- Who should have a will?
- Create a will and rest easy
- When to create or update your will
- Features of a will
- Avoiding common mistakes
- Choosing an executor
- What does an executor do?
- Superannuation and your will
- Testamentary Trusts can reduce taxes on bequests
A will is a legal document that states what you want done with your assets and interests after you die. If you die without a will (intestate), the government uses a standard formula to decide what happens to your estate, which may take a lot longer to finalise than if you had prepared a valid will. Your estate may also be hit with a bigger capital gains tax bill that eats into what your beneficiaries receive, so it's important to prepare a valid will.
Who should have a will?
- anyone over 18 years of age
- anyone who is married, regardless of age
Create a will and rest easy
Having a will means creating a legal document that will determine what will become of our assets and how our loved ones will be looked after we die.
Many people disregard the importance of having a will. Dying without one means that your assets will be divided up according to the relevant legislation in your State.
While the system for intestacy (dying without a will) tries to be as fair as possible, it can never be as good as what you might have decided for yourself if had made a will.
Creating a will is a lot simpler than most people might imagine. Will kits are available from newsagencies and post offices around the country. You can also order or download kits off the internet.
A will follows a standard format. Basically it must contain:
- the date and the name and address of the person making the will
- a statement revoking any previous wills
- a statement detailing who the executor of the will is,
- a description of what you would like to become of your assets, who you want them to go to and so forth.
- The signatures of two witnesses and the will maker
It's time to change your will if it is:
- outdated and your assets have changed
- there are new members to your family
- Your marital status has changed
- You have entered a new relationship
- Tax laws change
- You want to change the details of an existing will
Credit unions offer a comprehensive range of services. For more information on the importance of compiling a will contact or visit your local credit union.
When to create or update your will?
If a major event occurs in your life it's time to update your will. For example:-
- you get married, divorced or separated
- someone is born or dies
- you move interstate
- your assets change significantly (e.g. you buy or sell property or personal effects)
- tax laws change
- you wish to change any details of an existing Will
Talk to a professional
Avoid the temptation to cut corners - and lawyers' bills - by using a Do-It-Yourself will kit. Estate planning is an important but complex process so should be handled by a professional, especially if you have substantial assets.
Features of your will
Your will may be one of the most important legal documents you ever sign, particularly if you have a young family or dependents. To ensure your will looks after your loved ones adequately and your wishes can be carried out without delay when you are gone it's advisable to have a professional prepare your will.
Before you start, draw up a list of all your assets - and , for capital gains tax purposes, when you first got them - including superannuation, property, important possessions, insurance policies and so on. Then draw a similar list of your liabilities, such as loans, mortgages and other debts.
A good will has these features:
- names the person you have nominated as Executor of your will, and a backup in case this person cannot manage the task
- lists details of how you want your estate divided, naming all beneficiaries for possessions, investments, insurance policies, property etc.
- in Victoria, de facto partners are not automatically entitled to the same claims as married partners or dependents so you must make give specific details of what you want your de facto partner to receive from your estate
- specific reference to those people you want left out of your will
- names guardians for your children
- anticipates the future needs of your family and may provide for such things as education costs
- addresses the issue of what happens if you and your partner both die at the same time
- addresses the issue of what happens if your children die before you
- can reduce income taxes your estate must pay
- gives instructions for - and makes financial provisions for - your funeral
Avoid common mistakes
- keep your will up to date
- make sure the executors of your will know where to find it
- being the executor of a will can be complex and time consuming so choose someone you know will be able to the responsibility
- avoid unnecessary court costs by giving your executors the powers they need to carry out your wishes
- make provisions for anyone who is financially dependent on you e.g. children, elderly relatives etc.
- give clear instructions on what you want done. To avoid disputes and delays it is wise to ask a professional to prepare your will
- if you plan to omit someone from your will, make sure your will clearly states this
- nominate guardians if you have young children (don't forget to check with the people you nominate before naming them in your will!)
- don't leave your loved ones your debts. Specify that debts should be paid out of your estate before assets are distributed
- don't bequeath assets you don't own
- avoid confusion. Don't write an informal or ambiguous will
- don't ask beneficiaries or their spouses to witness your will - they will not be entitled to any part of your estate if you do
Choosing an Executor
It's your choice who you nominate as the executor of your will. Many people choose their spouse, especially if they are the main beneficiary. It is also quite common to name more than one executor to share the task of administering your wishes, which can be a lot more complicated and time consuming than most people realise.
What does an Executor Do?
- meets with your family to read and interpret your will
- deals with a variety of third parties to ensure your affairs are managed according to your wishes after your death e.g. the government, financial institutions, insurance companies, lawyers
- prepares an inventory and valuations of your assets
- hires a lawyer to apply for probate (court approval) of your will
- may arrange to sell real estate or other assets you owned to pay debts, if required
- prepares your final tax return
- distributes your assets to your nominated beneficiaries
Superannuation and your will
Although you may have nominated who you want to receive your superannuation assets after you die, there is no guarantee that your wish will be fulfilled. What happens to your super is at the discretion of the trustee of your super fund. If a dispute arises, the Superannuation Claims Tribunal may be called in to resolve the situation.
Testamentary Trusts can reduce taxes on bequests
If you're worried about the tax implications of leaving significant assets to your loved ones particularly children or pensioners - consider forming a testamentary trust. This is a complex process that must be handled by professionals but well worth the effort.
Here's why ...
Assets left to a surviving spouse may effect their pension entitlement. Instead, consider placing the assets in a testamentary trust that is controlled by the surviving partner. That way the assets are not subject to means testing.
