Can I contest a will?

This is the question that as lawyers we get asked rather frequently and up until 2015 there were a wide ranging number of people who could make a claim against a person’s Estate. All of this changed in 2015 and the class of people eligible to make a claim against a person’s Estate narrowed significantly.

We call this “contesting a will” and there is a fixed category of people who can do so. You can make a claim to contest a will if:

• You are the spouse or the domestic partner of a person at the time of their death
• You are a child or a step-child of a person who has died
• You are someone who believes for a substantial period of a deceased person’s life that they were the child of the deceased person and that they were treated by the deceased as a natural child
• A former spouse or domestic partner in circumstances where a property settlement was not reached with the deceased following separation
• A registered caring partner of the deceased person
• A grandchild of the deceased
• A spouse or domestic partner of a child of the deceased (if the child dies within one year of the deceased’s death)
• A member of the household in which the deceased was or had been in the past and would likely be in the near future also a member

Now while you may fall into one of the categories of those who can make a claim does not mean that you will automatically be eligible, it really is only a starting point.

Whether or not you can make a claim against an Estate depends on a deceased person’s personal circumstances. The days of being able to contest a great uncle’s Estate because he was a multi-millionaire are well and truly over and you will need to speak with your lawyer or a member of our Will & Powers of Attorney team about what approach you can make in this area. Call us on 03 5445 1000.

10 things to know about divorce

10 things to know about divorce

When a married couple separate, the whole event is often described as a divorce.

However, divorce has a very specific meaning under Australian law. It is not a property settlement, it is not a separation, it is not sorting out the arrangements for children. A divorce is a court order ending a marriage. It is like the official tearing up of your marriage certificate. There are a lot of myths and misunderstandings around divorce, so here’s 10 key things to know about divorce.

1. For a divorce order to be made, your marriage must be broken down irretrievably.

That is, you will not resume married life. You’ve made up your mind and it is final.

2. You do not need to provide the court for a reason for your divorce.

The Family Law Act 1975 established the principle of no-fault divorce in Australia. Therefore, the court does not need to hear or judge the reason why the marriage has irretrievably broken down, that can stay between the two of you.

3. You must have been living ‘separate and apart’ for at least 12 months.

This is easiest to prove when one of you has moved out of the former matrimonial home and you have been separated ever since. It is common for people to been separated but have lived separately under the one roof for all or some of the 12 months of separation. To prove you were separated during this time, you must show there was a change in the way you related to each other after separation in comparison to beforehand. This could include:

• Sleeping in separate bedrooms;
• No sexual relations or intimacy;
• Not helping each other out with household chores such as cooking each other dinner or doing the other persons laundry;
• Having separate finances ;
• Not attending social functions or events together;
• Not socialising together.

Periods of Reconciliation

It is also common for people to attempt reconciliation after they have separated.

If the reconciliation lasts for a period of less than 3 months, you may add the periods before and after the reconciliation together to obtain the necessary 12 months.

However if the reconciliation lasts for a period longer than 3 months, the clock starts again for the 12 month period at the end of the reconciliation period.

4. You must demonstrate to the court that there have been reasonable arrangements made for the care and welfare of any children under the age of 18.

This involves explaining the arrangements made for the child in line with their:

• Living needs
• Schooling needs
• Health needs

5. If you are applying for a divorce within two years of when you got married, you will need to prove that you have attended counselling.

Visit the Family Relationship Centre website for a list of court certified counsellors that can give you a certificate demonstrating to the court you and your spouse have attended counselling.

6. You must have a jurisdictional connection to Australia in order to apply for a divorce here.

Either you or your to be ex-spouse must either:

• Regard Australia as their home and intend to live here indefinitely after the divorce; or
• Be an Australian citizen by birth, descent or by grant of Australian citizenship; or
• Ordinarily live in Australia and have done so for 12 months immediately before filing the divorce application.

As long as one of the above criteria is satisfied the Court will be able to hear your Divorce Application, regardless of where you were married or where you previously lived.

7. The Court will only focus on your divorce application.

Many people come to us thinking a divorce application also encompasses a property settlement, spousal maintenance, child support and interim orders. Although this may be the case on US TV shows, it doesn’t work that way in Australia. The court will only consider whether or not it should grant a divorce. The court does not have to have any regard for if both parties of the marriage want to get a divorce or if only one party does.

Property and children’s matters are separate court applications.

