We all know what a will is and what it does. When a person dies leaving a valid Will, it becomes a set of instructions to the executors of the estate as to how the will maker wishes to dispose of his/her assets. However, what most people do not know, is what makes a will valid or invalid, what can and cannot be dealt with under a simple will, and what happens when circumstances change.
In this article, we will give you the basic four Ws you should know in will making and succession planning.
Who can make a will?
Anyone over the age of 18 can make a will. However, capacity can be an issue from time to time. A person making his/her will must have testamentary capacity, in that the will maker must be able to:
Understand the nature and effect of the will;
Understand the nature and extent of their property;
Comprehend and appreciate the claims to which they ought to give effect;
Further the will maker must not be suffering from any condition that would result in an unwanted disposition.
However, just because a person suffers from mental illness does not mean a person lacks testamentary capacity. It all depends on the circumstances surrounding the making of the will.
Why do you need a will?
Unfortunately, it is impossible to predict what the future holds. We encourage everyone to consider making a will, here is why:
If you are in a long-term relationship but not married and may (not) want to make specific arrangements for your partner, a will can help you achieve that, same goes for ex-partners, de factos;
If you have a blended family or complicated familial relationships, a will can help protect your assets so as to avoid disputes after your death. Litigation can be rather expensive and it may even be the case that the estate has to pay all the legal costs;
If you have a family member with disability or requires special care, a trust set up under your will can assist in the family member being looked after;
If a potential beneficiary is in a profession or in an occupation which carries certain personal risks (eg. Company director), you may wish to “lock away” your gift to that person under a trust arrangement;
Taxation benefits. A well-planned trust structure distributes trust income between family members which can save in tax. An example may be that if you own an investment property and it is intended that the use be continued so that your beneficiaries including young children can receive a stable income stream, a testamentary trust may be a suitable and it could save your beneficiaries a substantial amount in taxation.
These are just some of the benefits a well drafted Will can provide.
What you should consider before making a will
In most circumstances, a simple will covers everything you need to arrange for your loved ones. Before you decide to sign a will, you should make sure that it will withstand the test of time. Here are some of the things you should consider:
What are your assets?
These may include cash, stocks, bonds, superannuation, SMSF, real property, chattels, motor vehicle, boat, insurance policies, options under an agreement, social network accounts, cryptocurrencies, intellectual property rights etc… remember, it is not just the tangible assets but also the intangible. You might also consider if there is any thing you are expecting in the near future like an inheritance.
What are your future plans?
Generally, marriage will invalidate a person’s will unless it is made in contemplation of marriage. On the other hand, if you and your partner are divorcing, any disposition made under your will about your divorced spouse may become invalid. If you are planning to have (more) children, you might need to consider if they are covered by your existing will. The age and maturity of the children also play an important part when it comes to succession planning. This is also the reason why many people choose to set up a testamentary trust for their children so that when they pass away their children can be adequately provided for and a trustee could play a supervisory role in the children’s future wellbeing.
How do you plan to divide your assets?
Have you thought about leaving what to whom? If you have a blended family what arrangements do you want to make for your parents, step parents, partner, ex-partner, children, step/adopted children, children from previous relationships, and young children. If someone passes away without a will, his/her assets are distributed under the Administrative and Probate Act, and it may not necessarily be what was intended.
What is the tax implication?
Even though we do not have death duties in Victoria, when a property is passed on to a beneficiary under a will, there could still be (sometimes substantial) tax payable by the beneficiary. For example, if a testator’s main residence is not sold within two years of his/her death, there could be capital gains tax for the beneficiary when they sell.
When is the best time to make a will?
A lot of people make wills in contemplation of marriage, when they have children or when someone passes away. However, we recommend that you should always have a will in place and when major life events take place, review your will to make sure it still reflects your intention and is valid. After all, we cannot predict what will happen tomorrow.
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At Barrett Walker Lawyers, our combined legal and accounting practice ensures that you receive the most comprehensive, accurate legal and taxation advice tailored for your needs.
Please note the contents contained in this article are intended to be general advice only and should not be construed as specific legal or financial advice.
If you require any specific legal advice please do not hesitate to call our friendly team on 03 9428 1033 or email us at email@example.com.