Death is not a merry topic; nevertheless, it’s important to face it head-on when it comes to making a will and providing for your family’s future.
“But it’s so complicated,” say people, as they put off estate planning for another year. Truthfully, it needn’t be complicated at all, not with the right people in your corner.
We’re going to demystify the process by answering 16 of the most burning questions about wills and estate planning.
A will is a legal document that details your specific wishes for the distribution of your assets upon your death, including bequests to charity. Without a will, estate law will determine wealth distribution, regardless of your wishes. A will also makes clear your decisions that have nothing to do with assets. It can, for example, name the legal guardians you want to raise your children after you die. It can include conditions, for example, your child only comes into their inheritance upon completing their university degree. However, these stipulations may not be legally binding. Victoria Law Foundation has a great PDF that explains what a will is as well as all related matters.
A valid will must be in writing. It must be dated and signed with at least two witnesses present. Parties concerned cannot sign at different times or locations where one or more of the parties are absent. Each page must be signed, using the same pen! You must be of sound mind; no temporary or permanent delusions, or incapacitating mental disorders. If you have a mental disorder, such as Bipolar Disorder, it’s a good idea to get an affidavit from your psychiatrist testifying as to your sound state of mind at the time of writing the will. Victoria Legal Aid has more information on making a will, including affidavits and powers of attorney.
You have three options if you want to change your will: You can revoke it, you can add a codicil, or you can destroy it. Your decision depends on the change concerned. A codicil is best if you want to make a small change. Be very clear because a confusing codicil is likely to be invalidated. Revoking your will is best for a big change, for example, adding a spouse or taking into account a sudden windfall. Destroying a will is exactly what it says on the box: Physically destroy the document. Burn it, shred it, drown it – whatever serves to completely remove it from existence. Victoria Legal Aid explains how to change your will in more detail.
Executors are responsible for managing everything related to your estate after you die; this includes legal and financial obligations. Public Trustee explains an executor’s role in detail, but we’re going to look at just some of the duties. Executors must locate and gather all the valuables and insure all property for the duration of the process; complete a final income tax return; pay all debts; divide the estate; make funeral arrangements and dispose of the remains; and defend the estate in the event of legal proceedings. Note: The executor may be taken to court if they don’t perform all their duties timeously or if beneficiaries feel the executor has neglected their duties or personally claimed assets not belonging to them.
Your executor should be someone you trust implicitly. They should also be able – and willing – to navigate red tape, hold true to your wishes, and manage family fights should any disputes occur. It is a significant responsibility, so don’t make the choice lightly. You could appoint an impartial executor; for example your attorney or the public trustee. An impartial executor such as these won’t be swayed by family attachments and is familiar with all the administration involved. According to Professor Prue Vines, UNSW Faculty of Law, you can have more than one executor. They’re a back-up if your first choice is unavailable, or they could support your first choice by managing tricky admin.
No and yes: Your will is not valid if you get married, but it remains valid if you get divorced. If you want a will made before marriage to remain valid, it should clearly demonstrate that it was made with your intended spouse in mind, or it should indicate that you are making it with a future marriage in mind. If you are divorced and you haven’t changed your will, your ex-spouse will be, for all intents and purposes, considered dead. All provisions and bequests will fall away. Note: If you are separated your will remains valid. Your spouse still benefits from the existing terms. Victoria Legal Aid has more information on the validity of your will through marriage and divorce.
We hope that you never have to make the difficult decision to cut a child from your will; but life happens and sometimes it seems that this action is your only choice. The question is: Will it stick? The frustrating answer is: It depends. You can certainly omit a child or dependant, but they can challenge the omission on your death. According to Rod Cunich, it helps to make a statutory declaration that explains exactly why that child is being cut out. If the reasons are compelling enough, the challenge may not succeed. But, if the child has compelling reasons to challenge the will, for instance they’re living in poverty, then the court may decide in their favour.
Leaving a gift to charity is admirable, but you need to get the details right otherwise it might not get the legacy you intend. For example, you need to use the charity’s full registered name, which may not be exactly the same as the name used to front the organisation. A gift by its nature is unconditional, but you can ask that your legacy be put to a specific use. Note: A charity can refuse your gift if the conditions are too severe. Public Trustee has a final recommendation for successfully leaving a gift to charity and that is to talk to your family about your intentions so there is no ill will or inclination to dispute the gift.