8. A divorce is not obtained overnight.

When the application is filed the Court will list it in court for a hearing. The date of the hearing will most likely be a couple of months away.

Provided that the court is satisfied that you have met all of the requirements a Divorce Order will be made but it does not take effect until one month and one day after the hearing.

9. Until your divorce is final, neither of you are able to get married to anyone else.

If you do, you will be committing bigamy which is a criminal offence in Australia. Perhaps just put a few more months into the wedding planning and wait for after the divorce has taken effect.

10. The Will you made during your marriage will now be invalid.

If you have a Will at the time the divorce is obtained certain clauses will be revoked because of the divorce. These clauses include any provision you have made for your former spouse, any grant of power you have given them or if you appointed them as an executor of your will.

Any clauses that appoint your former spouse as a trustee of a trust in which the beneficiaries of the trust include children of your former spouse will not be revoked. This means your former spouse will have control over money or property you have your children.

If you separate from your spouse and do not have a Will, your former spouse may still inherit if you die before a Divorce Order is issued by the Court. If you have never made a Will, only a Divorce Order will ensure that your former spouse will not be able to inherit your assets.

Rather than leave these matters to chance it is best to be on the safe side and make a new Will after your divorce to ensure your intentions concerning your former spouse are crystal clear.

Life Interests under wills

A life interest in a will is a type of trust created by the will which allows for a beneficiary (known as the "life tenant") to receive the benefit of an asset (i.e. a property) for the remainder of their life.

In the case of a property, the life tenant is not transferred the ownership of the property, but rather the property is held by the Executors for the life tenant to occupy, rent free, for the rest of their life. The life tenant is usually responsible for maintaining the property and paying all rates and outgoings; however they are also usually entitled to income generated from the asset.

A major advantage of a life interest is that you can elect someone to receive the benefit of the asset during their lifetime, and then upon their death, nominate who should receive the asset outright.

In blended family situations where you have a second spouse or partner, and children from a different relationship for example, a life interest may be beneficial as you can elect for your spouse/partner to receive a life interest in your property, and then upon their death, the property is to go to your children.

A life interest is governed under the "Settled Land Act", which importantly provides that if a life interest is created under a Will, there must be two trustees (Executors) appointed to govern the trust.

It is important that if you wish to include a life interest in your will you work with an experienced wills lawyer to ensure that the life interest is drafted appropriately. One important factor to consider is what happens if the beneficiary of the life interest needs to move to a nursing home or retirement village. An approach to this is to have the provision structured to allow the life tenant to sell the property if necessary say to move into a nursing home or retirement village. Upon the life tenant's death, the refund from the nursing home or retirement village is then dealt with in accordance with the Will.

Depending on your circumstances, a life interest could be a very helpful trust to include in your will. A Will & Powers of Attorney lawyer at OFRM can look at your circumstances to advise whether this is advantageous to your particular situation, and also ensure you comply with the relevant legal requirements. Call us on 03 5445 1000.

It’s my money. I’m going to give it charity

Leaving a gift to a favourite or meaningful charity is one of the most powerful and rewarding things a person can do when preparing their will. However, if you plan to make a significant gift, it is vital to receive accurate legal advice when making your will to ensure that what you think is going to be the effect of the gift is what happens and that the gift isn’t challenged.

If there are people in your life who you have an obligation to support, they may be able to challenge such a gift made in your will. If it could be considered that you have such an obligation, then your will needs to be carefully constructed so that any Court understands why you have made the decision to distribute your estate in the manner you have, that you knew what you were doing and that were good reasons for your decision.

If your will is challenged, the Court has powers under Part IV of the Administration and Probate Act to provide provision to eligible persons you owed a duty of proper maintenance or support.

Persons that may be eligible to make a claim against your estate include a spouse or partner, a child or a step-child.

Simply because someone can make a claim against your Estate does not mean that they will be successful, however as these issues will be dealt with when you are no longer here it is important that you have provided significant information which gives context to your decision to assist the Court in determining if a claim should fail.

This is yet another example of why it is so vital to get quality legal advice when making your will. Call our Will & Powers of Attorney team on 03 5445 1000 and they will be able to help.

Flying overseas? Better make a will before you go

In my many years of preparing wills, the most common reason for making a will (or updating a will) is because there is an overseas flight imminent.

Despite air travel being one of the safest forms of transport, people see that hopping on a plane as a real motivator to get their will in order.

Any reason that makes a person pay attention to their will is helpful.

