Robert Holmes a Court, the legendary Australian businessman, had something in common with Prince, the legendary American musician: they both died without a will. And it caused no end of headaches for their families.
Nobody likes contemplating their own mortality, so preparing a will undoubtedly involves some uncomfortable or awkward conversations and decisions. It’s one of those painful admin tasks that’s all too easy to keep putting off – apparently Holmes a Court carried an unsigned will around in his brief case for years that he just never got around to finishing off.
A will simply records what you want done with your assets, or your estate, when you die, and who you want to look after the process, a position called the executor.
Critically, if you die without a will, which is referred to as dying ‘intestate’, then the distribution of your assets is dealt with according to state law.
That’s why it’s called an estate plan. As Lav Chhabra, principal of Perpetuity Legal, says, “Everybody has a plan, the issue is whether it’s one they choose, or one that’s imposed upon them.”
Each state has its own intestacy laws, with nuanced variations, but it means the division of your estate follows a pre-determined formula, so some or all of your assets can end up in the hands of someone you’d prefer not to get them, the whole process may be overseen by someone you’d rather not be involved, it can take considerably longer than if you have a valid will, and the risk of arguments over who should get what is increased.
What’s more, if you fancy the idea of giving some of your estate to friends or charities, then that simply isn’t catered for in the state intestacy laws.
You might think you don’t really need a will, but regardless of your family circumstances, as soon as you have some assets (outside of superannuation, which technically are in the control of the trustee, so don’t form part of your estate), you will benefit from having a valid will, if only for ease of administration.
Anyone who owns assets and has children under 18 should definitely have a will. If you die and your assets go to a minor, first, you might not be convinced they’re mature enough to be trusted with a sizeable chunk of money, and secondly, kids under 18 will be taxed as adults.
There’s a simple and effective way to deal with those problems, called a testamentary trust. It only comes into existence once you pass away, but you can leave instructions about how you want the assets your children inherit to be dealt with. For example, you can specify they don’t get control of the money until they’re a certain age, but they can make reasonable requests before then.
The more complex your family situation, the more important it is that you have a valid will. If you have a blended family, for example, or you’ve got children with different partners, you really need to give some thought to how your assets should be apportioned. Or if you’re estranged from your family, that needs to be taken into account.
And keep in mind, the bigger the estate, the more likely it is a will is going to be challenged.
Another important part of estate planning is appointing Powers of Attorney. This is where you nominate someone who can make decisions on your behalf, which could be financial, medical or personal, in case you’re incapacitated.
You can imagine how valuable that can be if you’re in hospital and critical decisions need to be made, like what treatment to approve or bills that have to be paid.
Good estate planning need not be expensive, especially when you compare it to the hassle and cost it can avoid, like tens of thousands of dollars spent on challenges to an estate.
If your situation is straight forward, you can get an online will for as little as $70. But beware, you get what you pay for.
We always advise clients to think about estate planning like a knee replacement: you’re going to get a much better outcome if you see a specialist.
A couple that’s not in a blended family situation should be able to get a will drafted by an estate planning specialist, with testamentary trusts and Powers of Attorney, for around $3,500.
Finally, and this is critically important too, you could have the best drafted will in the world, but if nobody can find it when you die, then it’s no good to anyone. Normally an estate planning lawyer will retain a signed copy for safe keeping and give you a second copy.
Your executor, or someone in your family, or a trusted adviser, needs to know where to find your will.
It’s estimated 50% of Australian families don’t have a valid will, at a time when it’s forecast there will be $3.5 trillion of intergenerational wealth transfer over the next 20 years. Do your family a favour, and make sure you’re in the right 50%.