frequently asked questions
We sometimes use terminology that you don’t understand and are too polite to ask, “What the ..?”.
Here are the most frequently asked wills & estate planning questions (and the answers!).
A will is a legal document setting out who will receive your property and possessions after you die.
Your will appoints an executor to carry out the administration of your estate and carry out your wishes.
Your will can also provide your burial/cremation wishes, appoint a testamentary guardian for your minor children and establish testamentary trusts (including special disability trusts).
Estate planning is the process when you consider and plan for what will happen with your assets (and liabilities) if you are incapacitated or die. Estate planning encompasses documents like your will, superannuation death benefit nomination, power of attorney and advance health directive. For complex estates, it involves some restructuring of assets, companies and trusts during your lifetime.
The estate planning process enables you to consider and apply strategies that will provide asset protection, promote tax savings and reduce the risk of estate litigation when you die.
The will prepared after considered estate planning provides for the smooth and tax-effective transition of your wealth to your intended beneficiaries.
You should appoint someone who is capable of dealing with paperwork and finances. The person you appoint as an executor should also get along with any co-executors and the beneficiaries.
A parent or guardian of a child may appoint a person as guardian of the child in their will. The appointment may stipulate that it is to take effect on death or on the death of the last surviving parent.
A testamentary guardian of a child has all the powers, rights and responsibilities, for making decisions about the long-term care, welfare and development of the child, that are ordinarily vested in a guardian. For example, the child’s education and religious upbringing.
The appointment of a person as testamentary guardian of a child gives the person daily care authority for the child only if there is no surviving parent.
You can gift assets that are owned by you personally in your will.
- Your personal assets include such things as:-
- Property owned by you solely or an interest held in property as tenants in common
- Banks accounts in your name only
- Shares in your name
- A car in your name
You cannot gift such things as:-
- A property held as joint tenants
- Your superannuation death benefits (although you can direct any superannuation death benefits
- The proceeds of a life insurance policy if you have named a beneficiary
When parties own property as joint tenants, all of the joint tenants have equal ownership and interest in the property and the right of survivorship applies.
The right of survivorship means that if one of the joint tenants dies, the property automatically passes to the surviving joint tenant. This means that the property cannot be gifted by will.
A joint tenancy may be severed.
When parties own property as tenants in common, it means that two or more people co-own the property if defined shares. Each co-owner can dispose of their own interest in the property by their will.
A testamentary trust is a trust established in a will that does not come into effect until the death of the willmaker. The terms of the trust are contained in the will.
A special disability trust is a trust that provides special social security and tax concessions for the benefit of an eligible beneficiary. A special disability trust may be established be deed during your lifetime or in a will and implemented after your death.
The validity of your will may be challenged after you die if, for example:-
- It is alleged that you lacked testamentary capacity at the time you made the will
- It is alleged that you did not know and approve of the contents of the will
- It is alleged that there were suspicious circumstances, undue influence, coercion or fraud when you made the will.
The other way your will may be “challenged” is by an applicant making a family provision claim. An eligible person who has been left out of your will or left inadequate provision by your will may apply to the court for further provision from the estate.
An eligible applicant who has been left out of your will or left inadequate provision by your will may apply to the court for further provision from the estate (thereby changing how you intended your assets will be distributed).
The following people are eligible applicants to make a family provision claim –
- a spouse
- a child (including stepchild) of the deceased
- a dependant of the deceased – a dependant is a parent of the deceased, or the parent of a child under the age of 18 years, or a person under the age of 18 years, who was being wholly or substantially maintained or supported by the deceased person at the time of the person’s death.
A power of attorney is a legal document that enables a person (the principal) to nominate a person (the attorney) to make decisions on their behalf.
An enduring power of attorney is a legal document that enables a person (the principal) to nominate a person (the attorney) to make decisions on their behalf, and the power continues if the principal loses capacity to make decisions for themselves.
A general power of attorney is a legal document that enables a person (the principal) to nominate a person (the attorney) to make decisions on their behalf for financial matters while the principal has capacity.
An individual or a company may have a general power of attorney.
