be quite considerable, depending on the size of your estate - for example, at the present time a Government Trustee company based in one of the major states would charge the following executor fees for an estate valued at:

• $500,000 - $14,300
• $1,000,000 - $22,550
  

Alternatively, many charities will provide access to "free" will drafting if a donation is provided or a bequest made. We are absolutely opposed to these services - you are certainly encouraged to make provision for your preferred charity in your will, but a potential beneficiary should not be involved in the provision of what should be "independent advice". There is too much risk of an implicit or explicit bias involved in this type of process.

Can your will be Contested?

University of Queensland research completed a few years ago makes bleak reading for those concerned to ensure that any disposition of an estate will 1) reflect their wishes and 2) won't initiate or spur disagreements between siblings or family members. The research and wider information suggests that up to 75% of wills are being successfully contested, mainly under "family provision legislation" - laws which typically enable a spouse, child or dependent to contest a will on the basis that adequate provision has not been made for them - regardless of their prior behaviour.

Bear in mind in these situations that the cost of contesting a will may be borne by the estate, if agreed by the Executor or the court, and there are situations where contestants are sometimes in a "no loss" situation. The only sure winner are the lawyers - the costs of contesting a will, particularly if goes to court, will normally be measured in the tens of thousands of dollars. In general though, as posed in the report, there are, ". . questions as to whether the legal framework is too generous; or courts in their interpretation of that framework, are too quick to alter testamentary dispositions; or whether some of these contests are able to be settled without judicial intervention."

Particularly if you have a larger estate or complicated circumstances - where for example equity demands that your estate is not equally split - specialist advice from a lawyer who focuses on estates and successions is essential; and a discussion around testamentary trusts.

Perhaps the best method of ensuring that your assets are distributed in the fashion you want is to do so during your lifetime so "theree is nothing to fight about". However, even this approach can have tax and social security implications and prior professional advice is abosolutely recommended.

Choose your executor very carefully

Relatives or friends are often designated as the executors of an estate. Whether this is correct, or whether perhaps a solicitor should be appointed, is going to depend very much upon the complexity of your estate, and the winding up process.

Executors are expected to exercise great care in their role, and to discharge their role professionally and within a reasonable period. The role can also give rise to personal liabilities, for example where tax has not been appropriately paid or reported. For these reasons, you should take some care when appointing an executor, and review that decision over time, particularly if your estate or family situation becomes more complicated. You owe it to both your family and executor to do so - particularly given that unless provided for in a will, the executor cannot charge the estate for the time they spend, although they can engage professional assistance which is paid for out of the estate.

Some general comments to bear in mind when choosing an executor:

• Seek to choose an executor who, to be frank, will almost certainly outlive you - otherwise, if you die and not appointed an alternative executor, an application will need to be made to the court to appoint an administrator - which is costly and cumbersome.
• Typically, professional advisors such as lawyers will not want to become executors, for a whole variety of reasons, and - apart from the professional fees payable - there may be conflicts of interest. An alternative is executor companies but, as indicated above, we believe they can be both expensive and slow.
• To state the obvious, you should make any executor aware of the fact that you have appointed them to this position, and ensure that they are supportive - it is not a function that they are required to perform and they can choose not to accept the position..

Who should draft your will?

Unless your circumstances are exceptionally simple, we believe that individuals should seek the advice of an experienced solicitor in drafting their will, and review the provisions at regular intervals. This is obviously the situation if you wish to use a testamentary trust, you have foreign assets or there are significant tax issues that need to be addressed. Otherwise, scrimping in this area will often be a case of "penny wise pound foolish given" given that the cost of getting your estate "wrong" in terms of your family and because relatively simple mistakes in terms of formalities - such as failing to sign each and every page with two adult witnesses using the same pen - can invalidate a will.

If you would like to arrange professional advice in relation to the above matters, please complete the Inquiry form below providing details and you will be contacted accordingly. You will receive a fee quotation in advance of any advice or services being provided.