If a couple should both die at the same time, whether it be in a plane accident, a car accident or house fire the distribution of the estate where there is no will can be quite surprising.

For most couples, their main asset will be a jointly owned house. Joint ownership means that, upon the death of one owner, the other co-owner automatically becomes the sole owner of the property. If both owners die at the same time then you need to look at the pathologist’s report to decide who lived the longest, even if only for a short period of time. Then the house goes to the next of kin of the person who died last.

Assuming that there are no children, then the beneficiaries are likely to be the parents of the person who died last. The parents of the person who died first would receive no share of the house.

If the pathologist cannot decide who died first, then the oldest person is legally presumed to have died first, and the relatives of the youngest person would inherit the house.

So if a couple dies without a will, it really is a lottery as to where the assets will flow.

The easy solution is to make a will which provides that upon the death of both persons, the estate is divided equally between the two surviving families, and that way it does not matter who dies first as you end up with the same outcome. Of course, you may not want your relatives to inherit the house at all. You may have other choices that are more important to you.

Despite having planned the overseas holiday many months in advance, I am still surprised by the number of people who contact me only a week prior to their trip asking for a will to be made or updated. You should give yourself plenty of time to complete the task and do not wait to contact the lawyer on the same day that you are packing your suitcase!

To make or update your will contact our Will & Powers of Attorney team on 03 5445 1000.

I need a small amendment to my Will. Should I make a Codicil or do a new Will?

Once you have made a Will, it is probable that the next time it needs to be updated only a minor amendment is required. One simple option is to make a formal codicil to the Will. This operates to delete and/or insert provisions in the original Will.

“Codicil” is a bit of a funny sounding old fashioned legal word. It is generally defined as “an addition or supplement that explains, modifies or revokes a will or part of one”. The idea of codicils probably hark back to the days before computers when redrafting a previously prepared will meant completely rewriting (in fountain pen!) or retyping the whole will. To save having to do the whole thing again a codicil could be made to alter only the relevant part of a Will.

With modern technology it is now possible to easily create a new will based on your old will and alter the relevant parts.

It is preferable to update the Will rather than make a codicil for reasons including.

• The formal requirements are still necessary including signing the codicil in the presence of two witnesses.
• Most importantly, your beneficiaries do not get the opportunity to see the amendment. All that is left is your final Will. No one will know if there has been a previous document which increased or decreased the provisions for any of the beneficiaries. This can prevent a beneficiary’s feelings from being hurt.
• Drafting a codicil can be messy. Although the change might appear to be simple, it does require the reader to look at two separate documents to understand your wishes. While it is possible to have more than one codicil, it just makes the task for the reader more challenging. Keeping everything together in the one document is more logical.
• There are no savings in the costs of preparing a codicil as compared to updating an existing Will. We always keep electronic copies of Wills and it is straightforward to make amendments. It can be more time-consuming to prepare a codicil then update an existing Will.

Everyone should look at their existing Will every 2 to 3 years and do their own analysis as to whether any changes are required. It is surprising how easy it is to forget the provisions contained in your Will even though the document is only two years old.

When is there a reading of the Will?

No doubt you have all seen the dramatic movie scene when the family are seated before the lawyer who reads out the contents of the Will and then the camera pans to the excited/disappointed/angry faces of the family in turn.

That scene pretty much only happens in Hollywood. It is rare in Australia for there to be a "reading of the will" — these days the contents of a will are much more easily and appropriately distributed by people being provided with a copy of the will. Photocopiers and the internet have changed the way!

Once a willmaker dies, the Will is under the control of the executor. They determine if copies are to be sent to anyone. However section 50 of the Wills Act states that a number of people are entitled to be given a copy of the Will if a request is made:

• any person named or referred to in the Will, whether as a beneficiary or not;
• any person named or referred to in any earlier Will as a beneficiary;
• any spouse of the deceased at the date of death;
• any domestic partner of the deceased
• any parent, guardian or children of the deceased;
• any person who would be entitled to a share of the estate if the deceased person had died without making a Will;
• any parent or guardian of a child referred to in the Will or who would be entitled to a share of the estate if the deceased had died without making a Will; or
• any creditor or other person is a claim at law or in equity against the estate of the deceased and who produces evidence of that claim.

It is sensible for beneficiaries to be given a copy of the will, even prior to them asking. Doing this often avoids the angst caused by uncertainty and speculation. There is a natural curiosity when a person dies as to what provision they have made in their Will. Keeping secrets might change curiosity into frustration and anger.

