A paramount concern is ensuring that our wishes, and those of our loved ones, are honoured after we pass away. Effective estate planning involves doing all that is possible to ensure that your assets pass to your chosen beneficiaries efficiently and tax effectively.
Equally important is having a Power of Attorney and Enduring Guardian in place for that person you trust to take care you and your affairs when you can no longer do it yourself.
Why you need a Will?
Making a Will is the only way you can ensure your assets will be distributed according to your wishes when you die. Studies show that at least 45% of Australians do not have a valid Will.
What happens if you die without a Will?
If you die without leaving a valid Will, then your estate is distributed under the laws of intestacy. In simple terms, this means that your Estate is distributed according to a pre-determined formula between surviving immediate family members in fixed proportions depending upon eligibility rather than having any regard to your wishes or the needs of your family. This process can be very complicated and time consuming.
What do you need to do to make a Will valid?
A valid Will needs to:
- Be in writing
- Appoint an Executor (also called a trustee)
- Deal clearly with all your Estate assets
- Be validly witnessed in accordance with strict legal requirements
What can happen if a Will is made that does not comply with all legal requirements?
The consequences of an incorrectly prepared Will can be disastrous. Specific gifts may not be effective, or part of your Estate may be distributed under the Will and part may be distributed under the laws of intestacy or all of your Estate may be distributed under the laws of intestacy.
We also strongly advise against using ‘Will kits’ or writing your own Will. We have been involved in Estate litigation where a ‘Will kit’ was not properly witnessed and where a ‘Will’ was written and changed by the testator on different dates. The legal fees paid by the Estate to obtain probate ran into the tens of thousands of dollars due to family members disputing the authenticity of the Wills. If the deceased had received proper advice at the time the Will was made then there would have been many more thousands of dollars available for distribution to the beneficiaries of the Estate.
It is also important to ensure all your different types of assets are accurately dealt with legally in the Will. For example, all working Australians are required to have superannuation and unless there are binding death benefit nominations in place, your superannuation death benefits may be payable to your estate. If so, these benefits would be distributed in accordance with your Will. The same applies to any life insurance or death benefits that may be available for distribution after your death.
Who can challenge a Will?
It is usually the case that any potential challengers to a Will are a spouse, former spouse, children or any person who has lived in your household as a dependant. For a claim to succeed the claimant must prove that no adequate provision has been made either during your lifetime, or in your Will, and the claimant will also needs to demonstrate a need relative to the size of the Estate, and the circumstances of the other beneficiaries.
Once we have gained instructions from you we will be able to advise you about any potential claims against your Estate, and steps that you can take to prevent or minimise any potential claims.
Are there different types of Wills?
There are simple Wills, complex Wills and testamentary trusts.
How do you know what type of Will is needed?
Based on your instructions we will be able to advise you on what type of Will is suitable for you.
Advantages of a simple Will
A simple Will;
- Is straightforward
- Sets out with certainty the distribution of Estate assets
- Is comparatively inexpensive
Disadvantages of a simple Will
If a simple Will is used;
- The distribution of assets is inflexible and does not take disadvantage of tax concessions that are available to testamentary trusts;
- May not adequately provide for blended families and second marriages which can leave your Will open for claims of provision by disgruntled family members;
- If the time at your death any of your beneficiaries are bankrupt, addicted to gambling or illicit substances, or going through any matrimonial dispute then the beneficiaries’ entitlements are put at risk;
- It will not be structured to prevent or minimise any possible claim against your Estate.
How can Estate Assets be protected?
A complex Will (perhaps on its own or in conjunction with other documents) can contain flexible discretionary testamentary trusts which place the Estate Assets in the hands of the Executor on trust with a discretion as to how the funds are to be distributed to particular beneficiaries.
Advantages of a complex Will
A complex Will:
- Better protects estate Assets;
- Provides a flexible structure for your Executor to make decisions as to when and your Estate Assets should be distributed;
- Maximises the tax concessions available for distribution of Estate income;
- (Depending on individual circumstances) may be able to deal with any possible claims against your Estate and for a one-off fee establishes a structure that will not require substantial alteration unless your circumstances change.
