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1. What is a Will and why do you need one?
A Will dictates what happens with your assets and liabilities (your “estate”) after you die. In NSW you generally have the freedom, subject to some legislative requirements, to dispose of your estate as you wish, but only via a valid Will. Making a valid Will requires certain formalities to be observed (such as two adult witnesses) and requires you to be of sound mind and to understand the nature and size of your estate and the nature and effect of the Will you are making.
If you die without a Will (“intestate”) your next of kin will have to make an application to the Supreme Court for Letters of Administration before being able to deal with your estate. This is generally more expensive, more complicated and can take a lot longer than a simple Probate application, which occurs where there is a valid Will.
Also, if you die intestate then there are strict rules imposed by legislation about who gets your estate. In certain circumstances, this can result in your estate going to someone who you may not have wished to receive it, or even in part of your estate going to the government. A Will allows you to control (subject to some limitations) what happens to your estate.
2. Executor/Trustee
An executor, or trustee, is the person you appoint to administer your Will and trust to implement its terms. It is important to appoint someone who you trust and useful (although not compulsory)to tell the person they have been appointed and to discuss with that person your wishes in relation to your Will.
An executor can always choose to renounce their executorship - they don't have to do the job. For this reason, it is common to make the executor one of the beneficiaries, so they will have their own interests at heart, however you may also choose to appoint a professional executor as an independent person, such as your solicitor, accountant or a trustee company.
Being an executor can be a lot of work and trouble. You can include a clause allowing an executor (particularly a professional executor) to pay themselves from the estate for their work. Otherwise, an executor is entitled to be paid “commission” for the work involved in administering an estate, usually assessed at between 0.5% and 2% of the total estate. Generally, executors who are also beneficiaries do not claim commission (although they may), whereas professional executors would certainly do so.
You can appoint more than one executor, to act jointly. This has the advantage that if one of them dies or renounces, the other(s) can continue. However, it is important to appoint at least one alternate executor. If you do not make provision for an alternate executor and your appointed executor dies, then his/her executor will become your executor, which may be someone you do not even know. A professional executor is a good idea as an alternate, so that there is a definite fall back position.
3. Guardianship of Infant Children
If you are a parent you can provide in your Will for the guardianship of your infant children. In the situation where one parent dies, then guardianship of children automatically reverts to the surviving parent.
If both parents die at the same time their Wills can appoint one or more guardians for the surviving children. You should discuss any such appointment with both the guardian and with your executor (it can be the same person) so that your wishes for your surviving children are clearly understood.
Your executor will administer your estate for the benefit of your children, looking after their financial affairs until the age you have nominated for them to inherit. The guardian will look after the children on a day to day basis and will make requests of the executor from time to time for money from your estate to assist with the children’s needs, subject to the provisions of your Will.
4. Specific bequests
It is simplest to allow your executor to divide up all of your personal items between family members and friends as the executor sees fit. However, if you wish to specify who gets which ornament, or piece of jewellery, book, photo etc, then the easiest way is to make a list allocating each of these items to certain people and either give it to your executor of attach it to your Will. This means you can change the list easily from time to time without changing your Will. You should also discuss your wishes with your executor.
5. Superannuation
Your superannuation is NOT generally part of your estate. It is held on your behalf by the trustees of your super fund and what happens to it in the event of your death is covered by the terms of the trust deed for the fund.
When you establish a super fund you are given the opportunity to nominate to whom you want your super to go in the event of your death, so you need to check what nomination you made in respect of all super funds of which you are a member. Note that such a nomination is NOT necessarily binding upon the trustees of the fund (but they would usually comply with it).
Also, if a couple have each nominated the other and they die together, there would not normally be an alternate beneficiary nominated and the trustees will have to decide what to do with your super (albeit guided by legislation).
You can make a binding nomination – ask your super fund(s) for the relevant form. The other way to deal with super, so as to have real control over what happens to it, is to make a binding nomination, nominating your executor (or actually your “legal personal representative”) as the beneficiary of your super in the event of your death. It then gets paid to your estate and becomes subject to the terms of your Will.
6. Beneficiaries/Family Provision
Your beneficiaries are the people (or institutions) to whom you leave your assets. While you have freedom to give your assets to whomever you wish and even to exclude people from your Will, this freedom is constrained by a chapter of the Succession Act that deals with Family Provision.
The Family Provision chapter allows certain “eligible persons” (spouse, children and sometimes others, including grandchildren or persons who may have resided with you and been financially dependant upon you) to bring a claim against your estate after you die for a share of your assets if they have been left out of your Will.
If a Family Provision claim is brought against your estate, your executor(s) will have to decide whether to settle it, or to fight it in court. Family Provision litigation can cost your estate a lot of money in legal fees and your Will should be drafted to avoid the risk of litigation if possible. The issues as to whether a Family Provision claim might be brought and whether it might succeed are complex and you should discuss them with the solicitor drafting your Will if you think there are any “eligible persons” in your life or if you propose to exclude anyone from your Will.
Once you have nominated your beneficiaries, you should consider also nominating alternate beneficiaries, to inherit where your first choice of beneficiary dies before they can inherit. You should consider the (terrible, but also possible!) scenario where a meteor hits the family picnic and wipes out all of your relatives. If there are no beneficiaries left to inherit under your Will your Will can fail completely and the rules of intestacy can apply. You should consider all possible scenarios and have a series of fallback beneficiaries. It is common to include a charity as the final beneficiary where there is no one else to inherit.
7. Trusts
It is possible to be extremely detailed and complicated about your wishes in a Will. If you want to impose detailed and/or onerous conditions upon your beneficiaries’ inheritances, then you can do so via testamentary trusts set out in your Will.
This type of estate planning is technical and expensive. If you feel your estate is large enough, or your family situation complicated enough, to warrant that sort of Will, you should discuss it thoroughly with your solicitor.
Complicated Wills (and large estates) are often the subject of litigation which can seriously deplete the assets of the estate. Your Will should always be aimed at reducing the chance of there being litigation over your estate and your solicitor can advise you as to the best methods of doing so. However your solicitor can only provide advice and then act upon your instructions.
Ultimately, the contents of your Will are up to you and you should carefully consider what you want.
NB: The above is some very general information about Wills only and should not be relied upon on its own. Your Will should reflect your own personal circumstances and you need to provide full and detailed instructions to your solicitor so that the drafting of your Will takes into account all relevant matters to ensure the Will accurately expresses your intentions and minimises the risk of litigation.
Please contact BRRT to make an appointment to discuss further.
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