Once the probate application has been filed, any member of the public can obtain a copy of the Will upon providing payment of the search fee.

Given that so many people might possibly read the Will after death has occurred, is a reminder that great care should be taken when making any comments that are justification of decisions made. You should consider explanations where it is appropriate. It is best to avoid words that are merely intended to hurt or offend.

It is a good idea for you to look at your current will in light of the matters discussed above. If you think that your will needs more explanation given the potential audience you should contact one of our Will & Powers of Attorney team on 03 5445 1000 to discuss further.

Where do I keep my will and who should I tell?

Your Will is a very important document and like the title to your house should be kept in a place that is secure, unlikely to be damaged by liquids, drawn on or mistaken for the place to write down the shopping list.

The safest place to keep your original Will is at your lawyer’s office. Our office has a secure and fireproof room where wills are kept and kept in a manner that means they are acceptable to the Supreme Court.

You should also keep a copy of your Will with your other important documents.

You should tell your Executors the location of the original will and advise them that you have appointed them as your executor. You may also want to tell them where you are keeping a copy of you Will and other important details they may need.

In addition to your Executors some people like to tell their children or other significant beneficiaries the location of their Will and who they have appointed as executors, however there is no obligation on you to do this.

It is very rare that anyone needs to know the content of your Will in advance. If you choose to disclose the content of the Will, you can do this but there is no obligation on you to do so. All your Executor needs to know is the location of the Will and that you have chosen them as your Executor.

If you need any further information regarding these important steps please contact one of our Will & Powers of Attorney team to discuss by phoning 5445 1000. For clients who have their will done with us, storage in our office is a free service.

What is probate and who grants it?

Obtaining Probate is an essential element in administering many deceased estates. Probate is the process of proving the last Will of the deceased with the Supreme Court to establish the following:

• That the Will is indeed the last Will
• Who the Executors are
• That the will is valid

With the assistance of a lawyer, the Executor or Executors provide information to the Supreme Court in prescribed forms to prove the above information. If the Registrar of Probates is satisfied about those elements, Probate is granted. The practical step of Probate being granted is that there is an official document that is sealed by the Court as evidence of probate — it is then the proof used to conduct all of the necessary transactions for the estate.

Not all Estates require a Grant of Probate. If none of the asset holders request a Grant of Probate from the Executors then there may be no need to apply for Probate.

The types of assets where a grant of Probate will be necessary include:

• Solely Held Real Estate
• Bank Accounts and Share Holdings in excess of $50,000
• Nursing Home Accommodation Bonds
• Superannuation if it is paid to the Estate

Examples of Assets that do not require Probate include:

• Jointly held assets including real estate, shareholdings and bank accounts
• Motor vehicles
• Small bank accounts and shareholdings
• Superannuation paid directly to beneficiaries

In many people’s minds the word that often follows “Probate” is “Duty”. Probate Duty was abolished in 1984 and is no longer payable. While there is a Court filing fee this is not a duty based on the value of the estate as was the case between 1870 and 1984 in Victoria.

The Estates team at OFRM are always willing to assist with any estate matters and you can call them on 03 5445 1000. Make sure you look at the other information regarding estates on our website as well.

It's not equal!

In life it seems that few things are fair. Most people seem to think that what someone leaves us in a Will should be equal and therefore fair. This is not always the case.

When making a Will a willmaker is entitled to make any decisions that they wish with regard to who receives what and how much.

Courts are very aware of a willmaker’s entitlement to do this. It is only in very significant circumstances that they intervene to change.

Currently in Victoria the only people that can make a claim against an Estate is:

• spouse or partner,
• a child,
• step-child or
• a person who has always believed that they were a child of a deceased.

If you fit into one of the categories you may be eligible to challenge how things were divided in the Will. However, it is not enough that you were not treated equally. To make a claim to change someone’s Will and obtain provision from a loved one’s estate you must meet a range of criteria.

What you believe to be fair and equitable may not necessarily be so in the eyes of the Court.

Where there are some young children and some older children in a family, an equal division of a willmaker’s assets may not reflect the difference between what children have already received (say for education expenses) and what they may need in the future. An unequal division may also be appropriate where a particular child has made a more significant contribution to a willmaker’s estate, such as by working on the family farm or a child with a disability may have a greater need for a willmaker’s assets.

If you believe that a willmaker should have made provision for you it is important to seek legal advice from a lawyer such as those in our Estates team who are experienced in such matters. Call 03 5445 1000.

