Wills & Estate Planning

Is Your Current “Will” Exposed To Risk?

8 Questions to help you find out …

A “simple” or what some refer to as a “boiler plate” Will is often a complete waste of money and can easily turn your estate into a very expensive and time wasting exercise for your executors and beneficiaries (including mega legal costs etc). The “boiler plate” Will of course just gives direct gifts to each other and the children etc.

Solicitors, Lawyers, Accountants & others who do not specialise in Wills, Trusts & Estate Planning and have no background in Tax, Trusts and Superannuation Law still produce these old fashioned, mass produced Wills which fail completely to deal with a lot of very important Tax, Asset Protection and Estate planning issues, like:

  1. 1. Does your Will make it possible for your beneficiaries to save the “back door death duties” of Income, Capital Gains Tax (CGT) and “Superannuation exit taxes” arising from your Estate/Super?

  1. There can be up to 4 significant taxes that are attracted by death, and even small estates can wind up with large taxes payable to Federal and State Governments applying to property, cash etc
  2. One scenario could be the surviving spouse/partner ending up paying 30% or 40% more in Income Tax because he or she has no spouse to “split” income with.
  3. The out of date “boiler plate” type Will often puts your beneficiaries in the worst possible tax situation where they are often forced to pay high or higher income taxes for many years at top marginal tax rates or big Capital Gains Tax when a piece of property is sold.
  4. Quite a lot of tax can or maybe be saved if your Will is written by a Lawyer familiar with drafting discretionary testamentary trusts in Wills as well as *other appropriate structures.
  5. A Will without modern “Will trusts” after death which are optional (or indeed provision for *other optional structures) may reduce the value of your gifts/bequest(s).

  1. 2. Does your Will protect each of your relatives/children/partner(s)/beneficiaries from losing their inheritance to bankruptcy (or potentially the subject of other claims) or give some protection to a beneficiary going through a relationship breakdown?

  1. The point and print, cheap “boiler plate” Will may put your beneficiaries in the worst possible asset protection situation where, possibly, a bankrupt beneficiary loses their entire inheritance to people suing them, or where an inheritance is left easily exposed to potential “predators” spouses/partners (and “Creditors”).
  2. A Lawyer reasonably familiar with tax and property protection issues can write clauses in your Will which may/most likely allow your children, relatives/partners to “benefit” from their inheritance by including “optional discretionary testamentary trusts & *other structures” in your Will which may likely reduce the risk of loss of inheritance(s) through going broke, bankruptcy and relationship breakdown (and protect from “Predators & Creditors”).
  3. A simple poorly drafted Will without these clauses may deliver a sad expensive loss to a loved beneficiary/partner(s), spouse or children etc.

  1. 3. Who gets your “Superannuation” when you die?

  1. Super can be a person’s second most valuable thing after their house – surprised to learn that your Super’ is a “non estate asset” and (unless paid to your estate) cannot be left in your Will?
  2. Required; is to make an effective Superannuation Binding Death Benefits Nomination (BDBN) and then have instructions written in your Will that support your nomination.
  3. Generally the Trustee of the Super Fund decides who gets your Super money and there are significant taxes to pay (up to the top marginal tax rate) if your Super goes to non-dependants. The Trustee can override or ignore your nomination if it’s not done properly. (Super Funds and their Agents/Employer(s) often don’t explain this adequately to people when they review or sign up for their Super ... this can cause havoc and a lot of extra legal expenses and delay in the event of someone passing away unexpectedly).
  4. You should ensure that your Lawyers / Solicitors / Accountants / Financial Planners are familiar with Superannuation Law and that they have dealt with these issues; otherwise, expensive mistakes can easily take place.
  5. If your Will says nothing about “Superannuation” then your Will is “old fashioned” and out of date.

  1. 4. Will all your children (partner(s)/relatives) be treated equally under your Will?

  1. A simple and cheaply formed Will may turn into a costly legal battle where the Will fails to “even up” inequalities between children, relatives/partners etc. Often gifts or loans to one child during your lifetime may cause disparities to emerge between the other children which can give rise to expensive disputes on your death.
  2. You need to make sure that your Solicitor / Lawyer / Accountant / Financial Planner is aware of this issue and can assist to put clauses in your Will which may help avoid costly disputes. Sibling rivalry, existing dislike between partners/relatives often only need a slight provocation after you pass away to turn a poorly written Will into an expensive legal mess together with an unnecessary lifetime of family disputation (and what price can you put on that!)
  3. If there is no “adjustment / equalisation clause” in your Will, then it may be dangerously incomplete.

  1. 5. Who gets control of your “Family / Trading Trust(s)” and the property in it?

