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May 14th, 2018
Some people find writing a will too difficult to contemplate, while others have simply never made the time. The reality is, it’s an issue that anyone who wants control over their finances after they die should confront.
Like instruction manuals, wills are a step-by-step guide on how your assets should be handled.
It’s estimated that almost half of Australians die without a will, which is legally called intestacy[1]. The rules around intestacy differ under various state and territory legislation.
Without a will, your loved ones cannot be sure what your exact wishes for your estate would have been. This creates room for confusion and conflict among loved ones.
It’s widely assumed that families argue over money after a death in the family. But many differences also stem from people’s differing views on the wishes of the deceased person.
It’s an emotional time for families and without a will there is no certain way to determine exactly what the person’s wishes would have been.
Usually an intestate estate will be divided up among surviving spouses and children. If there is no surviving immediate family, the assets may be allocated to other family members including parents, grandparents, aunts, uncles or cousins.
Legislation in some states also allows individuals and organisations to pursue moral claims to estates[2]. This may include a person who depended on but was not related to or was in a de facto relationship with the deceased person, or a charity with close ties to the deceased person.
Where there are no surviving family members and no claims to the estate, the estate is likely to pass to the state or territory government[3].
Even after death, it’s important to make your money work hard. Many lawyers recommend testamentary trusts because they protect assets and work best when beneficiaries are minors or have diminished mental capacity. They may protect estates from being split as part of a divorce settlement or becoming subject to a bankruptcy proceeding.
Testamentary trusts are also more tax effective for estates. They can allow for asset protection and income streaming, which can reduce the tax payable.
Normally, minors are taxed at a higher punitive rate, but when a testamentary trust is used, minors are taxed at the ordinary marginal rate of tax.
Lawyers recommend reviewing your will at least every three years. You may need to update your will details, particularly if you become separated, divorced, have remarried or an executor dies or becomes ill.
It will also prove useful in making sure nothing has been overlooked. Ensure you have prepared for circumstances where you may lose your mental capacity[4]. You will need to appoint a person to manage your financial and legal affairs pursuant to an enduring power of attorney and appoint a person who can make decisions about your medical treatment, pursuant to a medical power of attorney.
Preparing your estate may involve time, money and facing some bleak facts of life, but it ensures your hard-earned assets are distributed the way you choose.
To find your nearest wills and estate expert, visit your state’s Law Society.
[1] Wills and Powers of Attorney, 2017, ASIC’s MoneySmart, https://web.archive.org/web/20191217105658/https://www.moneysmart.gov.au/life-events-and-you/over-55s/wills-and-power-of-attorney
[3] Bona Vacantia, 2013, Victorian Law Reform Commission, https://www.lawreform.vic.gov.au/
[4] Powers of Attorney, date undisclosed, Australian Government
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