If you want to know more about estate planning, there’s a great short video on Public Trustee; but in a nutshell: It details the distribution of assets after death. This includes wills, trusts, donations, policies, naming executors, and your wishes for your funeral arrangements. For example, if you want a soundtrack that celebrates your passion for life. Ideally, you want to hire an attorney familiar with estate law so that they can limit estate taxes while staying within the letter of the law. Estate planning also describes how assets and financial responsibilities are to be handled should you become incapacitated.
A will is typically a single document that gives instructions about how your assets are to be divided after you die. It also makes provision for funeral arrangements. It’s relatively straightforward and is a good option if you have a small and uncomplicated estate.
An estate plan is more comprehensive than a will. In fact, a will is one component of an estate plan. Other components include trusts, powers of attorney, and living wills. It takes care of your financial obligations and legacies after death, and in the event that you become incapacitated and can’t make cogent financial decisions.
There’s a great article on Money Smart that explains the difference between a will and an estate plan in more detail.
Hunter Kuffel has written an extensive article that tells you what an estate planning attorney is, and what services they provide. For instance, estate planning attorneys do more than help you write a simple will; they can also establish trusts and use their knowledge of local laws to ensure the government doesn’t get more inheritance tax than is strictly due. They are indispensable if you have an extensive or complicated estate and can ease the burden on your loved ones by helping them through all the red tape following your death, including probate.
Sooner rather than later: In fact, some experts recommend you start with your first serious job with regular income. You may feel that you don’t have the assets to justify a plan, but you probably have a car, maybe an insurance policy, and all of your digital gadgets total a respectable sum. You can split it all between friends and family if you don’t have a significant other. You could leave it until later, but preferably no later than getting married, buying a home and having children. Don’t forget to change the terms as your life circumstances change; for example, divorce or starting a business. An article on Altus Financial includes other factors to consider when you start estate planning.
You need a will that details the distribution of your assets, your executor and attendant legal guardians. If you have a trust, you need a Binding Death Nomination or Superannuation Will to detail non-estate distributions. If you have health problems that render you incapable of managing your financial matters, you need an Enduring Power of Attorney (EPOA) – someone who takes care of this aspect of your life. Medical directives (living wills) detail your wishes regarding medical treatments, for example, do not resuscitate. You can include a personal document that includes a variety of information, including computer passwords and banking details. Ken Raiss, writing for Michael Yardney’s Property Investment Update, details the different documents estate planning requires.
Death and taxes: The two inevitabilities of life. Unfortunately, they are also bound together because death is taxed. Pop onto the Queensland Government website for in-depth information on death-related taxes, but get the short form here. In terms of federal tax, the estate may have to pay capital gains tax, tax on superannuation death benefits, death benefit termination tax, and estate income tax. When it comes to state tax, the estate may have to pay land tax and transfer (stamp) duty. The taxes due depend on what assets are included in the estate, and how the assets are distributed.
There are five types of trusts: Child trusts manage a child’s inheritance until they come of (specified) age; Trusts for incapable beneficiaries are intended to provide life-long financial support to those who cannot take care of such matters themselves; Life estates ensure the beneficiary has life-long accommodation and income; Discretionary trusts give trustees power of discretion so they can divvy the income between beneficiaries in a tax-effective manner over a period of time; Charitable trusts provide regular gifts to the charity of your choice over an extended period of time. The Public Trustee of Queensland has more information on the types of trusts.
Anyone who can legally own property can be a trustee. However, trustees are responsible for the long-term management of trust money for your beneficiaries, with the aim to maintain or grow the funds through good investments and decision-making. So instead of nominating your best friend, rather nominate someone who has proven financial acumen. It’s ok if the only financial whiz you know is a beneficiary; they can still act as a trustee. There are two other options: You can appoint several trustees to tap into collective expertise, or you can appoint a company or organisation that specialises in trust management. Pop onto the Public Trustee of Queensland site for more advice on appointing a trustee.