What is fair is not always what is equal.

When is the right time to make a will?

Most people never know when they might die and consequently a Will should be made as early as possible in your lifetime.

Make your first Will before turning 30 and then update it when a change is necessary. Most people will make between 2 to 4 Wills during their lifetime. There are a number of things that can influence when is the right time for you to make your Will.

You need time. Occasionally it is necessary to obtain more information from your superannuation fund, complete a title search, check trust deeds, liaise with an accountant or financial advisor or seek feedback from family and friends. Some Wills can be completed in a day, but other Wills might require several weeks to collate all of the necessary information.

You need knowledge. There are lots of tricks and tips about Wills that are good lawyer can tell you. You need to know this information so that you can apply it to your own circumstances make the Will that best suits you.

You need to be in the right frame of mind. Making a will when you are angry, hurt, depressed or otherwise unhappy with life is usually not a good idea. A Will should not be used as a mass weapon of destruction to hurt people that have upset you. A Will should be used to make life easier for those that behind and to reward people that are important to you.

I can tell you the wrong time to make a Will. When you are dying and literally have days to live is not the best time to make a Will, although some people have no alternative because they have never made a Will or the Will that was made 20 years ago is so horribly out of date. If you are lying in a hospital bed, your mind can be distracted by pain, anguish, and the sheer miserableness of your own condition. When making a Will, you need to weigh up many matters and your memory needs to be in good shape and you do need a reasonable level of emotional energy. You can make a good Will if you are dying or very unwell, but at another time the task would have been easier.

The best thing you can do is consider making a Will now by making an appointment to see one of our wills lawyers by calling 03 5445 1000. It's best to get the ball rolling.

The Perils of Leaving It to Chance

What happens if I die without a will? I’m sure the default outcome for many is the common sense approach of “It’ll be right.”

While in some cases the above, relaxed attitude to estate planning may fortunately lead to the desired result, how many of us know exactly what the rules of intestacy may produce in if we die without a will?

If you leave a partner and no children your partner is entitled to 100% of the Estate. From an asset perspective this could be the preferred outcome. However there are added complications of administering an Estate without a will for without one, simple tasks such as changing the registration of motor vehicles become significantly more difficult.

What if I leave a partner and children? The first $100,000 will go to your partner along with a third of the remainder. The remaining two thirds go to the children, regardless of age. The complications of this formula are obvious when it comes to estates comprising solely of the family home.

While the above two examples have their complications the final example is a clear demonstration of why it is best not to leave it to chance.

The deceased was separated from her spouse but not divorced, never re-partnered, never had children. She also never made a Will. She always assumed that her estate would go to her parents as her next of kin. When she died, her spouse inherited her entire estate under the rules of intestacy.

Due to a recent change in the Victorian legislation her parents were not eligible to make a claim against the estate as they were too far removed. There was nothing that could be done after her death.

Making assumptions about estate planning can lead to undesirable results, you are much better to plan for the future and make a time to discuss your Will with one of our lawyers – phone 03 5445 1000 to make an appointment.

I'm young and have no assets so why should I bother making a will?

I am 31 years old, I have two children and a husband, I own my mortgage, the bank owns my house and I own very little, so why do I need to make a Will?

Interestingly, a significant number of young people when considering making a Will often don’t make one because they believe they do not own enough assets. The common misconception is “I don’t have much, so it’s not really going to matter”.

The truth is that quite often we have far more assets than we believe. Many of us have life insurance, we have superannuation (with some insurance component attached), we have some equity in a home, and we may have some small bank accounts.

Whether we realise it or not, these small amounts can actually can add up to a significant amount of money.

So, if I don’t make a Will where does this money go?

If you don’t make a valid Will, there can be significant ramifications for your family in the event of your premature death. The rules of intestacy provide that in circumstances where you die without leaving a valid Will, your spouse is entitled to the first $100,000 of your Estate. The monies remaining are then divided into thirds, with 1/3 of these funds being paid to your spouse and the other 2/3 being paid to your children. This can lead to a situation where your spouse and your children own your home together. While this sounds workable in theory, in practice, it means that it is incredibly difficult for your spouse to move freely, have access to money in the event of a necessity and may make it difficult be able to provide for the ongoing costs related to raising children. It also may have an impact on your children having access to first home owner grants and schemes in the future.

The death of any family member is incredibly stressful and emotional time. The failure by a spouse to leave a Will at an age can increase the stress and anxiety for family members significantly. Making a Will is a very small step in ensuring that your family is taken care of when they really need it.

