Is a Will a must have or just something your advisors keep telling you that you need? There are a few key points that you should understand around why you may need a Will.
When you pass away you will either have a Will, or not have a Will. If you have a Will then your Estate (a combination of your personal items, bank accounts, property, investments, superannuation etc.) will be administered according to the terms of your Will and pass to the people you have nominated as beneficiaries. If you pass away without a Will it is said that you have died ‘intestate’ and your Estate will instead pass in accordance with the laws of intestacy.
Laws of Intestacy
Each Australian jurisdiction has legislation that prescribes how a person’s Estate must be distributed if they pass away intestate. This legislation varies significantly between jurisdictions.
In South Australia the laws of intestacy state that:
- If you have a spouse (this includes wedded spouses as well as domestic partners) and no children then your Estate will pass to your spouse. Sometimes it can be quite complicated for the surviving partner to prove the existence of the domestic relationship, especially in the case of blended families. Ex-spouses are also entitled to benefit in some circumstances, in which case your Estate may be split between spouses!
- If you have a spouse and children, then your spouse will receive your personal items and the first one hundred thousand dollars ($100,000.00). The remaining assets will split half to your spouse and half to your children. This can cause a lot of anguish and even financial hardship for your spouse if, for example, they receive only half of your house. The other half of the house will be held by the Public Trustee on behalf of any minor children until they reach the age of eighteen. This means that your spouse may be unable to sell the property without the consent of the Public Trustee.
- If you do not have a spouse or children then your parents will receive the full benefit of your Estate. If you do not have any parents living then your siblings and then nieces and nephews will benefit.
A Valid Will
The benefits of having a valid Will are:
- You are able to ensure that the people you wish to benefit from your Estate do benefit. You are able to gift specific items or cash amounts to different people.
- You are able to choose who you would like to make arrangements for you after you have passed away and to administer your Estate (called your Executor).
- You are able to ensure that your beneficiaries receive their inheritance at an age you think they will be capable of handling the inheritance. You may wish to prevent them receiving large sums or money when they turn eighteen years old and instead hold money on trust until they are older.
- You may direct that your assets are to be held in a Testamentary Trust for the benefit of one or more beneficiaries and their lineal descendants. Testamentary Trust is a structure whereby assets are managed by a Trustee who has the discretion to distribute capital and income between a group of beneficiaries nominated in your Will. Testamentary Trusts are tax effective and give additional protection to your inheritance from your beneficiaries’ spouses, bankruptcy and/or spendthrift habits!
- Your Estate will likely incur fewer costs and will be administered more quickly.
People often say they do not need a Will because they do not have any assets. Even if this is the case now, a lot can change by the time you pass away. Assets such as life insurance and superannuation benefits may form part of your Estate and can be more significant that you think.
If you have a spouse and/or children then passing away without a Will leaves them in a tough spot. They will likely incur significant legal costs, not to mention emotional hardship, in proving their relationship and/or paternity to the court. This also often causes disputes with your parents and/or siblings.
If you do not want the intestacy laws to apply to you, do not want additional costs to your Estate and wish to provide guidance and support to your next of kin then a Will is a must have!
Article provided by the Estate Team at 360Private, whom are happy to discuss your queries or concerns around your Estate Planning requirements. They are contactable on 8291 2111