Description of this module
Is Your Will Fit For Purpose?
A will is one of the most important documents that you will sign in your lifetime so it imperative that it records your wishes correctly and fits your current circumstances.
Recent experiences when dealing with estates have highlighted certain matters that need careful consideration when drafting and updating a will. Some of those matters are outlined below.
Assets and Liabilities
It is important that you know the extent of your assets and liabilities and how they are held in order to understand how your property will be dealt with on your death. For example if your house is held jointly with any other person(s) then the house will automatically pass to the surviving joint owner(s) when you die regardless of what is stated in your will. If this is not your intention then your property must be held as tenants in common. This type of ownership enables each owner to leave their share to someone else in their will. Similarly, where life insurance or bank accounts are held jointly the proceeds will automatically pass to the survivor.
Obligations to Family Members
Drafting wills for couples that have married young, had children together and built up their wealth together, is generally straightforward. However, these days family structures are often more complicated. Increasingly people are entering into second or third relationships and have children with more than one partner.
You will certainly want to ensure that your spouse and minor children have sufficient financial support when you die but what are your obligations to your children from a previous relationship who are adult and independent?
Although spouses and minor children have a superior claim against an estate, it is generally accepted that parents have a duty to provide for all their children even if they are adult and financially independent. It is often difficult to balance the needs of a spouse against the needs of children from a former relationship – especially when the new spouse and children from a former relationship are of similar age.
If someone feels aggrieved with the amount that is left to them under a will or under an intestacy there are several options available to them. They can make a claim under the Family Protection Act 1955, the Law Reform (Testamentary Promises) Act 1949 or in the case of spouses, the Property (Relationships) Act 1976.
Accordingly, it is important to bear in mind the possibility of claims being made against your estate when drafting your will.
In some circumstances, where there is a real risk of a claim being made against your estate, setting up a trust to hold your major assets may be the best solution. With the abolition of gift duty, it is now possible to transfer significant assets to a trust without a debt back to the settlor. It will then be up to the trustees (guided by a memorandum of wishes drafted by the settlor) to decide how to distribute the assets. If the trust is set up properly, and all major assets have been transferred to the trust during your lifetime, then there will be less chance of a successful claim being made against your estate. However it is important to note that recent cases have made it clear that leaving assets to a trust does not necessarily release you from your moral duty to your spouse and children. Your directions to your trustees and the likely distribution to the affected beneficiary will be important in determining whether you have fulfilled your moral obligations.
Do it Now
Don’t delay in putting in place or updating your will.
There can be unintended consequences if you don’t have a will in place as distribution of your assets will be determined in accordance with the Administration Act 1969. For example if you die leaving a husband, wife or de facto partner and one or more parents (with no children) then your partner will get all your personal chattels and the residue will be distributed as follows:
- Your partner will receive an amount prescribed by statute (currently $155,000.00).
- Anything remaining will be split as to two-thirds to your partner and one-third to your parent or parents.
It may be that you have no relationship with your parents and this is not what you intended at all.
You should not wait until your health deteriorates before making or changing your will. Doing so may leave the will open to challenge as some beneficiaries (or non-beneficiaries) may claim that you did not have capacity to make or change your will at that stage of your life.
It is important to review your will at least every 5 years or whenever there is a significant change in your life. Wills need to be tailor-made to fit your circumstances so take the time to get legal advice at an early stage. You will then be more likely to have your wishes carried out on your death.