Why Do I Need A Will?
A Will is a document that specifies how you would like your assets distributed when you die and the person who will be responsible for managing your assets (your executor).
Nobody likes to think about dying, and sometimes it can come unexpectedly. Having a Will gives you peace of mind that your family and loved ones won’t have the unnecessary burden of having to sort through a messy estate, during a difficult time.
Preparing a Will is the first step to take when planning the distribution of your estate. It enables:
- An executor of choice to be appointed. This may, for example, allow you to appoint a person who is competent to run the business within the estate, until it is sold.
- The estate to be distributed and managed according to your wishes, reducing the potential for family squabbles.
- Probate to be granted without undue delay and costs. (Probate is the process where the court gives your executor the power to carry out their obligations).
If you die without a Will, an administrator will manage your assets. An administrator will not have the same powers as the executor. If you don’t have a Will or your Will doesn’t cover all of your assets, they will be distributed according to a state-based formula, known as” intestacy rules”. These rules apply to everyone and do not take into account your personal circumstances, or what you might have wanted. Under the state-based intestacy legislation your estate passes to your next of kin, as specified in the formula. If you have no next of kin, your estate assets will go to the State.
Things to remember:
- The most important thing about your Will is that it meets your needs. Your needs change as your circumstances change (for example, getting married, buying a house, having children, etc), so it is important to keep your Will up to date.
- Make sure that you leave your Will in a safe place. This could be, for example, with your solicitor (if they prepared it for you) in a safe or safety deposit box. Plus, give your executor(s) a copy and let them know where the original is.
Who Can Make A Will?
- You must be 18 or over. In some states, the law allows those under 18 to make a Will, subject to specific conditions being met.
- You must also have “testamentary capacity”, which means you know what assets you have and how much they are worth. You don’t have to know the exact value, but you must be able to decide who should receive the asset.
- You must have the mental capacity to make decisions. If there is a question about your mental capacity, make sure you talk to a solicitor.
What Can Be Included?
- Assets you own in your own name or certain assets you own with others, ie a house, car, money, shares, cash and investment properties.
- Specific belongings, such as paintings, photos, or items of sentimental value. Be sure to list specific items and ensure they are easily identifiable.
Some assets cannot be left to your beneficiaries in a Will. These are non-estate assets and include superannuation with a binding nomination to an eligible beneficiary, certain insurance policies and jointly held assets. For example, a jointly owned family home cannot be disposed of through a Will. When one owner in a joint tenancy dies, the asset passes automatically to the survivor/s. It makes no difference whether you have a Will or not.
In contrast, assets held under tenancy-in-common are considered assets of an individual’s estate. A tenancy-in-common exists where two or more people hold a distinct share in an asset. When one owner dies, there is no automatic transfer of that share to the other owner/s.
If you own an asset as a joint proprietor, but would like to leave your share of the property in your Will, discuss changing the title to tenants in common with your solicitor. Also discuss any potential tax implications of this with your accountant.
Who Can I Leave My Assets To?
Whoever you want. However, it is important to recognise that if you do not leave sufficient assets to the people who depend on you, they may be able to take legal action to get a bigger share. Speak to your solicitor if you are concerned about this.
If you leave assets to someone under 18, those assets must be held in trust until they turn 18. However, unless other arrangements are made, children can access the funds on their 18th birthday.
How Do I Choose An Executor?
An executor is the person who is responsible for carrying out the instructions in your Will. This is a very important job and some of the possible tasks include:
- Responsibility for your burial / cremation.
- Obtaining probate (if required).
- Collecting any debts or investment income.
- Claiming life insurance.
- Insuring any assets of the estate.
- Selling assets, if required.
- Distributing the remainder of the estate.
There is no rule about who is the best person to be the executor. It can be your husband/wife, children or any other person who can be trusted to manage the distribution of your assets. It can also be a beneficiary. Things to consider when choosing an executor are:
- Are they likely to outlive you?
- Will they have the time to do what is needed?
- Will they be impartial if there is a dispute?
- Do they have some understanding of your assets?
- Will they be prepared to deal with your assets confidently, and in the way that you want?
- Do you trust them?
- Are they happy to do the job?
You should also consider having an alternate executor, in case the first executor is not available or changes their mind.
It’s also possible to appoint two people to act as joint executors. Talk to your solicitor about these options and the pros and cons for each. If you don’t know anyone, or you want someone independent to handle the task, you can appoint a solicitor, accountant or a person from a trustee company.
Can I Change My Will?
You can change your Will as your circumstances change. You can’t expect that your present needs will remain the same for the future. Some reasons for changing your Will include:
- Starting a business.
- Your children grow up.
- You increase your assets substantially.
- Your circumstances and assets change (ie you may get married, separate or become a parent).
- You dispose of assets mentioned in your Will.
- A beneficiary or executor dies.
Your Will is automatically revoked in most states if:
- You marry or remarry. There are some situations where a Will made before marriage might continue, but you should not assume that this is the case, unless you have received legal advice to this effect.
- You destroy the original.
- You write something on the Will so that it is clear that you intended to cancel it.
- You make a new valid Will. This automatically cancels the old one.
After a divorce, it is important to get legal advice about the status of any existing Will. You should check whether the Will has been cancelled by the divorce, or whether the divorce cancels any distribution to your ex-partner. It may also cancel any appointment of your ex-partner as executor, trustee or guardian. It is important to make a new Will and best to ensure it takes effect as soon as the divorce is final.
You should definitely review your Will when you separate – check this with your solicitor.
What you need to know
This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.
