Writing your own Will is dangerous

This article is republished courtesy of the original author, Brett Davies Lawyers. Please contact them directly for any questions and advice you may need on this topic.

Question:

My New Year Resolution was to write my own Will.

I thought it would be easy. However, I have come to realise that Will writing is far more complicated than I first thought. I asked my financial adviser for some help. She almost spat her extra-skinny, organic, soy, decaf-latte (obviously her New Year resolution was to be more health conscious) at me in shock. Apparently, my idea was ‘ridiculous’.

I am not perturbed. I’d like some hints. What are some of the essentials of a good Will?

Answer:

Congratulations on making a Will a priority in 2011. However, your suggestion to write your own Will is giving me heart palpitations. If I had an extra-skinny, organic, soy, decaf-latte, I would be doing the same thing as your adviser.
Many people underestimate the complexity of their affairs. Even if you just have your family home and a car, you still need a Will that is drafted clearly and correctly. Add in complexities such as superannuation, investment properties, blended families, ex-spouses – and the importance of a good Will increases exponentially. Otherwise, you may as well name the tax-man and your ex-husband’s new mistress as your main beneficiaries.

Wills are complicated legal documents which require a high level of precision and thought. Only instruct a specialist lawyer to prepare your Will for you. Please do not attempt to write it yourself. Although it may appear simple and clear to you, I guarantee your beneficiaries and the Probate Court will see it differently. Using your “simple self-drafted” Will, your beneficiaries may be tied up for years and spend all of their inheritance on legal fees to figure out who gets your assets. Unfortunately, I have seen this happen.

At Civic Legal, we have solicitors that only practice in tax, superannuation and estate planning. Our Wills are 3 Generation Testamentary Trust Wills – these protect your assets from vultures, protect your beneficiaries from squandering their inheritance and they also save tax.

Here is a short list of questions to ask yourself before meeting with your lawyer to prepare your Will:

  1. Who should be the Executor?
    The best Executors are those people getting the proceeds of the Estate. This usually means the spouse in the first instance and then all the children once Mum and Dad both die.What if the children don’t get along? We hold firm our view that even where this is the case, the best Executors are still all the children. This is because the Executors hold a subservient position. Their prime duty is to pamper and obey the whims of the beneficiaries.It is often forgotten that the naming of a person as an Executor is simply an invitation. It is not a mandatory appointment. If a person who is named as an Executor is unable or unwilling to act they can renounce (give up) the position.The Executor clause in your Will could be improved:

    i.          if it does not appoint the surviving spouse at first instance

    ii.          it only appoints one child as Executor once Mum and Dad die – it is appropriate to appoint all of the children as Executors

  2. What should be done with the home?
    There are two ways of allowing someone to live in your home at death without giving them ownership of the property: Life Estates and Rights to Reside.Life Estates and Rights to Reside have adverse tax consequences – potentially triggering Capital Gains Tax. They generally lose the principal place of residence CGT exemption.
  3. Superannuation as an ‘Estate Asset’ Superannuation does not automatically form part of the estate. It often does not go into the Will.Want to know how to deal with Superannuation and get it to non-dependants tax-free?
  4. Why is tax planning essential at death?
    Capital Gains Tax, Income tax and transfer duty are the silent insipid de-facto death duties.Your Will can benefit from a Three Generation Testamentary Trust:

    • A Testamentary Trust is designed to minimize tax. That is, it is designed to allow the beneficiaries to wash out the de facto death duties
    • One of the advantages of a Testamentary Trust is that the tax payable on the income earned on the estate or Capital Gains Tax payable is paid to family members on low tax rates.
    • Each Primary Beneficiary controls their own Trust by becoming the “trustee” of their own Trust. For tax purposes, they control the assets. They do not own the assets.
    • The Primary Beneficiary is often the person in complete control of the Estate assets in their own Testamentary Trust.
  5. Protecting beneficiaries?
    Simple Wills do not protect any beneficiaries who are bankrupt. This results in the beneficiary’s inheritance passing straight out of their hands to the Trustee in Bankruptcy. Effectively the beneficiary’s inheritance is lost.A 3 Generation Testamentary Trust Will from Civic Legal gets around this unfair situation by including Protective Trusts.A Protective Trust keeps the wealth in the family. A Protective Trust is an instruction to the Executor to not make a gift to a beneficiary if certain criteria are true for that beneficiary – for example the beneficiary is bankrupt, lacks mental capacity or is under age.

    The Protective Trust is there to protect the beneficiary and not deny them of their inheritance. Once the beneficiary is out of bankruptcy, mentally sound and has attained the age of majority they are entitled to their inheritance.

  6. Who might challenge my Will?
    Where there’s a Will – there’s someone who can challenge it. There is a strong blood line relationship which defines who can make an application to the Supreme Court to challenge a Will. The class of people who can challenge your Will include, your:

    • parents
    • spouses – including de factos, mistresses and gay partners
    • biological and adopted children (but not step-children)
    • biological and adopted grandchildren
    • anyone that you financially maintain (but not in all States).

    To reduce the chance of anyone challenging the Will, we always recommend a Considered Person clause. A Considered Person clause names those people who you don’t wish to make provision beyond what is stated in the Will. There’s no need to air out your dirty laundry. When you die, your Will becomes a public document. Best not to give Ms Busybody next door any ammunition. A Considered Person clause does not prohibit a person challenging the Will, however it makes it harder for them to be successful.

    Read a previous article on who can challenge a Will.

Ready to instruct a lawyer to prepare your Will?

I am happy to discuss your Estate Planning with you. Contact me at (08) 9325 7999

Author: Brett Davies

Brett Davies is a guest contributor to The Money Guide. Civic Legal (incorporating Brett Davies Lawyers) has helped clients across Australia for over 16 years. From managing your personal Estate Planning and Business Planning to tackling the ATO in the High Court, Brett Davies Lawyers offers clear and straight forward advice. Civic Legal is a private tax law firm. We only take instructions via your own Lawyer, Accountant or Adviser. http://www.civiclegal.com.au/