Do I Need A Will?
This is a question in the minds of a lot of people and is a question which sometimes is never answered as statistics show that over 40% of Australians pass away without having made a Will.
Before going any further we need to dispel an historical supposition that if a person dies without a Will his or her estate passes to the State. Except where there are no eligible next of kin this is not the case as the Succession Act 2006 (NSW) provides for a range of people related to the deceased person who are entitled to share in a deceased estate. The range of next of kin is extensive and runs from a surviving spouse and children to aunts and uncles.
The rules for the distribution of estates of persons dying without a Will (Intestacy) can be complex depending on the number of next of kin surviving and their relationship to the deceased.
Likewise there may also be a number of persons who are entitled to apply for the right to administer the estate of a person who dies without a will (Letters of Administration) which can cause logistical and emotional difficulties.
If you are 18 or over (or under 18 if you are contemplating marriage) and you own property you should make a Will. This will ensure that your property and estate is divided amongst your beneficiaries in accordance with your wishes and any other wishes that you may wish to express are adhered to or taken into consideration. It also aims to ensure a far smoother administration of your estate for your friends and relatives.
When making your Will you need to appoint an Executor who is the person that on your death applies to the Supreme Court of New South Wales for Probate of your Will. The granting of Probate entitles that person to deal with your assets and distribute your estate in accordance with your wishes as expressed in your Will.
When making a Will you also need to consider the persons who you wish to share in your estate. For example, if you are married or in a de-facto relationship your spouse or partner and if he or she pre-deceases you, your children. If you are not married you may wish to leave your estate to your parents, siblings, other relatives or friends, or a combination of both.
When making your Will you need to sign it on each page in the presence of two adult witnesses who also need to each be present when the Will is signed and witnessed.
There is a common belief that a Will can be prepared with the assistance of a “Do it Yourself Will Kit” which may or may not be the case. However there are often potential tax liabilities for beneficiaries which need to be considered and it is also necessary to ensure that all of your assets are dealt with in the Will so that there is not what is known as a partial intestacy left in respect of a particular asset or assets that are not left to anyone.
If you already have a Will and you have married or divorced since that Will was made, the marriage or divorce will in most cases at least partially revoke the terms of the Will so it would be wise for you to make a new Will. Likewise if you have separated from your spouse since making the Will, you should consider changing the Will as if you were to pass away before being divorced the terms of the Will could still have effect.
In certain circumstances it could be prudent to consider creating what is known as a Testamentary Trust in your Will. The effect of a Testamentary Trust is to create a discretionary trust or trusts within the terms of your will that comes into existence upon your death.
That is, your estate is left to one or more trustees (usually close relatives or friends) who then hold the assets in your estate on trust for certain specified classes of beneficiaries that are named in your Will. The trusts created upon your death can then operate as a normal discretionary trust for many years into the future, allowing for trustees to manage the trusts’ assets, distribute capital and income to beneficiaries, etc.
The net effect of a Testamentary Trust is that your estate is not distributed to your individual beneficiaries, notwithstanding the fact it is distributed to their benefit.
The advantages of a Testamentary Trust are that it can protect your estate from falling into the hands of a prospective beneficiary who may find him/herself in dire financial circumstances or in the process of being divorced where the relevant share of the estate becomes liable to pass otherwise in accordance with your wishes.
There are also relevant tax considerations which need to be considered on a case by case basis. A Testamentary Trust adds a dimension of flexibility in allowing these tax considerations to be dealt with at the time of your death rather than many years before.
For further information or assistance regarding Wills or Testamentary Trusts, please contact Tim Osborn on 4925 2077.