Twelve reasons why you need to make a Will and why you need to do it now
1. ‘One day son, all this will be yours’
Leigh Adams Estate Planning Lawyers have heard this before. It’s called ‘sweat equity’. The deceased’s son had worked hard in the family business for 15 years, only to discover just after his father died, that a year before his father’s death, the father had re-written his own will leaving his daughter (the son’s sister) who had been recently financially impoverished from a bitter divorce, one half of the family business. The father had not forgotten about his promise to his son, but had assumed that the son ‘would understand’. He didn’t understand at all. The consequential legal challenge to the will left the estate substantially worse off, and the siblings themselves never forgave each other. An experienced estate planning lawyer would have ensured that the will properly dealt with the father’s promise to the deceased’s son. Loose lips sink ships.
2. Who is my spouse?
The recently enacted New South Wales Succession Act covers any person who was in a ‘domestic partnership’ with the deceased at the time of death. That includes legal spouses, de facto spouses, and gay and lesbian partners as well.
This new expanded definition means that a deceased can now die with multiple spouses. Consider for example, the situation where a person is separated from their spouse but not divorced, and is currently living in a de facto relationship with another at the time of their death. And ‘spouse’ also includes any person whose relationship with the deceased resulted in the birth of a child. That includes one night stands.
3. Where there’s a will, there’s a relative
The number of people who can claim part of the deceased estate as a worthy beneficiary is now very broad. It includes spouses (as defined above), children (not only from the current ‘spouse’ but from every former relationship), parents, brothers and sisters, and even cousins.
4. One current spouse and children from that spouse
The spouse gets everything and the children get nothing. What happens if that surviving spouse then remarries and has further children with their new partner? If they then divorce, then half of the deceased’s estate will likely go to the ex-second spouse. Even if there is no divorce, the deceased’s children may never see their inheritance as the property may be shared (in part or in whole) upon the death of the surviving spouse and/or their second spouse, with the surviving spouse, the second spouse and the children of the second union.
5. One current spouse and children from that spouse and children from a former spouse
This really hurts. The estate is split between the current spouse and the children of the former relationship. Again, the children from the current spouse get nothing.
6. Multiple spouses and no children
The estate is divided between all spouses.
7. But I own everything – no you do not!
Many people do not fully understand that they may have interests in property which a will cannot control. Examples include real property, bank accounts and company shares where the property is held jointly (as joint tenants) with a spouse. Other examples include interests as beneficiary of a family discretionary trust, and interests in a superannuation fund. Leigh Adams Estate Planning Lawyers focuses their clients’ attention on such issues.
Except in the case of bankruptcy (see Paten v Cribb, & section 58 of the Bankruptcy Act 1966) , property held as joint tenants passes to the surviving holder and does not form part of the deceased’s estate. That spells bad news if the surviving holder is not the person the deceased wanted to get the property.
8. Control of my property and avoiding Capital Gains Tax
If the deceased does not have a will, the administrator of the estate (who is Court appointed), generally has no interest in saving tax. Or they do not know how to. Or they do not want to. A trained estate planning lawyer will consider the issue of whether passing assets to beneficiaries, in lieu of themonetary equivalent of the assets, will postpone any capital gains tax. It usually will. Tax postponed is tax saved, as they say.
9. And my family trust – who gets that?
The persons who controls the corporate trustee of your family trust will generally control the trust itself, right? If you own the shares, you can control the directors and therefore the trustee company and therefore the trust. Broadly, that is generally correct. But who will get those shares if you do not have a will? Your family trust assets could well fall into the wrong hands.
Despite the above comments, the trust deed may have provided for an appointor. The ‘appointor’ can sack the current trustee and appoint someone else or some other company as trustee. If the deceased has recently come out of a broken relationship, then the current appointor may no longer be suitable. That can spell disaster if the deceased has died without a will. As excellent estate planning lawyers, Leigh Adams Lawyers will review this issue and focus the deceased’s attention on such matters to ensure that the trust is controlled by the person or persons that matter.
10. Statement of last wishes
A devastating accident leaves one partner dead and the survivor on life support for 4 years. The children are under 18. When the deceased finally dies, there is no money left at all for their children. The deceased did not have a will. It could have stated that in such circumstances, the life support would be terminated.
11. But I want to control my self-managed superannuation.
Many people now have self-managed superannuation funds (SMSFs). Controlling the beneficiaries of an SMSF is made easy when a will maker’s attention is drawn to it. But if the deceased has not made a will, then it is highly likely that the deceased has also not thought about what is to happen to their superannuation entitlements. That can be catastrophic.
Where a person dies, the balance of their superannuation interests (known as their death benefits), are paid to one or more of their dependants or their legal personal representative. The term ‘dependant’ is defined in s 10(1) the Superannuation Industry (Supervision) Act 1993 (SISA).
But s 302-195(1) of the Income Tax Assessment Act 1997 (ITAA97) has a separate definition of ‘dependant’. That’s important because the tax payable by a dependant under SISA is determined by the definition under ITAA97. The definitions are not exactly the same!
Control of death benefits can be effected by using binding death benefit nominations. They give certainty. They do not have to be renewed every three years if they relate to a SMSF and they can also deal with pension entitlements upon the deceased’s death.
12. The dark side of binding death benefit nominations
But the simplicity of making binding death benefit nominations is beguiling. It’s not just a form filing exercise (which, without professional advice, many people get wrong in any event). A fundamental question must be answered before considering them: does the SMSF trust deed provide for binding death benefit nominations? If it does not, then it will have to be amended. But if the individual has already lost capacity from accident or dementia, then this may not be possible.
And so the estate planning advisor should be involved well back from the point of death to earlier times which should be well before the deceased became disabled. Do it now!
The informed legal estate planning advisor will ask questions like: who is to control the self managed superannuation fund when the individual is unable to? The answer includes being sure that an enduring power of attorney is in place. But does the power provide for the attorney to become a director of the corporate trustee or a trustee themselves? Does the power’s wording extend to these matters?
Does the corporate trustees’ constitution provide for that? Does the corporate trustee’s constitution provide for the removal of a director upon the director becoming mentally disabled? Who can amend the constitution or elect the attorney as director of the corporate trustee when the grantor of the power has already lost capacity?
Does the Self Managed Superannuation Fund Trust Deed provide for the removal of a trustee who has lost capacity? Will the trust deed need to be amended to do so? What is the process of amendment? Can it be amended if the individual has already lost capacity?