A personal story and why we all need a will

Regan Isaac | April 19, 2018

If you are reading this article, chances are you are one of the 45% of Australians that have never written a will, or perhaps you haven’t updated it recently. Neither situation is likely to ends in a positive outcome.

Did you know that if you were married after you drafted your will, this can invalidate any wishes you have made? Marriage and divorce can automatically invalidate a Will or some parts of it unless the Will was made in contemplation of that marriage or divorce. It is important for your Will to have a clause expressly stating that the Will is made in contemplation of marriage or divorce. In a defacto relationship? Under Australian law, people in a defacto relationship have the same financial responsibilities to their partners as if they were married.

What’s the big deal, you ask? Wills can be expensive, and each state across Australia have rules for handling these kinds of things anyway, right? While that’s true (at least, the part about different laws in each state is true) there can be serious consequences to not putting an estate plan in place. Let me share a story with you as I can speak from firsthand experience.

Going back nearly 10 years now I lost someone very close to me. At the time she was my best friend, someone I deeply respected and loved dearly – She also happened to make the best Barramundi and chips! This kind lady was my grandmother, who doesn’t love their grandmothers cooking though right?!

My grandmother stood to inherit a large sum from a close friend who lived with her and my grandfather as he had no other beneficiaries (or so it was thought). The family friend now lives in supported living and has lost “mental capacity”. He had however managed to execute a very simple will naming my grandmother as the sole beneficiary beforehand (A will kit, if you will – pun fully intended). She was also his guardian.

Unfortunately, in a tragic turn of events, my grandmother passed away at barely 60 years of age. As the family friend had not named any secondary beneficiaries or provided what we call “cascading provisions”, his will is no longer relevant and the rules of intestacy will apply. Here comes the twist, often people can “come out of the woodwork”. In summary, this “long lost beneficiary” who formed part of the extended family, and has played no part in the family friend’s life for 15+ years now but stands to inherit almost everything which was definitely not our friend's intention.

The sad part about all this? This whole scenario could have simply been avoided with a proper will making reference to the close support and friendship my grandmother and grandfather had given him over many years and also made allowances for the possible death of a beneficiary. We all have stories of our own families or perhaps someone close to us that may have experienced something similar.

So, what makes “A good Estate Plan”?

*  A Will

A will is a legal document that that appoints someone to deal with your assets (Called an “executor”) and distributes them in line with your wishes to your preferred beneficiaries.

*  Enduring Power of Attorney

This is a powerful document which provides someone you nominate the authority to make financial decisions on your behalf which includes almost anything you yourself have the ability to carry out. This may include buying and selling the property, accessing bank accounts, selling assets, liquidating investments etc. You should note that this document will also allow someone to make these decisions on your behalf even if you are not able due to medical reasons.

*  Enduring Guardian

An enduring guardian is a document which allows the individual nominated by you to make medical and lifestyle decisions on your behalf in the event you are unable to. This may include what type of treatment is sort for a particular injury or illness, where you live, whether to “turn off the switch” if you are unlikely to recover from your illness or coma or ensure that your moral or religious beliefs are upheld. This list is not exhaustive, but you can choose what powers your EG has.

* Testamentary Trust

This is a type of trust that you can select which is created upon your death to hold and manage a part of your estate. A testamentary trust is particularly useful for caring for young children or family members with special needs, as a “Trustee” is appointed to help manage the money on behalf of the beneficiaries. You can also provide instructions to the trustee through your will. I.e. The parents of a young child may elect to establish a testamentary trust so that someone can look after the financial aspects of their child’s upbringing without the child immediately inheriting large amounts of money (pay for education, medical needs, ongoing housing costs etc.). A testamentary trust can also be used as a tax structure to minimize tax payable by the beneficiaries of your estate.

*  Guardianship Arrangements

Guardianship arrangements are a key part of your will for any parent as this will indicate your wishes with regard to any children under your care. You can make directions such as; who your children will live with if you die, where they will attend school, their living arrangements etc.

*  Superannuation Death Benefit Nomination

Superannuation is in fact not generally dealt with under your will as it is considered to be a “Non-Estate” asset similarly with jointly owned assets. This type of benefit will be dealt with by the superannuation fund unless you make a prior election. As a result, you need to make a separate nomination through your superannuation as to who these benefits will be paid. Keep in mind, most of us will have some type of life insurance through our super which will be dealt with under the same rules and as a result, may change a death benefit from a small super balance of $100k to $500,000 including insurance. This issue can be compounded if you have multiple superannuation funds. You should also note that there are various kinds of superannuation nominations which may mean the fund is not bound by law to follow your instructions.

The most important thing that you can do when having a will drafted is seeking the opinion and guidance of a trusted professional who you feel comfortable talking about these scenarios with. The above details can all sound pretty daunting when you start to think about it, which is perhaps why 45% of Australians don’t have a valid will (I just can’t get past that number). However, it’s always too late when it’s too late….

 In summary, reasons to organise your estate:

* A will is not for the person drafting it – A will makes it far easier for your family and friends to sort everything including your estate when you pass away – without one, the process will be far more time consuming and stressful. As an adviser, I speak from experience when I say that this is never a pleasant time for the people who are left behind. Let your loved ones grieve the person, not the situation.

*  If you don’t write a will, everything you own will be shared among your beneficiaries as defined by the Succession act – This may not be the way you want. In some cases, ex-spouses or estranged family members may be in a position to make a claim on your estate.

*  A well thought out will can reduce the amount of tax that might be payable on the value of the property and money you leave behind to your beneficiaries.

*  Writing a will is especially important if you have children or other families who depend on you financially, or if you want to leave something to people outside your immediate family.

*  Ensuring that you have a sound estate plan will not only comfort loved ones in time of need but also ensure that your wishes are carried out in the event of illness, serious injury or death.

Reasons not to organise your estate:

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I thought so, give me a call on 02 9251 5558