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Writing a Will
Writing a Will and Estate Planning
As wills and estate lawyers on the Gold Coast, estate planning and writing a will involve three key steps:
- Identifying the assets that will form part of the estate
- Ensuring those assets pass to intended beneficiaries in the desired proportions
- Clearly documenting the person’s intentions
These steps are fundamental to effective estate planning. Skipping the first two steps and proceeding directly to drafting a will can result in assets not being dealt with as intended and may lead to disputes. This commonly arises with informal or poorly prepared wills.
To prepare a will properly, a clear understanding of the will maker’s financial position is required. While this may seem detailed, it is necessary, as not all assets a person believes they own will form part of their estate.
Identifying Assets When Preparing a Will
When estate planning and writing a will, it is necessary to identify the different types of assets involved. These generally fall within the following categories:Jointly Owned Assets
Jointly owned assets commonly include joint bank accounts, personal property and real estate owned by more than one person. Where property is held as tenants in common, each person’s interest forms part of their estate and is dealt with under their will.
Where property is held as joint tenants, the interest will usually pass to the surviving owner, regardless of the terms of the will. However, under the Property Law Act, there is a presumption that property is held as tenants in common unless a joint tenancy is clearly established.
Solely Owned Assets
Assets owned solely by an individual are generally dealt with under the terms of their will. However, not all assets a person controls are legally owned by them.
Assets may instead be held by a company or by a person in their capacity as trustee of a trust, which affects how those assets are dealt with on death.
Assets Held by Companies
Where assets are held by a company, the individual does not own the underlying assets but instead holds shares in the company. The estate will deal with the shares, not the company’s assets.
This distinction is important, as the value of the shares depends on the financial position of the company. There may also be financial arrangements between the individual and the company, such as loans.
In some cases, steps such as liquidating a company to realise value for an estate can have significant tax consequences and require careful consideration.
Assets Held by Discretionary or Family Trusts
The death of a beneficiary does not affect the ongoing operation of a trust. In some cases, there may be loans to or from the deceased that need to be addressed during the administration of the estate. Where a person’s interest in an asset is as a beneficiary of a trust, ownership of the asset remains with the trust and is not affected by the person’s death.
When considering assets held in trusts as part of estate planning, control of the trust is a key issue. This often involves ensuring that control of the trustee company or the appointor role passes to a person who understands and will implement the deceased’s intentions.
It is also common to prepare a letter accompanying the will setting out the deceased’s wishes for how the trust should be administered. An expression of wishes is generally not legally binding but may guide those controlling the trust.
When preparing a will, we review trust deeds and financial information to identify relevant issues, including beneficiary loans and control mechanisms, to ensure the estate plan aligns with the client’s intentions.
Superannuation Benefits & Life Insurance Benefits
Superannuation and life insurance benefits generally do not form part of a person’s estate and are not dealt with under a will. These benefits arise under contractual arrangements and are paid in accordance with the relevant fund or policy.
Superannuation Benefits
Superannuation funds, including self-managed superannuation funds, typically allow members to nominate beneficiaries. These nominations may be binding or non-binding and should be considered as part of the overall estate planning process.
It is important to ensure that nominations are made correctly and in accordance with the fund’s requirements. Alternatively, a legal personal representative may be nominated so that benefits are paid to the estate and distributed under the will. Strict compliance with the fund’s nomination requirements is necessary to ensure validity.
If no valid nomination exists, the trustee of the fund will determine how the benefit is distributed, usually among dependants as defined under the relevant legislation and fund rules. This may give rise to disputes, particularly in blended family situations.
Life Insurance Benefits
Life insurance proceeds are generally paid directly to the nominated beneficiary or policy owner and do not form part of the estate. In some cases, however, the proceeds may be paid to the estate depending on the terms of the policy.
Careful planning is required to ensure that insurance proceeds are directed appropriately and can be applied to intended liabilities and obligations.
Documenting Your Intentions
Given the range of asset types involved, documenting a will maker’s intentions may require a combination of a will, enduring power of attorney and binding death benefit nominations for superannuation.
It is also important to consider who will control any trust structures where assets are held, to ensure those arrangements operate in accordance with the will maker’s intentions.
A will may also include provisions such as granting beneficiaries an option to purchase a specific asset or a right to reside in a property.
Properly documenting intentions can also reduce the risk of a will being challenged. This may involve assessing the will maker’s capacity and considering whether any external influences may affect the validity of the will. In some cases, medical evidence may be obtained to confirm testamentary capacity.
Advice may also be required in relation to potential claims against the estate and strategies to reduce that risk, including where a person intends to exclude a dependent or child.
Testamentary Trusts
Testamentary trusts, often structured as discretionary trusts, are commonly used in wills to protect assets and manage tax outcomes, particularly where beneficiaries are minors.
Under a testamentary trust, the executor or trustee appointed by the will has discretion in how assets are distributed, including the timing, amount and allocation among beneficiaries. The terms of the trust are typically set out in the will, which can increase the complexity of the document and requires careful drafting.
Risks of Low-cost or Informal Wills
A will is often prepared well in advance of when it is needed, which can lead some people to prioritise cost over quality. However, low-cost or informal wills can result in unintended outcomes and complications for beneficiaries and executors.
Homemade or template wills frequently contain errors, omissions or gaps, particularly where assets change over time. These issues may lead to partial intestacy or ineffective distribution of the estate and may not be capable of correction.
Where a will is prepared without a full understanding of asset ownership and structure, there is a risk that it does not accurately reflect the intended distribution of the estate.
If you would like to speak to us about wills and estate planning, please contact Peter Muller on 07 5574 0575 or peterm@qbmlaw.com.au.
Wills and Estates Areas Of Practice
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Frequently Asked Questions
If all assets are held as joint tenants, they will generally pass to the surviving owner regardless of the terms of a will. However, a will remains important.
A will is necessary where you later acquire assets in your sole name or where assets are held as tenants in common, as each owner’s share forms part of their estate.
Administering an estate without a will (intestacy) is typically more complex and costly than where a valid will is in place.
If you are separating or divorcing, it is important to review your will.
In Queensland, divorce can affect certain provisions of a will, particularly those relating to a former spouse. However, it does not revoke the will entirely, which may result in unintended outcomes if it is not updated.
Obtaining legal advice ensures your will reflects your current circumstances and intentions.
An executor is responsible for administering your estate, including collecting assets, paying debts and distributing the estate in accordance with your will.
The executor should be someone you trust who is capable of managing financial and legal matters. This may be a family member, trusted adviser or a professional such as a lawyer.
In some cases, appointing more than one executor or a professional executor may be appropriate, particularly where the estate is complex or there is a risk of dispute.
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