Making your wishes clear becomes even more important if you are in a second relationship where there may be more than one child or you may both be bringing children to the relationship. How you treat these children may be vastly different depending on your personal circumstances. The failure to leave a valid Will can have a disastrous impact on the assets available for your loved ones in the event of your death.

Look after those who love you most and make a Will, it is a small thing you can do that will mean so much once you are gone.

Penny wise and pound foolish - why you should not make your own will

Making your own will is simply a bad idea. Making no will is even worse, but many people are lulled into a false sense of security when they use a will kit. I have seen many will kits over the years and the success rate for effective completion is less than 50%. Now that is not a very good outcome when you are trying to protect assets that might be worth hundreds of thousands of dollars.

The main difficulty is that the information contained in the will kits are of a general nature and consequently the knowledge that is passed to you becomes quite superficial. There are many legal issues that are relevant when preparing a will and it is simply not possible for an untrained person to be aware of these matters when making their own.

An experienced lawyer can draw to your attention many issues that may not have been considered usually there are numerous options and solutions to the issues that should be considered in a will, but if you don’t know about them, then your beneficiaries might be disadvantaged.

But even if you feel that you have covered all of the relevant issues, do you have the skills to complete the form? The kits sometimes provide suggested phrases, but it can be very difficult to know what phrase should be used in your situation. The language can be unusual and sometimes difficult to interpret. I saw a will recently where a mother had intended to leave all of her assets to her own children, but the will actually left everything to the children of her husband. It was a classic “cut and paste” of a legal paragraph and it had been written by a family member who was trying to be helpful, but simply made the matter worse.

The number one problem with making your own will is that you cannot see the errors that have been made. Usually the first time that a lawyer gets to look at the home-made will is, sadly, after the person has died. Sometimes the errors can be corrected, but usually it does create tension and on a number of occasions, the errors made in the will have substantially added to the cost of administering the estate.

Another advantage of seeking specific advice is to ensure that your will and superannuation together lead to the best outcome. Most people do not realise that their superannuation is not necessarily going to be covered by their will. But with the advent of binding death benefit nominations it is possible to control the payout of your superannuation and you can still do it through your will. A lawyer is simply the best way to ensure that your beneficiaries receive their proper entitlement.

Why make a will on separation

So, your relationship has ended. Why should you now update your will?

• If you have children it is extremely important to make a new will.

• If you are married and do not have a will, even though you might be separated, your spouse will automatically receive all of your personal chattels, plus the first $100,000 of your estate. If your estate exceeds $100,000 then your spouse will receive one third of the excess and your children will receive two thirds of the excess.

  • However if you make a will, then your assets are distributed in accordance with your wishes.

• If you do not have a will and if you are not married, but separate and have children, then all of your assets will pass to your children, but the person entitled to administer your estate will be the parent of your child or children.
  • This default position might be acceptable, but it is also quite likely that you would rather that other people can be in charge of looking after the funds for your children until they reach an appropriate age.

• Although you might not consider that you have many assets, it is quite surprising when you actually attempt to list the value of the items that you own.

  • If you have a will, then it is usually very easy for your executor to administer your estate, particularly if the estate is small. If there is no will, then the costs of administering your estate become far more expensive and, of course, the statutory formula for distribution of your estate may not be ideal.

• If you have superannuation, you probably need to ensure that your superannuation benefit is not paid to your estranged spouse. Separation does not make your spouse ineligible to claim your superannuation benefit. You should make a binding death benefit nomination with your superannuation fund and you should also make new provision in your will.

• For a lot of people, the idea of having to make a will is challenging, particularly if there are other stressful issues in your life. However, after talking to an experienced lawyer, most people can create a will which accurately reflects their wishes and, in most cases, is relatively straightforward. A lot of people are then extremely relieved to have that important issue resolved.

• You might think you are better to delay making a will until your family law property settlement is finalised. Our experience is that you are better to make a new will soon after separating and update it, if required, when your property settlement is finalised

Most people put off making a will, because they are waiting for an event which will prompt them to complete the task. Entering into a relationship would be a good time to make a will. Ending a relationship is absolutely the best time to make a new will or update an existing will.

Setting the age of inheritance

When making a gift to a child in a Will it is rarely appropriate to give the gift to the child outright before they reach adulthood. Many people prefer the gift to be held by the Executors until the child has reached 18, 21 or 25 years. Usually the larger the gift, you might want a higher age before the child has complete access to the funds.

