Wills & Estate planning

Six Tips Before Preparing a Will

1) Your family trust does not form part of the estate

Example: Johnny has a family trust. The trust owns two investment properties, a Rolls Royce, and a holiday house on Mt Buller. None of these assets will form part of Johnny’s estate when he dies.

2) Superannuation does not automatically form part of your estate
Example: Sarah is married with 2 children. Sarah is also a member of Hostplus and Plum Insurance. Tragically Sarah has an accident and dies. Sarah does not have a binding death benefit nomination for either fund. The superannuation does not form part of the estate and the trustee of the funds now has discretion as to how to apply $1.2 million in death benefits payments.

3) Dying without a valid will can lead to conflict over superannuation death benefits and leave loved ones without adequate provision

Example: The recent Queensland Supreme Court decision of McIntosh v McIntosh [2014] QSC 99 stands for the proposition that if you die without a valid will, or without making a binding death benefit nomination, the administrator appointed by the court is under a fiduciary duty to request that the trustee of the superannuation fund pay the death benefits (in the absence of a binding death benefit nomination) to the estate rather than to an individual applicant (even if that applicant is a dependent). Were an administrator to apply to have the funds paid to them personally rather than the estate, they would be found to be in breach of their fiduciary duties and made to pay any death benefits they received to the estate.

Example: John dies and leaves behind his wife Mary and a young baby Sally. John does not have a will. John’s estate at the date of his death is worth$955,000. Under the law, Mary is entitled to the first $100,000 and all personal chattels of John’s estate which include his personal effects and his car. She is further entitled to one third of the balance of the estate and her daughter Sally is entitled to the remaining two thirds of the estate. Sadly, because John didn’t prepare a will, Mary is entitled to approximately $385,000 of the estate which is not enough for her to discharge the mortgage over the family home. If John had taken the time to prepare a will, he could have prevented the financial disaster Mary now finds herself in as she would have inherited the estate valued at $955,000 instead of the $385,000 she is now receiving.

4) Be careful who you leave out of your will

Example: Dermott Baratone, a famous AFL footballer died after tragically falling off a balcony at a Las Vegas casino. Dermott left behind 2 former wives, one current wife and 6 children from the three marriages. Dermott left all his estate to his current wife Sandy. Dermott had been supporting all his ex-wives and children before his death. Dermott’s ex-wives and children make a claim against Dermott’s estate, with the effect that Dermott’s estate is whittled away from costly and bitter legal battles. Dermott should have sought advise rather than letting his children and former wives fight over his estate.

5) How you own property affects whether you can leave it by will

Example: Sally and Mary are longtime friends. Sally and Mary buy an investment property in South Yarra as joint proprietors. Sally dies. Sally’s share in the property automatically transfers to Mary as they purchased the property as joint proprietors and not tenants in common. This is not what Sally would have wanted.

6) Sometimes you need two wills

Example: Rodriguez has property in Australia and in his native country of Mexico. Rodriguez dies and only leaves behind a valid Mexican will. This creates all sorts of taxation problems for Rodriguez’s estate.
Rodriguez should have made one will for Mexico and one for Australia.