No Will, No Say
Approximately 86% of people over the age of 65 years have a Will, however research indicates that 50% of people pass away without a Will.
Altogether too often young people die unexpectantly yet younger Australians are generally more difficult to convince to make a Will. What many young people fail to realise is that if they were to die, their estates tend to be larger than expected. This is due, in large part, to the compulsory inclusion of life insurance as part of superannuation. Take a moment to check how much your superannuation fund has insured your life for and then consider who you would prefer it went to.
What is a Will?
A Will is a document in which you express what you wish to happen to your property after you pass away. Fundamentally, a Will must be signed on each page by the person making it and witnessed by two people over the age of eighteen. These witnesses should not be beneficiaries or relatives of beneficiaries under the Will.
A Will should always be professionally drafted. A word of warning – ‘Do-It-Yourself’ Will kits can feel empowering, but even a small error can cost more to rectify than having it professionally drafted in the first place. Our experience is that such Wills are a great deal more expensive to administer and tend to result in unintended consequences more regularly than their professionally-drafted counterparts.
Beyond giving you the certainty that your loved ones will be looked after,, some Wills go further and incorporate what are referred to as Testamentary Trusts. These options tend to be more attractive when estates are larger. You should speak to your financial advisor about whether such an option would be best for you.
Testamentary Trusts allow your beneficiaries to take some or all of their benefit in the form of a trust, where income or capital can be distributed from time-to-time. There are two key benefits to Testamentary Trusts:
• tax minimisation; and
• asset protection for beneficiaries.
The tax benefits come from the fact that, unlike family trusts, Testamentary Trusts can stream the income of the trust to minor children at adult marginal tax rates. For example, a family with three minor children can benefit from three $18,000 tax free thresholds before having to worry about the marginal tax rates which would apply to the adult parents. Again, you should speak to your financial advisors about how much this could save your beneficiaries.
A Testamentary Trust has mechanisms in place that prevent a beneficiary from controlling their trust when they are going through financial troubles, such as bankruptcy or a property settlement. This means that the Trust creates a barrier that may prevent creditors or a former spouse or partner obtaining any of the capital of the trust.
The down side to such benefits is that such documents tend to be more expensive. Speak to your beneficiaries and financial advisors to decide if a Testamentary Trust is right for you.
What happens to my property if I do not have a Will?
When a person dies without a Will an inflexible formula set down by legislation is used to divide the estate of the deceased without considering their known wishes, passions or interests. The formula changes with the circumstances of the deceased, varies from State to State, is seldom ideal at best and could be seriously inappropriate at worst.
The statutory formula can have unexpected applications. Take for example, a young couple without children who move in together for two years. In the ACT and New South Wales, if either were to die without a Will the other would be automatically entitled to the whole of the deceased’s estate. When the law deems a de facto relationship exists, it will then exclude other family members from taking a benefit regardless of the intentions of the deceased person.
Consider also a young couple who have been together for five years but have never quite met the standard required to receive the whole, or even a part, of the estate in the event of the untimely death of one of them. When the law deems a de facto relationship does not exist, it may require that the deceased person’s estate pass to estranged family members (for example, one or both parents or siblings) regardless of the intentions of the deceased person.
By requiring the estate to be divided in a one-size-fits-all fashion, you can be certain that some people who ought to have been provided for will not be and that some people who ought not to have been provided for will be. This may leave the estate open to a claim for further provision under the Family Provision Act 1969 (ACT) or the Succession Act 2006 (NSW) – litigation that the estate will have to bear at least some of the costs of, to the disadvantage of some or all of the beneficiaries.
Other costs are also increased when a person dies without a Will. Such costs include obtaining Letters of Administration, if required, and estate administration generally. Considering the time it may take friends or family to search for anything that resembles a Will and to locate your assets, these costs can become significant.
A little known, but easily understood, fact is that marriage automatically revokes a Will. Careful drafting Will can avoid this outcome, but if it is not dealt with at the time then despite your best efforts you may pass away without a Will. If you had a Will before you were married and are concerned that you may not have a Will, we are prepared to review your Will at no charge.
Seeing a solicitor about your estate planning goes beyond just drafting a Will; we also discuss estate assets, non-estate assets, superannuation and enduring powers of attorney. You could say that estate planning is akin to a complete legal health check-up.
Wills are forward-looking documents that everyone should consider, if only so they can have some say in how their estate is divided once they are gone.
Bradley Allen Love Lawyers are specialists in Will and Estate Planning and have considerable experience administering complicated estates.