In all but the most unusual circumstances, a provision is included in the Will which allows the Executors to pay some, or even the entire amount to the child before they reach the nominated age, if the Executors feel that the payment is for the education, maintenance or other benefit of the child. Clearly the choice of Executors is extremely important and you should choose people who would reflect your own standards and beliefs. If funds are being held for a child, it is my strong preference that at least two Executors are chosen and that they are not from the same household.

Why do people prefer 25 years?

More and more people prefer that the beneficiary reaches 25 years before having total access to the money. The majority of young people will complete, not only secondary schooling, but go on to complete a tertiary course. The vast majority of tertiary courses are at least four years. This means that a University graduate is likely to be 22 or 23 years old.

Many people hold the belief that it is not until you are working full time and are fully supporting yourself from your own income, that you truly develop a sense of the value of money. Having to budget for payment of accommodation, food, utilities, car and transport, health insurance, etc is a great learning opportunity. The vast majority of our grandparents left school at 15 years and commenced employment receiving less than the adult wage. A large chunk was retained by their own parents for board and your grandparents had to be rather thrifty with the balance remaining. By the time your grandparents reached 21 years, they had been managing their own funds for five or six years.

Is 30 years or higher appropriate?

Occasionally it is appropriate to place a higher age upon the child receiving the money. But you must be careful that this restriction does not become unreasonable. The role of the Executors in managing the money for infant children is an onerous and very important task. Looking after money until the child reaches 21 years is very different to looking after those funds for a further nine years until the child reaches 30. You must ask yourself is the potential beneficiary going to change their behaviour substantially between the ages of 25 to 30 years.

A number of clients have been well aware that the child will be financially very comfortable during early adulthood and there is no need for funds to be made available before 30 years.

Very occasionally I have clients who wish the benefit for a child to be held until the child reaches 35 or 40 years. The reasons have to be carefully examined. I have never met anyone yet who can persuade me that an age restriction higher than 40 years is ever appropriate. If the question is simply about when the child will be mature enough to manage the funds independently, then an age restriction is the best method to use. If there are other concerns about the child’s ability to manage the money then Protective Trusts should be used and this is a different and more complex topic.

Supercharge your will with a Discretionary Testamentary Trust

A normal Will provides a gift to a beneficiary without any conditions. However, a Discretionary Testamentary Trust (“DTT”) has the effect of supercharging the gift. The main advantages are listed below.

Taxation

The primary beneficiary can divide the income earned by the DTT between family members and themselves. The big advantage is that children under 18 are taxed at the same rate as an ordinary adult. This special rule applies to trust distributions from a Deceased Estate. Where children receive trust distributions from a traditional Family Discretionary Trust, they can only earn $416 per annum tax free and the excess is taxed at the highest rate. But distributions from a DTT to a child are taxed at the ordinary adult rate of $18,200 tax free and then at the normal marginal rates.

Protection from Creditors

As the primary beneficiary does not, strictly speaking, own the assets contained in the DTT, this means that the inheritance is not at risk of being claimed by a creditor, should the primary beneficiary become bankrupt or otherwise have claims made by creditors. The primary beneficiary can use the DTT assets to pay creditors if they wish to do so, but they cannot be compelled to use those assets.

Protection from Relationship Breakdown

The Family Court can take into account the assets contained in the DTT if there is a marriage breakdown, but inheritances are treated slightly differently from normal assets accumulated during the life of the relationship. There is definitely an advantage if the inheritance is quarantined from the general community assets of the parties. However, the best way to protect an inheritance is for the primary beneficiary to enter into a Binding Financial Agreement which complies with the provisions of the Family Law Act. The agreement would state that upon separation, the other party can make no claim against the inheritance contained in the DTT.

Encouragement to Save and Accumulate

Because of the advantages listed above, there is a real incentive to save and accumulate the inheritance provided through the DTT. Most parents are comfortable that their child will be able to make sensible decisions with any inheritance, but most would like the inheritance to be accumulated, if possible rather than being spent immediately on activities or assets which will not produce a long term benefit. Funds in a DTT have some similarity to superannuation. Both offer taxation benefits and protection from creditors. The real benefit from both funds derives from accumulation and strategic planning for the use of the funds.

