WHAT TO CONSIDER WHEN MAKING A WILL
Who will be your Executors?
Your Executors are the people you appoint to deal with your assets and affairs after you pass away. You should appoint someone you trust to distribute your assets in accordance with your wishes in your Will. Your Executors may be different from the people or person you appoint as your Power of Attorney. Your Attorney may act on your behalf during your lifetime for financial and personal matters whereas your Executors only act on your behalf once you pass away.
Your beneficiaries are the people you intend to benefit from your estate. However, in certain circumstances, there may be a good reason why someone does not want you to leave them a gift. For example, if someone is on a pension, then a monetary gift is likely to affect their right to receive a pension. Worse than that, they may lose their pensioner concession card and the benefits it affords them. Likewise, if you intend to leave a property to someone, and it is not your Principal Place of residence at your death, there may be capital gains tax implications for that beneficiary.
Jointly held assets cannot be left to someone in your Will. Jointly held assets, such as a property or a bank account automatically transfer to the survivor on the death of the other joint tenant. For a married of de facto couple, both for succession planning and taxation, it is important to determine whether you purchase a property jointly (where you each technically own 100% of the property) or as ‘tenants in common’. Where you purchase as tenants in common it may be in equal shares (you own 50% each) or in unequal shares. As opposed to joint tenants, tenant in common may gift their share of the property in their Will.
Formal requirements to make a valid Will
To make a valid Will, it must be in writing, with the intention for it to be your final Will. It must be witnessed by 2 independent people over the age of 18. Both witnesses must be present when you sign your Will and must see you sign your Will, otherwise it may be held to be invalid. Anyone receiving a gift under your Will should not be a witness as it may imply that they influenced you to leave them a gift.
Typical ‘partner Wills’ leave everything to each other; then to children in equal shares; then to grandchildren so the estate is kept within the family.
This is not normally dealt with in your Will unless you nominate your executor on your binding death nomination. If you have made a binding death nomination, your Superannuation fund will pay your benefit directly to your nominated dependant.
Under superannuation law, a “death benefit dependant” includes:
• a spouse or de facto spouse
• a child
• a person in an interdependency relationship with the deceased. This is a close personal relationship between two people who live together, where one or both provides for the financial, domestic, and personal support of the other.
Usually a binding death nomination must be updated every 3 years. However, some Superannuation funds will allow you to make an enduring nomination which lasts forever unless you revoke it.
If you do not have a binding or enduring nomination, then it is usual practice for the Trustee of the Superannuation Fund to use their discretion when determining to whom to the benefit is paid.
However, to gift your death benefit in your Will, you can nominate your Executor on your binding death nomination. This means that your death benefit will be paid to your Executors who must hold the benefit on trust to be distributed in accordance with your Will.
One benefit of this is being able to distribute your death benefit to non-family members which your Superannuation Fund will not allow.
If you have children under 18, it is important to appoint a Guardian for your children if you pass away before they are 18 years of age.
Effect of Marriage on a Will
Section 13 of the Wills Act 1997 (Vic) revokes your Will except for any gift left to the person you are married to at the time of your death.
Therefore, if you make a Will before marriage leaving property to your partner, and subsequently marry them, the gift to your partner will stand if you are still married at the time of your death.
All other gifts will be revoked, and your estate will be distributed pursuant to the laws of intestacy (intestacy laws apply where someone passes away without a Will or without a valid Will). These intestacy laws are found in the Administration and Probate Act 1958 (Vic) and they aim to distribute your estate fairly between your next of kin.
The intestacy laws apply differently depending on whether you leave a partner or a partner and children from a previous relationship.
See how an estate is distributed where a deceased leaves a partner and children from a previous relationship here Probate and Estates
However, if you are single when you pass away and do not have any living children, your estate will be left in the following order:
a. to your parents if alive, if not;
b. to your brothers and sisters if alive, if not;
c. to your grandparents if alive, if not;
d. to your aunties, uncles, and cousins.
In the unfortunate event that no close relative can be found, your assets are deemed to have no owner and it will pass to the Government.
Effect of Divorce on a Will
Similarly, section 14 of the Wills Act 1997 (Vic) revokes any gift left to a divorced ex-partner. It also revokes their appointment of as your Executor. However, unlike the effect of marriage, the rest of your Will remains valid and is treated as though your ex-partner predeceased you.
Who may challenge your Will?
An ‘eligible person’ under the Administration and Probate Act 1958 (Vic) has the right to challenge a Will. However, the eligible person must also show that the deceased had a moral duty to provide for them and that the distribution of the deceased’s estate fails to make adequate provision for them.
An “eligible person” means, amongst limited other circumstances, the following:
(a) a person who was the spouse or domestic partner of the deceased at the time of the deceased’s death;
(b) a child or stepchild of the deceased, including a child adopted by the deceased;
(c) a registered caring partner of the deceased.
Avoiding a challenge
It may not be possible to avoid a challenge to your Will. However, you can explain in your Will why you have not provided for an eligible person, such as a child. It may be that you have already provided much more in life to one child as opposed to others, or that you are estranged from them.
If you own property your Executors will be required to apply for a Grant of Probate from the Supreme Court before they are able to sell or transfer your property in accordance with your Will. This means that your Will becomes a publicly available document.
Therefore, some people prefer not to include a reason for excluding an eligible person in their Will. They instead keep a separate statement with their Will that can be read with the Will and produced if a challenge is made to their Will.