Change of Circumstances
If you marry after you have made a Will, the Will is generally revoked, unless it was made in anticipation of marriage. Marriage will not affect a gift to the person who is your spouse at your date of death. If you divorce after you make your Will, it only revokes or cancels any gift to a former spouse. It also cancels your spouse's appointment as executor, trustee or guardian in the Will, but will not cancel an appointment of a former spouse as trustee of property left on trust for beneficiaries that include children of both you and the former spouse. However, this won't apply if the Court is satisfied that the Will-maker did not intend by divorce to revoke the gift or appointment.
Entering into a defacto relationship or separating from one will not affect your Will in the same way that marriage and divorce affects a Will.
Where to go from here
The process of making a new Will does not need to be complex, time consuming or costly – a Will ensures the orderly management of your wealth when you aren’t around to exercise personal control.
Remember reviewing and updating your Will is just as important as creating one. It is preferable to have your Will reviewed every time there is a major event in your life (a birth, death, marriage, acquisition of property, disposal of property) otherwise every few years. A review only means you need to check it’s still current. It’s rare that you need to change your Will but it’s critical you don’t miss that need.
Make an appointment today to discuss your concerns and putting place the appropriate legal documents to carry out your wishes.
Power of Attorney and Enduring Guardianship
A Power of Attorney is a document by which you can appoint someone else to perform financial tasks on your behalf.
An Enduring Power of Attorney includes a term for the power of attorney to continue to be effective even if you suffer loss of capacity through unsoundness of mind. You can still manage your own finances and can revoke the power at any time whilst you have the mental capacity to do so.
One of the most important considerations to be made when preparing Power of Attorney is whether there should be any restrictions or limitations.
Without any restrictions or limitations, it is possible for an Attorney to operate all bank accounts, take out loans, buy, sell, mortgage, transfer or lease properties. If the Power of Attorney is required for limited purposes or for a limited period then it is appropriate for conditions to be included in the document. The Attorney must still act in accordance with legislation and cannot intermingle your assets with their own.
We will be able to advise you what is appropriate when you provide us with instructions
Similar to Powers of Attorney, Enduring Guardians are documents designed to help you retain control of your affairs by giving the decision making to someone you trust. Whilst Powers of Attorney are limited to matters of a financial nature, Enduring Guardianship appointments relate to lifestyle and medical choices once you become incapable of making your own decisions.
If you are unable to manage your own affairs, then issues such as providing medical consent to non-urgent surgery may result in you having to wait for the appointment of the Public Guardian before medical consent can be given on your behalf.
Similarly, if there is a dispute in your family or between medical advisors, what arrangements are appropriate for your care? Your Enduring Guardian has legal authority to make these decisions on your behalf.
An Enduring Guardian has the power to make lifestyle and health choices on your behalf but only when you have lost the ability to make those decisions for yourself.
These decisions can include whether you continue to live in your home or whether based on medical advice other accommodation is needed.
An Enduring Guardian can also provide medical consent for any medical procedure. If the appointment is appropriately worded, the Enduring Guardian can authorise the termination of life support if you are in a coma or a vegetative state and the medical option is that there is no reasonable prospect of you recovering.
In most cases the same person or people will be the Attorney and Enduring Guardian. They need to be over the age of eighteen years old, preferably local to you and in good health.
It is important that you have complete and absolute trust in them.
You can change or amend a Power of Attorney or Enduring Guardian whilst you continue to have mental capacity to do so. However, there are certain legal requirements that need to be complied with to validly revoke the documents.
Only the Guardianship Tribunal can make any change of Guardian once you have lost the mental capacity to do so yourself.
Are there any risks associated with appointing a Power of Attorney and/or an Enduring Guardian?
Yes, we can advise you on safeguards which can be implemented but it is extremely important for you to have complete and absolute trust in the person or people that you appoint.
The best measure that can be taken by you to prevent any abuse or irregularities in the future is to choose the right person or people to be your Attorney and/or Enduring Guardian in the first place.
What do you do now?
Call Watson Law to make an appointment.