  1. Many including business and professional people, are advised by their Financial Planners & Accountants to create Family Trusts (& other types of Trusts) while they are alive to protect their property and get tax savings for themselves, their relatives, their businesses and investments.
  2. You cannot leave Property in a Trust in your Will. Who gets control of your (Family) Trust and the property/money held by it is set out in the Trust Deed of your Family Trust. What does your Trust Deed say about this?
  3. Lawyers / Accountants / Financial Planners who are not familiar with Estate Planning and have no training in Trust Law and Taxation Law often overlook completely or make mistakes in dealing with this important fact. Get it wrong and it may mean that a large part of your money/property can fall into the wrong hands and can become a possible disaster for your money / property.
  4. Your Solicitor / Lawyer needs to be aware of this issue and then write clauses in your Will that can deliver control of your Trust property to the right people (beneficiaries).
  5. If you have a Family Trust (or are thinking of starting one) and there is no mention in your Will of passing control of it, then your Will has not been prepared properly. You also may need a “Deed of Future Dealings” to ensure the succession of your Trust Property is fixed and certain in the event of some one challenging your Will or if it ends up being invalid or ineffective.

  1. 6. Are you happy to allow the money / property that you may have worked hard for to be wasted by a young or vulnerable beneficiary? (Did your Lawyer raise this with you?) Did the Solicitor / Lawyer who wrote your last Will think about this? Did you?

  1. If the Lawyer / Solicitor you paid to write your Will failed to ask about this or to write special clauses in your Will for protecting the young, vulnerable and the weak, then you run the great risk of allowing your money / property to be unnecessarily wasted away.
  2. Cheap and oversimplified Wills can allow 18 year old beneficiaries or a beneficiary who is substance addicted / ill / spendthrift to be paid their inheritance and to spend it all very quickly.
  3. Beneficiaries / Partner(s) / Children etc who suffer from mental or physical handicaps (known, unknown or in future) need special clauses in your Will, and your Will should only be written by a Lawyer who has the skill to write in special “protective” trusts.

  1. 7. Did Your Lawyer actually list your property, money & assets and then advise you as to what type of Will you should have? (And suggest talking to your Accountant/Financial Planner?)

Did your Lawyer ask you which legal structure or person actually owns particular property / assets etc?

Did your Lawyer ask you if you have assets / property / overseas or if you have some imminent incapacity / illness / divorce / family law type problem or are you going away overseas?

With Estates that consist of more than just the family home … did your Lawyer ever suggest that your Accountant / and or Financial Planner (if you have one) should be consulted as well about your Estate Planning / Wills?

Did your Lawyer ask you who would pay to look after vulnerable beneficiaries / spouses / partner(s) & children should you die?

Did your Lawyer inquire with you about adequate Life, Disability or Mortgage Insurance needs?

  1. 8. Did your Lawyer Discuss Safe Storage and / or Registration of your Will(s) & Trusts?

  1. Lost Wills and such can cause chaos, huge extra legal expenses and family disputes can arise in the event of loss of a Will / Family Trust or Super’ Deed as well as massive extra tax liabilities.

Modern Wills incorporating optional “discretionary testamentary Trusts” (and *Other possible legal structures) can increase the value of the inheritances/gifts you give by providing your beneficiaries with the possibility to get rid of or reduce many taxes they may have to deal with, and in a straight forward manner and cost effectively “package up” their inheritances with possibly secure increased protection from the claims of creditors, spouses, etc. so their inheritances can be easily “kept and passed down within the family”

BEWARE of Large Law Firms / Firms of Accountants who market ordinary “Estate Plans” / ”Portfolios” for a large amounts of money and market or sell them like Hamburgers.

There are a number of other concerns that “just having a simple Will” does not address – the more important include … a Will does not help if you are incapacitated.

  1. Enduring Powers of Attorney

Did your Lawyer / Solicitor ask you:

  • • Who makes legal / financial decision(s) for you if, through incapacity, you are unable to make those decisions for yourself? You need a modern “Enduring Power of Attorney” prepared to effectively deal with this issue. (If you move to another State or Country in the future you need a new one – if you have money / property outside Australia you may need one in each jurisdiction)

  • • Who makes personal health / welfare decisions for you if, through incapacity, you are unable to make those decisions for yourself? You need a modern “Appointment of Enduring Guardian” prepared to effectively deal with this issue as well. (REMEMBER POWERS OF ATTORNEY CEASE ON DEATH)

If you would like to discuss your Will, Estate Planning or Asset Protection needs today or would like to book an appointment please give us a call on 02 9369 1623 or send us an enquiry and one of our team will get back to you.