Attorneys With Estate Law Experience
A will is one of the most important legal documents you will ever sign. It is the best way to protect your assets and have them distributed according to your wishes when you pass away. For more information about wills, refer to the topic “What is a Will.”
Estate planning is about ensuring that the value of a person’s assets are preserved and enhanced, and to avoid unintended consequences for beneficiaries after that person’s death. The assets that are sought to be protected need not necessarily always be owned personally but can be owned by other means such as superannuation or family trusts.
Because circumstances change, it is important that estate planning be properly addressed and that wills be reviewed regularly by an attorney. The process has become a lot more difficult due to the fact that people are faced with a broad range of financial products such as superannuation and insurance. People also often have considerable assets tied up in business or company structures or trusts.
Failure to properly plan one’s affairs in the event of death can lead to a reduction in the wealth passed on to intended beneficiaries, and can result in beneficiaries either missing out on what was intended, or in other cases, receiving what was not intended. In many cases, failure to properly take planning considerations into account can result in costly litigation against the estate, which sometimes can drag on for years.
Because of the increasing complexity of the law, it is necessary to obtain professional advice from a lawyer that properly addresses your concerns. Our team has considerable experience in preparing wills for clients with fairly straightforward estate issues through more complex scenarios involving complicated tax and trust structures.
At Johnstone & Gabhart, LLP, we can help you with your estate planning so as to ensure that nothing is left to chance and that your will is legally sound and up to date.
Proper estate planning often involves other considerations in addition to preparation of a will. An enduring power of attorney or testamentary trust may be appropriate to a client’s circumstances. At Johnstone & Gabhart, LLP, we have the necessary skills to access your situation and suggest an arrangement that would be appropriate to your needs.
What is a Will?
A will is a legal document that comes into force upon your death and is prepared by you, the “testator”/”testatrix.” A will prescribes exactly who receives the benefit from your assets (known as “beneficiaries”). Provisions for precisely how to distribute those assets may also be detailed. A will is the most effective way to ensure that your assets are eventually distributed according to your wishes.
However, wills are not solely confined to dealing with your assets. They may include burial preferences, funeral expenses or appointing guardians for children, among others.
In the will, you may appoint a person(s) to oversee the distribution of assets and wishes. This person is known as the “executor.” Generally, they are under a strict legal obligation to comply with your will. The executor effectively acts as an administrator of your estate to ensure that your written desires are met.
Wills are rigid and complex documents in the sense that the literal effect of the words will be given considerable attention. Because they are so rigid it is important to keep them as up to date as frequently as possible. If you need to make a change to your will, you may have to execute a separate document known as a “codicil.” You should ask yourself whether the details of your estate, the list of beneficiaries and the chosen executor(s) are as up to date as possible.
If you do not have a will upon your death, then any desires you may have regarding the distribution of your estate will be irrelevant. In this case, an “administrator” will be appointed, who will divide your estate according to the list of those deemed in need.
What property passes in a will?
Historically, real or personal property could only be transferred by a will. However, this now includes other forms of assets. The types of property may include your house, car, boat, pet, bank account and shares, among others.
Together the real and personal property is referred to as your “estate.” This is the property that will be distributed by the executor of your will to your chosen beneficiaries.
Property in your will should be exhaustively detailed so as to avoid any potential confusion. For example, the exact address of a piece of land you own and wish to bequeath should be stated and be the current address.
What property does not pass in a will?
To be able to transfer the property that you list in your will, you must to a certain extent either own, control or have investments in that property. For example, if you state in your will that your car is to go to your youngest son, but you actually sell the car prior to your death; then that transfer to your son will not be valid, as you no longer own the vehicle.
You should also note that if you are a joint tenant of a property, you will be prevented from bequeathing your share of that property. If you die, the other joint tenant will inherit your share according to the survivorship principle. If you are concerned that this may apply to you, perhaps a tenancy in common would be more suitable because in that case you are allowed to bequeath your share in the property.
Superannuation and life insurance policies are not as clear cut as proceeds of these policies are controlled by the policy trustees and not the executor of the will. Usually you have to list the beneficiaries of your superannuation and life insurance upon the creation of them. Reference should be made to the terms of the trust deed of your superannuation fund to determine who the nominated beneficiaries are.
Other examples of nonestate property may include assets held in unit trusts or family trusts.
Requirements for validity of a will
As mentioned above, wills are very rigid and strict documents that may be interpreted literally. Therefore, the main requirements are that the will is a written document, which is duly signed by you, the testator. Two witnesses are also required to sign the will. The witnesses and the testator must be in the presence of each other when the testator signs the document.
The testator must be at least 18 years old, unless there is a court approval otherwise. These is also a requirement that the testator has “testamentary capacity” – meaning that you have a sound mind, memory and understanding. The testator must appreciate the consequences of bequeathing their assets in a will. Testators should not be afflicted with what is often referred to as a “disease of the mind,” which may include being free from dementia, mental illness and psychosis, among others.
The existence of any undue influence or duress may also be a consideration taken into account when determining the validity of a will. This will usually relate to when the voluntary free will of the testator has been compromised by another party. It may include any special disadvantage that has been exploited at the expense of the testator. The existence of undue influence or duress will depend on the particular circumstances of a given case.
Wills can be challenged for invalidity, especially if the testator did not have “testamentary capacity,” therefore, you should be careful to pay close attention to whether you have created a valid will by seeking professional advice.
Changing a will
Wills should be reviewed regularly and changed if there have been changes in the will maker’s personal situation that could result in unintended consequences. For example, if a marital relationship breaks down, it would be sensible for each party to that relationship to make new wills that would properly reflect their new circumstances.
If a nominated beneficiary of a will becomes bankrupt, it would be sensible to make a new will either excluding that beneficiary or creating a trust in favor of that beneficiary so that the creditors of that person do not benefit by a windfall injection of funds.
When changing a will, it is most important to ensure that this is done properly. Sometimes changes are made by way of a separate document called a “codicil,” which should be signed with the same level of formality as the will itself – i.e., in the presence of two witnesses and with the same pen. It is our philosophy at Johnstone & Gabhart, LLP, that unless exceptional circumstances apply, instead of adding a codicil, it is usually safe to revoke the current will and make a new one that properly reflects all of the desired changes.
Setting up a trust
Testamentary trusts can be used to provide flexibility to a will so that it is, as far as possible, able to adapt to meet changing circumstances of the intended beneficiaries of the estate. They can also be used in situations where it is thought that the beneficiary might go bankrupt, be in a relationship that is deteriorating or is possibly of unsound mind. Because of the flexibility that trusts afford, they are often said to “rule from the grave.”
Examples of testamentary trusts that are often employed in wills are as follows:
- Education – to enable a child/grandchild to finish education and when this is done the remaining trust capital would form part of the residual estate.
- Absolute capital protected – for situations where a spouse or children are not to receive control of capital but are free to do as they please with the income. The remainder beneficiaries receive either all the capital as “absolute” or surviving beneficiaries.
- Protective/special disability – for situations where there is a beneficiary with a severe disability in need of financial support for care and accommodation but not to be given control. Capital can be reserved for remainder beneficiaries after the vulnerable beneficiary dies.