Planning for what happens when you pass away or become incapacitated is an important way of protecting those you care about, saving them from dealing with a financial and administrative mess in the future.

Your will gives you a say in how you want your possessions and investments to be distributed. But importantly, it should also include enduring powers of attorney and guardianship as well as an advance healthcare directive in case you are unable to handle your own affairs towards the end of your life.

At the heart of your estate plan is a valid and up to date will that has been signed by two witnesses. Just one witness may mean your will is invalid.

You must nominate an executor who carries out your wishes. This can be a family member, a friend, a solicitor or the state trustee or guardian.

Keep in mind that an executor’s role can be a laborious one particularly if the will is contested, so that might affect who you choose.

Around 50 per cent of wills are now contested in Australia and some three-quarters of contested wills result in a settlement. ⁱ

The role of the executor also includes locating the will, organising the funeral, providing death notifications to relevant parties and applying for probate.

Intestate issues

Writing a will can be a difficult task for many. It is estimated that around 60 per cent of Australians do not have a valid will in place. ⁱⁱ

If you don’t have a valid will, then you are deemed to have died intestate, and the proceeds of your life will be distributed according to a statutory order which varies slightly between states.

The standard distribution format for the proceeds of an estate is firstly to the surviving spouse. If, however, you have children from an earlier marriage, then the proceeds may be split with the children.

Is probate necessary?

Assuming there is a valid will in place, then in certain circumstances probate needs to be granted by the Supreme Court. Probate rules differ from state to state although, generally, if there are assets solely in the name of the deceased that amount to more than $50,000, then probate is often necessary.

Probate is a court order that confirms the will is valid and that the executors mentioned in the will have the right to administer the estate.

When it comes to the family home, if it’s owned as ‘joint tenants’ between spouses, upon death your share automatically transfers to your surviving spouse. It does not form part of the estate.

However, if the house is only in your name or owned as ‘tenants in common’, then probate will need to be granted. This process generally takes about four weeks.

Unless you have specific reasons for choosing tenants in common for ownership, it may be worth investigating a switch to joint tenants to avoid any issues with probate.

You will also require probate if there is a refund on an accommodation bond from an aged care facility.

Rights of beneficiaries

Bear in mind that beneficiaries of wills have certain rights. These include the right to be informed of the will when they are a beneficiary. They can also expect to hear about any potential delays.

You are also entitled to contest or challenge the will and to know if other parties have contested the will.

Estate planning can be tricky and emotional, particularly when your circumstances are a little more complex. So, get in touch with us to ensure your estate plan meets your wishes and takes account of all the issues, and be sure to revisit it if your circumstances change.

Sources

 i Success rate of contesting a will | Will & Estate Lawyers

ii If you don’t, who will? 12 million Australians have no estate plans | Finder

Navigating complex family relationships and blended families can be challenging at times and particularly when a family member passes away.

A good estate plan can help to make sure your wishes are carried out. An estate plan, of which a will is the first and most important part, can ensure your estate is distributed in the way you want. It can also help if you become incapacitated, particularly when it includes an enduring power of attorney and a medical power of attorney that indicate who should oversee your affairs and any relevant instructions.

Professional advice is vital in estate planning to make sure that you have considered all the issues, including tax matters, and that your loved ones are protected. It is also important to clearly communicate your wishes, particularly when there are complex family dynamics involved, so that your wishes are clearly understood.

Your adviser would discuss any relevant matters with you. Here is a reminder of some of the issues to consider.

Superannuation

Deciding who gets your super when you pass away is more complicated than deciding what happens to your personal assets like property through a will. This is because superannuation is held in a trust by the super fund’s trustee, not in your name directly.

A binding death benefit nomination should be at the top of your list when you are considering the distribution of your superannuation funds.

This makes certain that your super death benefit is paid to those you choose because without one, the trustee of your super fund will make their own decision.

The nomination is usually valid for three years before it lapses and must be renewed. It’s a good time to review your nomination if your family dynamics change.

Blended families

If you have been married more than once and/or have children with more than one partner, your will helps to effectively provide for those you choose.

You may wish, for example, to ensure that your children receive the proceeds of your estate rather than your spouse or ex-spouse. Alternatively, you may need to ensure your will protects your current spouse from the claims of previous spouses.

When it comes to the family home, the type of home ownership is important. If you have purchased as ‘joint tenants’, the entire asset will pass to the surviving spouse. On the other hand, if you have purchased as ‘tenants in common’, each spouse can distribute their share of the house to others.

You may also wish to include a ‘life interest’ in the home so that your current spouse can continue to live in the home until their death before it ultimately passes to your other beneficiaries.

Trusts

Any existing family trusts should be reviewed with a blended family in mind. Check that the trust deed provides clear instructions for succession, if you want to ensure your children from past relationships are catered for.

Your will can also establish new trusts, known as testamentary trusts, to provide for any dependents with disability, if you are worried that a child may misuse your assets, or to allow for young children.

A testamentary trust can also help to protect your adult child’s interests if they were to divorce a partner or are facing bankruptcy. Any inheritance they receive from you would become part of their property and can be considered in a divorce settlement or called on by creditors.

Handing on a business

If you are in business with partners or would like to hand on the family business to one child but not others, a life insurance policy may be a useful strategy – sometimes known as estate equalisation – to even the distributions from your estate.

In the case of a business partnership, you would name your partner or partners as beneficiaries of the life insurance policy, to effectively ‘buy you out’ of the business. Where it’s a family business due to be handed on to one child, your life insurance would go to your other children to match the value of the business.

Note that it is crucial to continually review the value of the business and the value of the life insurance to ensure they remain current.

Estate planning can be tricky and emotional, particularly when your circumstances are a little more complex. Get in touch with our team of experienced financial advisers to help guide you through the planning stages so that your estate plan meets your wishes and takes account of all the issues.