Exposing Estate Planning Myths
‘Estate planning’ is important to all of us, irrespective of age or wealth. Our personal circumstances are all unique and in some cases, may call for creative, tailored and innovative planning.
As estate planning experts, we have assisted countless clients with:
- Tailored estate planning solutions;
- Elder Law (abuse of fiduciary duties, Enduring Power of Attorneys and disputes in the Queensland Civil and Administrative Tribunal ‘QCAT’);
- Wills with Testamentary Trusts;
- Mutual Will Agreements;
- Protective/Special Disability Trusts for vulnerable beneficiaries;
- Asset protection and structuring;
- Deceased Estate administration;
- Grants of Probate / Grants of Letters of Administration;
- Deceased Estate claims and disputes (contested estates).
In this article we share some of the common themes and misconceptions we’ve noticed along the way.
Wills are not necessary
This is probably the biggest myth of them all.
The misconception behind this myth is that somehow the intended people will end up with your money and assets after your death, so you do not really need to make a Will. This may not be the case. Dying without a valid Will can cause a lot of financial and emotional hardship for the loved ones you leave behind. Not only that, but your wealth could end up with people who you do not intend to benefit.
If you die without a Will, the Government gets everything
If you die “intestate” (without a valid Will), the relevant state law applies to determining the division of your estate according to a set formula. Generally, your spouse and children are the first in line to inherit (though the formula varies from state to state). In Queensland a surviving spouse and children will all share the deceased person’s assets. This may not be your intention. A Will provides certainly about who is to receive your estate.
Wills are just for ‘older’ people
The thinking behind this myth is fairly understandable – the older you are, the more likely you are to pass away… therefore the more important it is to have a current Will. The problem with this thinking is that none of us know when we are going to die! Every adult needs a Will. A Will becomes especially important if you are experiencing a life event such as marriage, a relationship breakdown, the birth of a child, the purchase of a property or the loss of a loved one.
A young person’s assets will automatically go to their parents if they don’t have a Will
Many young people believe they don’t own anything worth including in a Will. Others believe that if they die, their parents will inherit all of their assets. This is not necessarily the case, and many young people have more assets than they realise including superannuation and possible ‘death benefits insurance’, cars, computers and other assets. These assets are worth protecting!
It doesn’t matter, I’ll be dead anyway
Dying without a Will won’t change much for you but it could significantly impact the lives of your loved ones.
Not only will they be coping with grief, they may also experience increased financial and emotional hardship as a result of managing any complex legal complications that may arise after your passing. This can include expensive and protracted litigation which may not have been necessary if you had simply prepared a Will.
Preparing a Will costs thousands of dollars
The truth is the cost of your Will will depend on the complexity of your circumstances and your objectives. The cost of preparing a Will with an experienced estate planning expert can range between $500 and $3,500. It is important to remember, you get what you pay for!
My family is really close – they will never argue about my estate
Unfortunately, this is often wishful thinking. Of all the emotionally driven and hotly contested litigation matters we have seen, the worst have been disputes over deceased estates. Money and grief seem to be a bad mixture, bringing out all sorts of strong emotions. The clearer you are about how you want your affairs handled, the lower the risk of relationship-destroying disputes.
A 'home made‘ Will Kit is good enough
In many cases ’home made‘ Will Kits create more problems than they solve – due to the fact that they are often poorly drafted. This is good for lawyers who make money out of Estate disputes, but it is not good for your beneficiaries!
A Will Kit will not address any complexities in your estate planning, such as complex corporate structures (companies, trusts and businesses), disentitled beneficiaries, potential family provision issues or blended family considerations. It will also not offer any asset protection or tax minimisation options for your beneficiaries.
All my assets will be covered by my Will (including my superannuation)
Not necessarily. Most people think that they ’own’ assets in a Family Trust or family owned company. While you may be able to pass on the ‘control’ of those entities in your Will, the assets within these structures do not form part of your Estate.
Similarly, in the case of superannuation (whether in a self managed, retail or industry fund,) your death benefits will not automatically form part of your estate unless you have created a ’Binding death benefit nomination‘ directing those benefits to your estate (for distribution under your Will).
Often additional measures need to be taken to ensure that the assets in these kinds of entities end up where intended.
If I leave someone $1 under my Will, then they can’t make a claim against my Estate
Naturally, people want to take all possible steps to ensure that there are no claims made against their estate after their passing.
However, legislation in every State provides that the Court may consider an application made by an eligible person where the deceased has not made adequate provision from the Estate for that person.
It is therefore not sufficient to leave a nominal gift for a potential beneficiary under your Will. The Court is concerned with whether adequate provision for the beneficiary has been made for the proper maintenance, education or advancement in life.
Even though the outcome of a family provision claim is ultimately a determination for the Court, an experienced lawyer can advise you as to how to reduce the likelihood of any such claim being successful. If you are anticipating an Estate claim following your death, you should advise your lawyer of your concerns so that all necessary steps can be taken in the preparation of your Will and associated estate planning documents, for example, memorandum of wishes, affidavits.
Inheritance Tax (Death Duties) will dissipate my estate
Inheritance Tax, commonly known as ’death duties‘, has not applied in Australia since 1979. Despite abolishing Inheritance Tax, there are still a number of other (unavoidable) taxes and expenses which may impact your estate (e.g. Capital Gains Tax, Superannuation tax and stamp (transfer) duty). There are actions you can take to minimise the impact of your beneficiaries having to pay tax on your inheritance, in particular seeking expert legal advice in order to prepare an estate plan that will minimise any taxation that your estate, and ultimately your beneficiaries, may be liable to pay.
If you would like advice on your estate plan, please contact our wills and estates team, who can help you tailor a plan to suit your needs.
[This article was published in 18 April 2019 edition of The Wire]