You should consider appointing a person as your attorney who:
- you trust implicitly to handle your financial affairs
- you trust to make decisions you would agree with about your personal care and health care and welfare
- you have discussed your views, wishes and preferences with
- will put your needs, rights and interests ahead of their own and others in all decisions
- will understand their legal obligations and duties as an attorney
- will be available to make decisions about financial matters and carry out transactions on your behalf
- will be available to make healthcare decisions and decisions about your care and welfare on your behalf
- will be confident in discussing your health care with your health care providers.
Unless the superannuation trust deed prohibits an attorney from making a superannuation binding death benefit nomination, your attorney can renew and make a binding death nomination.
You should consider including a special term and instruction authorising your attorney to renew and make a binding death nomination in their favour if they are the superannuation dependant you intend to be the recipient of your superannuation death benefits.
An advance health directive is a legal document that enables you to give binding directions about your future health care decisions, medical procedures and life-sustaining treatment.
It must be completed in consultation with your general practitioner or other medical practitioner and then witnessed by a justice of the peace, commissioner for declaration or solicitor.
When you die without a will, your estate is distributed in accordance with the intestacy provisions of the Succession Act 1981.
When you die without a will, your estate is distributed in accordance with the intestacy provisions of the Succession Act 1981. It isn’t easy trying to explain the intestacy provisions in a post but essentially:-
- If you have a spouse, your spouse gets the household chattels, the first $150,000 and a percentage of the residue (depending on how many children you have). If you have one child, your spouse receives 50% of the residue. If you have more than one child, your spouse will receive one third of the residue. Not ideal for a young family.
- If you have a spouse and one child, the child gets 50% of your estate (excluding the household chattels and the first $150,000)
- If you have a spouse and more than one child, the children split two-thirds of your estate equally (excluding the household chattles and the first $150,000)
- If you don’t have a spouse, the children get your estate.
This is an oversimplification of the intestacy provisions!
There are various complicating factors about children who die before you taking the share their parent would have taken.
There are then further provisions if you are not survived by a spouse or child.
Not an easy thing to explain in 10,000 words or less!
You can nominate one or more beneficiary who is a “superannuation dependant” for your superannuation death benefits in a death benefit nomination with your superannuation fund. You may also nominate your personal representative (that is, your estate) to receive your superannuation death benefits.
Your “superannuation dependents” are:-
- Your spouse (legally married, civil or de facto spouse of any duration);
- Your children (minor and adult children, including adopted, step-children and children of your spouse)
- An interdependent at the time of death (that is, a person with whom you have a close personal relationship, lived with and one or both of you financially supports the other and provides domestic support and personal care) and
- Any person who is financially dependent on you at the date of death.
If you have not made a beneficiary nomination, the trustees of the superannuation fund will decide to pay your superannuation death benefits to any one or more of your superannuation dependants or your estate.
If your superannuation death benefits are paid to your estate, they will be distributed in accordance with your will or, if you do not have a will, the intestacy provisions.
A BDBN is a binding death benefit nomination.
The trustees of a superannuation fund are compelled to pay your superannuation death benefit to those nominated by you in a binding death benefit nomination.
Some BDBNs are only valid for 3 years and must be renewed.
The trustee of the family trustee holds the assets of the trust for the beneficiaries nominated in the trust deed.
The role of trustee is appointed by the appointor nominated in the trust deed. If there is no appointor nominated in the trust deed, the subsequent appointor may be appointed in the will of the deceased. If there is no subsequent appointed in the will of the deceased, the executor of the will can appoint and appointor.
If the deceased was the trustee of a trust, the trust deed will nominate the appointor of the replacement trustee. If no appointor is nominated in the trust deed, the executor of the will may appoint a replacement trustee.
The role of appointor is important because the trustee may be replaced by the appointor. Your estate plan should consider who is currently the appointor and, if it is you, how and who you should appoint as your successor.
The assets of the company are owned by the company and cannot be gifted by will.
The company is owned by the shareholders.
If you owned shares in the company personally, the shares will be distributed in accordance with your will or, if you did not have a will, the shares will be distributed in accordance with the intestacy provisions.
If you are a director of the company, the shareholders will be able to elect a replacement director.
