What is a Will?
A Will is a legal document that clearly expresses your wishes as to how your property is to be divided after your death.
Do I need a Will?
If you wish for your property to be distributed in a way that it provides benefits to your family, friends, neighbours or even organisations such as charities then you should have an up to date Will reflecting your wishes.
A Will can assist in reducing potential family conflicts by clearly stating your wishes at the time of your death. Your Will can provide for the continuous care of any kind you desire to your spouse, children, grandchildren or parents.
Studies have shown that at least 45% of Australians do not have a valid Will. If you die without a Will your property which forms your estate will be distributed according to a pre-determined formula and, if your only living relatives are more distant than cousins, your estate will be distributed to the State (Crown).
There is a range of terms that are relevant to Wills and we can advise you of them. However some of the most important include:
- Estate: everything that you own at the date of your death
- Executor: essentially, an executor of a will is responsible for making sure that any debts you owed at the time of your death are paid off, and that any remaining money or property is distributed according to your wishes as set out in your Will. The executor has to distribute the proceeds of a sale of property from the estate to the beneficiaries.
- Beneficiary: to whom you have left a share of your estate
- Residue: everything left over after payment of your debts and expenses
- Intestate: not having a Will at the time of death
- Life estates: An estate that terminates on the death of the life tenant or on the occurrence of a specified event, e.g. marriage, bankruptcy, etc.
Legal Wills take effect only after you die, so it is important that you think carefully about the content of your Will.
What assets will become your estate and be controlled by your Will?
Only assets owned by you will pass into your estate and be controlled by your Will. Some common examples of assets and how they affect your estate are:
Jointly owned assets
Ownership of jointly owned property will pass to the other joint owner(s) person upon your death, independent of your Will, if owned as joint tenants.
This applies to homes, home contents, bank accounts and your personal effects, and any other assets you own jointly.
Tenants in Common assets
The exception is assets owned jointly as ‘tenants in common’. Your interest in such property will be controlled by your Will.
For planning purposes, joint tenancy can be converted to a tenancy in common if appropriate. The costs of doing this are minimal.
Assets in your sole name, which can include cash, real estate, vehicles, and shares, can form part of your estate and be controlled by your Will.
Unit trusts and companies
Assets owned by unit trusts or companies controlled by you will not form part of your estate. The shares or units, however, will become part of your estate.
Assets owned by discretionary trusts controlled by you will not form part of your estate. They are owned by the trust and controlled by the trustee acting on the trust deed.
Once you have nominated a beneficiary in your insurance policy which can include your spouse or family member the money paid out on your life insurance policy do not form part of your estate however they are paid directly to your beneficiary.
If appropriate for planning purposes, you can nominate your estate as the beneficiary of your policies if you want the proceeds of the policies to pass to your estate and be managed by the terms of your Wil.
If the policy is owned by a superannuation fund, the proceeds will be received by the fund and not by your estate. The proceeds will be managed by the trustee of your superannuation fund acting on the terms of the fund deed.
Assets held by a superannuation fund are often provided to a dependent spouse or children, not your estate.
What should be in a Standard Will?
A standard Will is one that provides for standard distribution of your estate at the time of your death. Choosing a standard Will is simpler and provides you with a valid Will quickly. Some examples of standard Wills you might consider appropriate for you include:
- 100% of your estate be given to your spouse/partner if alive;
- If spouse/partner not alive then
1. Specific gifts to your chosen beneficiaries, then
2. 100% of the residue of the estate to be shared equally between the children
- If a child predeceases parents then that child’s share of residue goes to their children (i.e. grandchildren) if any.
- If no children or grandchildren then for example to siblings and siblings-in-law equally (or their children if beneficiary predecease will makers).
If there is no surviving spouse/partner then second, third and fourth distributions apply.
Non-standard Wills, on the other hand, can be more detailed and specific to your individual needs.
Some typical examples of non-standard Wills can provide:
- Distributions that are specific and non-standard, and/or
- Terms drafted to address blended families,
- Your wishes regarding:
1. Control of trust structures,
2. Ownership of company structures,
3. Ownership of business interests,
4. Ownership of a SMSF
- Dealing with your interfamily loans,
- Life estates
What is a Testamentary Trust Will?
A testamentary trust is drafted to provide you with maximum flexibility and allow for tax-effective distribution of capital and income as well as providing possible protection of your beneficiaries from third parties such as the banks.
The benefits include flexibility on capital and income allocation. A trust under a Will allows for optimum allocation of income and capital, which in turn may allow your beneficiaries to qualify for aged, disability and sole parent pensions, Austudy or the like, for which they would otherwise not have qualified under a normal inheritance.
What are Life Interests and Right of Occupation?
One particular use of testamentary trusts is to create a life interest or right of occupancy. It can be used to create a flexible or fixed life interest.
Life interest is a form of testamentary trust where a person (usually a surviving partner) is granted a lifetime of fixed income and benefits, and use and enjoyment of all or part of the assets, for example, the home of the deceased estate. This is useful if you wish to ensure that the capital assets are preserved after the lifetime beneficiary dies.
The executor or trustee is usually given the express power to pay any taxable capital gain that might be assessed against the lifetime beneficiary with funds from the estate.
By creating a life interest you are able to allow the life tenant to enjoy the asset (it can be the whole of your estate or just your home) for their lifetime and upon death, the asset or fund is given over to someone else (for example your respective children).
The person who holds the life interest is called the life tenant and the life tenant has the right to possession and enjoyment of the asset and its income until their death or until they abandon the interest.
For example if you nominate in your Will a life tenant to live on your land then that nominated life tenant has the right to occupy the land/home during the life tenancy and depending upon what conditions are imposed in your Will, can lease the property, improve the property and sell and replace with another property (for example if a downsize was required due to age or infirmity).
You can apply a range of conditions to be applied to the life interest but the interest always ends on the death of your nominated life tenant or in some cases when your nominated life tenant finds another partner. You can even provide that the life interest is to end after a specific period of time – for example, after 20 years.
Right of Occupation
By you giving a person, for example, your spouse or child the right to occupy your principal place of residence in a Will, your spouse or child becomes the owner of the land, and land tax is not payable while they use and occupy that land.
When that person dies or moves out, the residence will form part of your deceased estate and will be distributed in accordance with your Will.
However, a right of occupancy does not allow the person occupying your principal place of residence to sell or rent out the property.
Reviewing & updating your will
How often should I review my Will?
It is advisable for you to review your Will regularly. A review does not necessarily equate to changing your Will but does make sure that changes in your circumstances are not overlooked.
We recommend that Wills be reviewed when:
- you separate, divorce or re-marry/re-partner
- you have more children
- you establish or dispose of a company or business
- Whenever you buy or sell significant assets, such as a home or land
- You incur significant debts or there is a likelihood you may become insolvent
- Any of your major beneficiaries die or experiences a significant change in circumstances including a family law dispute
- Your executor dies or becomes ill
Can I alter my Will?
Do not add to or delete from a Will after execution without obtaining legal advice. Even simple changes must be made correctly or your wishes may be invalidated.
We are here to help
Our solicitors specialise in Wills & Estates matters throughout the Central Coast, the Hunter Region and Sydney. We have the experience and expertise to guide you through the process from beginning to end to ensure your peace of mind.
If you would like assistance with your Wills & Estates documents or wish to discuss a matter of concern to you, contact one of our Wills & Estates specialists on 1300 529 444 or fill in our contact form to arrange a free conference with a solicitor today. Contact us now! 24-hour legal advice 7 days a week
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