With superannuation there are restrictions upon withdrawing the funds unless you have reached retirement age. With a DTT, there is no restriction upon withdrawing the funds, but you cannot add other funds to a DTT and still obtain the special income splitting advantage with children under 18. Consequently, from a practical point of view, you would not want to add any additional funds to a DTT other than funds sourced solely from the inheritance. Income can be accumulated within the DTT.

How is a DTT implemented?

The Will incorporates the terms and conditions for DTT and these can be tailored to suit the individual needs of each person. Once the Will has been made, the DTT sits in a dormant position in the Will and becomes active upon the death of the Will maker. It is important to note that the beneficiary is usually not compelled to take the inheritance through the DTT. There is no stamp duty payable upon the creation of a DTT (which is in contrast to the stamp duty of $200 which is normally payable upon a traditional Family Discretionary Trust). The beneficiary is obliged to keep separate records for the DTT and each year an individual tax return for the DTT must be prepared, which indicates what income has been allocated to beneficiaries. This is a very straight forward tax return for most situations.

Why do it at all?

The parent has worked very hard to accumulate assets. A DTT gives the child the best opportunity to make use of those assets. Not only will it benefit the child, but it also gives the opportunity to benefit grandchildren, should they occur, and can even be used for successive generations (up to a maximum of 80 years from the date of death).

Wills — What information is needed?

I find that a lot of people put off the task of making a Will because they feel that they have not completely resolved in their own mind what they want to do and how they wish to achieve those objectives. But the best approach is to gather information and ideas and put them before an experienced Wills lawyer who can then suggest ideas and options and prepare the Will accordingly.

Having prepared more than 5,000 wills over 30 years; I have been able to resolve plans for just about every situation that could possibly arise. For even the most complex situation, there is a solution. Many clients are often surprised that after a detailed conversation, a workable solution could be agreed upon relatively quickly. If you go to a specialist Doctor, you would expect that they would be able to diagnose and treat your condition, no matter how unusual. A specialist lawyer is no different.

Your questions will be most easily answered if you can come prepared with the information listed below.

The Basics

A list of assets should be prepared. Ownership variations should be noted. Some assets might be owned jointly with other persons. There may be family trusts, private companies, superannuation funds and unusual investments.

The approximate value of the assets should be noted.

Specific Gifts

It is not uncommon to make a specific gift of an item to a particular beneficiary. This usually involves an item of strong sentimental value, although it might also have monetary value as well. It usually is an item that is unlikely to be converted into cash. For example jewellery, War medals, family heirlooms, etc. If a mother has three daughters, but only one engagement ring, then a decision should be made as to which person is to inherit the engagement ring. A direction that the daughters can sort it out between themselves is simply passing a problem onto the next generation. The Will could provide for gifts of other important items to the other two daughters who do not receive the engagement ring.

However, for most people, their assets represent a monetary value which can be divided between various beneficiaries. An attempt to nominate every asset to a particular beneficiary is rarely a good approach.

Executors

Executors have the task of carrying out your wishes. Generally, beneficiaries in the Will can often be the most appropriate persons to be Executors as well. Care must be given about choosing the right person. Often two executors are best, particularly if assets are being held on trust for infant children.

Provision for Infant Children

It is common to leave a gift to infant children on trust until the child reaches a particular age. You can nominate the age and 18, 21 or 25 years are common choices. When the child reaches the specified age, they receive the inheritance without restriction. Until they reach the nominated age, a Will would normally provide that the Executors could pay some of the money toward the education, maintenance or general benefit of the child. Consequently, the choice of Executors is important. Where monies are being held on trust for children, I think there are advantages if there is more than one Executor.

Taxation

While death duties were abolished many years ago, there can be a variety of taxation issues that can be relevant when preparing a Will. Shares and property will be subject to CGT if acquired after 20 September 1985. The principal residence is exempt. Awareness of the taxation issues is important so that you are able to assess the underlying net value of an asset.

Superannuation

This very important area is full of important rules (and governments have been altering these rules from time to time – and no doubt will continue to do so). A summary barely does nay justice to this issue, but these issues are always important:

• How many funds do you have? Is consolidation a good idea?

• What is the accumulated balance?

• Is there any insurance death benefit payable?

• Is there a binding death nomination, and if not, should one be made?

• There are important tax concessions depending upon who receives the benefit.

The next step

Once you have been able to gather as much of the above information make an appointment to see your lawyer who can advise you of the options available to you. Don’t try to solve all of your plans before you see the lawyer – let the lawyer complete that task. Focus on the big picture issues and let the lawyer can work out the details.