Making a will and estate planning are tasks often neglected by Australians but are crucial steps to conveying essential details including how you wish your estate to be distributed after your death. A valid will, for example, provides not only peace of mind for the testator – the will-maker – but certainty for the family members left behind.
Estate planning is the broad phrase used to encompass getting your affairs in order before life ends, including making a will and ensuring a power of attorney is in place in case a person loses the capacity to make important decisions during their lifetime (through dementia or another illness, for example).
Failure to make a will can result in intestacy where the rules of intestacy then determine how your assets are divided. Failure to update an existing will when your circumstances have changed can also lead to disputes between family members challenging the terms or validity of the will.
Anyone who begins to accumulate assets as they age should undertake the will-making process and consider an estate plan. Ideally, these documents should be reviewed every twelve months or when your circumstances have changed, and if necessary, updated thereafter to ensure they accurately reflect your testamentary wishes.
There are a number of important things to consider when estate planning and creating a will to minimise the possibility of problems once the testator has passed. Here are the top 10 mistakes to avoid when estate planning and making a will.
1. Relying on do-it-yourself will kits
The popularity of DIY wills is understandable as people try to save time and money and avoid legal fees. But common problems arise when people make mistakes in their will – adding in confusing or contradictory statements, including assets they don’t legally own, or failing to make a valid will by not meeting the formalities required (signing, witnesses, etc). Such errors can be costly to unravel once the testator passes, creating stress and confusion for beneficiaries and executors. For these reasons, it’s money well spent to consult a legal professional with expertise in wills and estates before creating the document.
2. Not knowing what your assets are
A common error testators make is to include assets in the will to which they do not have sole legal title. Property owned as a joint tenant, trusts, superannuation funds and life insurance policies are examples of assets which may fall outside a testator’s estate and may not be able to be dealt with through a will. A tenancy in common is a different matter – your percentage interest in the property can be passed on through your estate. It’s important to clarify what assets you legally possess and what assets form part of your estate before trying to pass them on in a will.
3. Failing to account for debts of the estate
One of the functions of a will is not only to distribute the deceased’s assets but also to reconcile all outstanding debts accrued during their lifetime. Where an asset of the estate is allocated or gifted to a specific beneficiary, if there is a debt attached to that asset and no instructions in the will about how the liability is to be met, then the beneficiary may also inherit the debt. In most wills, debts are met from the estate before assets are administered… meaning the testator needs to carefully consider what those debts are.
4. Appointing an inappropriate executor
On the testator’s death, the executor of the will assumes the important responsibility of administering the estate including ensuring all bequests are distributed to beneficiaries and all liabilities and debts are met from the estate. To carry out these duties, the executor needs to be an organised, efficient and trustworthy person, preferably familiar with the testator’s affairs before they passed.
More than one person can be appointed as an executor of an estate. Problems can arise however when two executors don’t agree on how to administer the estate. Appointing siblings with a history of disagreement, or a new partner and a former spouse as executors can often be a recipe for disaster, making the decision of who to appoint, is a highly important one. It’s also important for the testator to accurately and precisely define the powers of the executor, giving them what they need in order to administer the estate.
5. Failure to properly provide for beneficiaries
Unfortunately, not everyone who expects to benefit from a deceased’s person’s estate will do so. The testator may decide to leave some family members out altogether and give others a smaller bequest than they expected. In these situations the disappointed family member may be able to make a family provision application, contesting the will on the basis that they have not received ‘adequate provision’. The question of whether the testator had a ‘moral obligation’ to provide for the person contesting the will is a pertinent one addressed by courts in assessing the family provision application. It’s also one the testator needs to consider when creating a will, to try and avoid potentially costly litigation over the estate and disquiet among family members and beneficiaries.
6. Failure of gifts in the will
One thing most people seek to do in a will is ‘gift’ their assets to their beneficiaries, either specifically (a piece of property, a family heirloom) or generally (a percentage of their total estate, for example). But too often gifts left through a will fail because of simple technicalities, sometimes associated with the first mistake in this list.
Gifts may fail to be legally passed on where:
- the intended recipient dies before the testator;
- the nature of the item to be gifted is unclear or confusing in its description;
- the intended recipient of the gift is unclear;
- the gift is no longer legally owned by the testator at the time of their death.
Where beneficiaries share Christian names, for example, or a piece of property is not adequately distinguished from another property owned by the testator, uncertainty can arise and end in costly litigation. Having a specialist wills and estates lawyer draft the document to ensure gifts are expressed in unambiguous terms can save a lot of grief later on.
7. Not periodically reviewing and updating the will
Once a will has been created it’s advisable to review it every twelve months or so and, if necessary, update it as a person’s life circumstances change. Marriage, divorce, children, new relationships, selling and buying properties… all of these life events likely require changes to the will to reflect the new status.
8. Not putting Power of Attorney documents in place
When estate planning it’s important to ensure a Power of Attorney document is in place to empower someone to make financial, legal, personal and medical decisions on your behalf in the unfortunate event you lose the capacity to do so. In the absence of someone appointed as a Power of Attorney, an administrator or guardian can be appointed by a Court or Tribunal to make these decisions on your behalf, potentially in conflict with your wishes and those of surviving family members.
9. Incorrectly amending a will
For a will to be valid it must meet certain formalities. Some people will try to change the terms of their will – after a family argument or falling out, for instance – by physically writing or otherwise amending the existing document. Doing so, however, can revoke or alter the will or cause confusion as to your intentions, as can adding pages or attaching documents. In most cases amending a will requires making an entirely new will. If unsure, expert advice should be sought.
