As wills and estate lawyers practising at Gold Coast, the process of estate planning and writing a Will involves three important steps:
The importance of these steps when writing a will and advising in estate planning cannot be stressed enough. People or lawyers who skip the first two steps and simply go on to writing a will can leave estates which are not properly dealt with, and often catastrophic consequences. This is all too often the case with “home-made” wills, and sometimes the case with wills prepared by inexperienced lawyers.
To properly write a will, most wills and estate lawyer will need to understand the financial affairs of the will maker. This might seem intrusive or excessive, but it is necessary. It is necessary because not all of what a person considers to be their assets is always available to their estate.
When estate planning and writing a will, there are a number of different types of assets to consider. These fall generally within the following categories:-
Jointly owned assets include joint bank accounts, furniture and the like, and properties which are held by a couple jointly (if the property is held as tenants in common, then each interest is given in accordance with the terms of the respective party’s will). Save for the exception in relation to property held as tenants in common, the ownership of assets held as joint tenants generally falls to the surviving owner, irrespective of what is said in a will. There is however a presumption under the Property Law Act that property is held as tenants in common, meaning that unless it is clearly held as joint tenants, the interest in the property should be dealt with under the will.
The next category of assets is assets which are owned solely by an individual. Generally speaking, these assets may be given in accordance with the terms of the will. But many assets that people control are not necessarily owned by them as they may be owned by companies controlled by the person, or they may be owned by the person (or a company controlled by the person) but in their capacity as trustee of a trust.
In relation to assets that are owned by companies, a person’s interest is represented by their ownership of shares in the company. Accordingly, it is not the asset that can be dealt with, but instead the shares in the company that owns the asset. The financial statements of the company will be relevant, as (for example) the person may owe money to or be owed money by the company, and there may be significant tax consequences attempting to liquidate the assets of the company and pass the value of them through to the estate.
Generally speaking, the death of a primary beneficiary makes no impact upon the continued operation of a trust. Sometimes what will happen is that there will be loans either to or from the person who has passed on and as a consequence it is required to deal with those in the administration of that person’s estate. For practical purposes however, if a person’s interest in an asset is that of a beneficiary under a trust which owns the asset, then the ownership is undisturbed by their passing and – subject to organising the dealings of the trustee – it is “business as usual” for the trust.
If a person proposing to deal with assets that are held in trusts as part of their estate planning, then the usual way is to ensure that the control of the trust is left to someone who understands their wishes and who can be guided by an expression of wishes. To do that, the ownership of the shares in any trustee company which were owned by the will creator might be left to the person intended to have control of the trust, and that person might also be appointed to be the principal or appointor under the trust deed (that being the person who can dismiss the trustee and appoint a new one). That person might also be left a letter with the will telling them how the will maker would like the trust business to be dealt with, although this letter is generally not legally binding (hence its description as an “expression of wishes”).
Our will and estate lawyers would ask to see the financial statements of the trusts to see whether there are any beneficiary loans or unpaid present entitlements, and to identify whether there are any other issues that might be relevant.
For those reasons when writing a will it is important for our wills and estate lawyers to review the client’s trust deed and also the financial statements of the trust so that their Will can be drawn accordingly.
Superannuation benefits and life insurance benefits will generally “skip” the will because they are sums of money which are payable under an agreement as a consequence of death rather than an asset of the person.
With superannuation benefits, most policies and self managed superannuation fund trust deeds allow for the nomination of beneficiaries. Those nominations can be lapsing or non-lapsing and essentially should be done at the same time as the will.
It is possible to make the legal personal representative of your will the beneficiary of the superannuation payment as a result of which your superannuation death benefits are dealt with in accordance with the terms of your will. It is critically important to follow the precise procedure in the superannuation policy for nominating beneficiaries, as a non-compliant nomination is likely to be invalid.
If there are no nominations (or a nomination is invalid), then in most cases, the superannuation fund trustee will be permitted to distribute the proceeds, usually to “dependents” as that term is defined by the policy – usually spouses, children, and anyone else who can demonstrate a financial dependency and some sort of family relationship.
There have been a number of court decisions going to the validity or otherwise of nominations made under superannuation trust deeds, as well as many other challenges and disputes – particularly in the case of former spouses. Legal advice before filling out those documents is recommended.
Life insurance payments are also dealt with independent of the will. Generally speaking there will be a policy owner who is entitled to the payment, although sometimes the life insurance payment will find its way into the estate. Life insurance benefits are to a large extent not available to meet the claims of creditors and accordingly one needs to be careful to ensure that the life insurance is available to payout liabilities and borrowings if that is what is intended.
Because of these different classes of assets, documenting a will maker’s intentions can involve writing a Will, Power of Attorney, Binding Death Nomination for a superannuation fund, and ensuring by an appointment or variation that control of any trust in which you have an expectancy will pass to a person who you believe will carry out your wishes. A person also might want in the will to give certain beneficiaries an option to purchase a particular asset, or a right to reside in a particular home.
Properly documenting intentions should, for an experienced wills and estate lawyer, also involve taking steps to ensure that the will is not susceptible to challenge. This can involve the will lawyer spending some time with the will maker to assess competence and whether there might have been external issues flavouring the decisions, and in some cases obtaining medical evidence to confirm testamentary capacity. It can also include advising of the risk of claims being made, and what might be done to reduce that risk. The will maker may wish to exclude a dependent or child http://www.qbmlawyers.com.au/estate-lawyers-gold-coast-can-exclude-child-will/
Testamentary trusts (in fact “testamentary discretionary trusts”) are a frequently used device when writing a will, generally recommended for the protection of assets in an estate against claims and as a means to avoid taxation disadvantages particularly where a potential beneficiary is a minor.
Testamentary discretionary trusts are more often called “testamentary trusts”, but in fact all obligations of an executor under a will give rise to a testamentary trust – the difference with a testamentary discretionary trust is that the executor of the will (or trustee appointed by the will) has a discretion in relation to the gift – it might be a discretion as to the amount to give, or when to give it, or who within the identified beneficiaries is to receive it or the proportion of they will receive.
Most commonly, the terms of a testamentary discretionary trust are set out in the will itself. That will make the will longer and more complex.
If all of your assets are jointly owned, then in most cases they will pass to the surviving owner irrespective of what your Will says. That said, it is still useful to have a Will in the event that you become the sole owner of those assets or any of those assets are held as tenants in common (allowing each owner to deal with their own interest) rather than as joint tenants. The cost of administering an estate where there is no will (called an intestacy) is usually far more than would be the case if there was a will.
You should see a lawyer about a new Will if you are involved in matrimonial proceedings. The extent to which a divorce will affect a Will depends upon the state that you live in but in Queensland, both marriage and divorce will affect a Will.
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