A person’s last, and in many cases most lasting, actions in relation to property require careful thought and planning.
That thought and planning then requires proper implementation through the means of a carefully drafted Will and power of attorney.
When property is held in a family discretionary trust, careful consideration and, if necessary, restructure of that arrangement should be considered.
Proper estate planning and implementation requires more than just the preparation of a Will. The estate planning process can, however, result in very real and substantial savings and benefits for a person’s survivors which would not otherwise be available to them.
What is a Will?
A Will is the document which sets out a person’s directions regarding the disposal or management of that person’s property on their death.
The person making the Will (the testator if a male, or testatrix if a female) appoints one or more persons to carry out instructions set out in the Will. These appointees are called the Executors.
At any time the Will may be cancelled by destroying the document or by making a new Will. If a new Will is made it is wise to destroy all previous Wills.
In most cases a Will will be automatically revoked upon marriage unless it specifically states that it was made in contemplation of the marriage. In the case of divorce (but not separation), the ending of a marriage revokes any gift made in the Will to, and any appointment of, that spouse as an executor, trustee or guardian. Therefore, after divorce, separation, or marriage breakdown, a new Will should be prepared.
Formalities
While there are relatively few formal requirements for a Will, if those requirements are not complied with the Will, or parts of the Will, may not be effective.
Furthermore, if a Will is not carefully prepared it can have unintended consequences which may result in the wrong persons benefiting from the estate.
It is therefore vital that all necessary formalities are complied with.
Intestacy and Partial Intestacy
Intestacy occurs when a person dies without leaving a Will. Partial intestacy occurs when a person dies and leaves a Will but does not dispose of all of his or her property in that Will. The laws in each State in Australia define who is entitled to a person’s property in the case of an intestacy or partial intestacy. Generally those laws provide that members of the deceased’s family take specified proportions of the deceased’s property and that the government is only to take that property if the deceased did not leave any family.
Executors / Administrators — Probate / Letters of Administration
A deceased person’s estate is dealt with by that person’s personal representatives, who are either that person’s executors named in a Will or that person’s administrators.
A grant of probate is an act of a court which certifies an executor’s appointment under a Will. Technically an executor has power to deal with an estate without a grant of probate. However, many institutions will require grant of probate before dealing with the executor.
In the case of intestacy, a court may grant to a person (usually a close relative) letters of administration of the deceased’s estate, which gives the administrator the authority to deal with that estate.
Guardians / Beneficiaries
A guardian will be appointed in a Will where the deceased person died after their spouse and has left children under the age of 18 years. In this case, the Will will nominate a Guardian who stands in the shoes of the parents in relation to the legal rights and custody of the children.
Beneficiaries are simply people who may benefit under a Will.
Choice of Executors and Guardians
In this pamphlet it is not possible to give any proper advice regarding the choice of executors or guardians. These are matters that require careful thought having regard to personal relationships and the nature of the testator’s estate.
Often more than one executor and more than one guardian is named in a Will and in many cases provision is made for substitute executors or guardians who are to act if any other person named as executor or guardian dies before the testator or for some reason is unable or unwilling to act as executor or guardian.
It is usually wise to seek a person’s consent to act as executor or guardian before that person is nominated as such in a Will. It is, however, most unwise to inform anyone about the contents of a Will. To do so may develop in those people an expectation which after death could lead to disputes among beneficiaries.
Jointly held property
When property is owned by two people it can be owned by them jointly or can be owned by them as tenants in common. If property is owned jointly, then on the death of one of the owners that property passes to the survivor without reference to anything said in the deceased’s Will. Conversely if property is held as tenants in common then on the death of one of the owners their share is dealt with either as instructed by the deceased in a Will or in accordance with the laws relating to intestacy. Very often married people own their home and hold bank accounts jointly.
Updating Wills
A Will should be regularly reviewed to make sure that it meets with current requirements. We recommend that a Will be reviewed at least once every year. It is often convenient to review the Will when preparing the year’s tax return. We also recommend that everyone should review his/her Will at each important stage in life, for example, on birth of a child, on death of a relative, after marriage, after divorce or retirement and after each event which results in a substantial change to a person’s financial position or personal relationships.
More information
For more information, please contact a member of our Estate Group on (03) 8600 8885.
Note: This update is a guide only and is not intended to constitute legal advice.