Summary: Using lawyers to make binding legal arrangements for inheritance or estate administration (including trusts set up before death), guardianship of children, powers of attorney, or other death-related issues is often complex, onerous, costly, requires ongoing revision, has various tax implications, and is still subject to challenge and family disputes.
Though I have a partner, young child and considerable financial assets, I spend no time, energy or money on such matters apart from the 4 hours I spent making an ultra-simple DIY will. (I also spent 5 minutes online nominating my partner as my superannuation beneficiary). I've read enough of the relevant laws in Australia (i.e. Victoria), the periodic changes to laws, the discretion courts have to override instructions, how changes in circumstances necessitate changes in instructions, and of the frequency of disputes to realise that, for me, the burden of creating and maintaining comprehensive, binding arrangements outweighs any minor benefits over what will happen with just an ultra-simple, valid DIY will.
When I'm dead I won't be affected by outcomes that aren't exactly as I wished. The default application of the relevant laws in the absence of legal instructions is close enough to be good enough for everything other than wills. Having one partner and one kid and no complicated circumstances means there's much less I need to worry about. If I want to provide financial gifts to others or charity I'll do so while alive and mentally competent. Most of all, it's best to focus on having healthy, trusting relationships with my partner and immediate relatives, so I can be confident the best and fairest decisions will be taken at the time.
I plan on living a long, healthy life, but if certain issues eventually become more critical for myself or my partner (e.g. guardianship, powers of attorney) to create legal instructions, I'll prefer to keep things simple using the better DIY kits or minimalist instructions prepared by a specialist lawyer.
Regarding directly setting up accounts for children: In Australia, children can't earn more than $416 in investment income without paying very high penalty tax rates that far exceed adult's tax rates. While there are fairly-taxed education savings accounts and investment bonds that enable children to be legal beneficiaries these are inferior investment options to those I use. So I'll establish long-term investments in my child's name when she's over 18 but until then it will be in her parent's accounts.
Details:
Apart from a very simple will using a DIY kit, I currently don't have any written legal instructions on guardianship, powers of attorney or any other death-related matters, so I won't be providing much detailed advice in this post other than how to keep your affairs as simple as possible.
Mostly, I simply plan to collate the best external articles of relevance so that others can inform themselves and make suitable decisions for their own circumstances.
Note that if your situation is complicated by things like prior partners, multiple types of dependents, step-children, unusual living arrangements, property/assets owned in joint names, existing trusts, or complex self-managed superannuation, then you should seek specialist legal advice.
The better specialist lawyer blogs provide plenty of free information that can help those going down the DIY Will route as well as isolate circumstances where it is worthwhile paying for the advice of laywers who specialise in this area.
See:
> Atwood Marshall Lawyers - Wills and Enduring Powers of Attorney
1. Nominate the beneficiaries of your superannuation balance and any insurance held within super
This can generally be done (or changed) in 5 minutes via your super fund's member website, so there is never a good reason to leave this blank or have the incorrect person(s) nominated. You can nominate multiple beneficiaries and specify the proportions that must total 100%.
I don't hold any insurance and self-insure. But my superannuation balance has one beneficiary who is my de facto partner and mother of my only child. If I died, all of it would be transferred to her.
Your beneficiaries can be:
- a spouse (including de facto and same-sex)
- children of any age (including adopted and stepchildren)
- interdependants (someone who lives with you and shares a close personal relationship where one or - both of you provide financial and domestic support, and personal care of the other)
- other financial dependants (such as someone who relies on you financially)
- your legal personal representative (who will be the executor of your estate)
Note that children under 18 get any payments made to a trust. Children between 18 and 25 can be paid income but not the full amount till they turn 25.
If you only have children with one partner, no other dependents, and trust that partner to look out for them financially, you may be best off keeping things simple and nominating your partner as the sole beneficiary (rather than nomnating your children as well). If this circumstance did change in future (relationship change, children with other partners, new dependents you wish to provide for), you would obviously change this.
Making a binding nomination is a lot safer if you think there is any chance it may be challenged, there are several beneficiaries, or is somewhat unequal with regard to your partner, children and dependents. It is worthwhile obtaining the PDF binding form and submitting it in these cases.
See:
> AustralianSuper - Nominate a beneficiary
2. Understand what happens in your state if you die without valid, legal instructions
Once you have any significant assets or dependents, you should actually understand what will happen by default in your current circumstances if you die without legal instructions. So understanding what happens by default is the most important first step.
If you die without leaving a valid Will (‘intestate’) then your assets will pass in accordance with intestacy laws. The distribution of assets on intestacy in Victoria is set out in the Administration and Probate Act 1958 (Vic) (‘the Act’).
If you die leaving a spouse and one or more children, your spouse will receive $100,000 plus one third of your estate and your children will receive the remaining two thirds of your estate. Not only may this be an unsatisfactory outcome, the costs and time associated with making an application to administer an estate without a Will can, and often do, outweigh the costs of preparing a basic Will in Australia.Note also that any of your creditors are paid off first. Until I researched the relevant laws in Victoria, I'd assumed that, given my sole child is only 2 years old, my assets would just pass rather seamlessly to my de facto partner. But the law is written to protect all parties with an underlying assumption they are not sharing the assets anyway and may not agree - either now or in future - how to split the wealth or use it.
> Rigby Cooke Lawyers - Do I need a Will in Australia?
The law isn't written for harmonious families who can figure this out best themselves. For those with assets, dying without a simple, valid will can just create more work, obligations and costs. I'm not even sure how my partner would go about ensuring our child is the recipient of her legal share. She'd probably have to waste money on a lawyer to work it out.
See:
> Rigby Cooke Lawyers - Do I need a Will in Australia?
3. Make a simple, valid will using a DIY Will kit
A valid Will in Victoria requires the following:
- Testator (Willmaker) must be at least 18 years of age;
- Willmaker must have testamentary capacity;
- Be in writing;
- Signed by the Willmaker and witnessed by at least two independent individuals over 18 years of age;
- Willmaker must sign it with the intention of making a Will.
> Rigby Cooke Lawyers - Do I need a Will in Australia?
While you may have heard of informal wills written on a paper napkin and witnessed by random people, this will rarely survive any challenge or be easy to have accepted. I recommend paying $30 for one of the best DIY will kits (see below).
Don't leave your financial dependents out or treat them unfairly
"In Australia you can leave your assets to anyone you wish, including family, friends or charities. But it is important to remember that although you can leave your estate to anyone you choose, if you leave someone out of your Will who you should have provided for, then the courts may ultimately determine who will benefit from your estate."
> Rigby Cooke Lawyers - Do I need a Will in Australia?
Which DIY will kit should I use?
I did some research on Australian DIY will kits including the overall quality and currency of the information freely available on their websites. I also recommend reading this Choice article:
> Choice - DIY Will kit reviews
Based on my research, I chose to use the State Trustees Will kit for my state (Victoria). It costs only $31.50. It includes a comprehensive Will Planning Guide PDF to go along with the actual Will kit PDF that you can complete. The Will Planning Guide includes helpful things like a full example:
The State Trustees Will kit also includes free lifetime access to the Victorian Will Bank - a safe, accessible place to store your will, as well as your enduring power of attorney document if you have one. This solves the issue of where to store your will and make it accessible only when needed, ensure it is the latest version, and advise your relatives or friends where to find it.
I recommend reading all of the relevant Will kit provider's FAQs on suitability and usage.
See:
> State Trustees - Will kit FAQ
> Victorian Will Bank
4. Understand the actual facts relevant to your assets and will, and how they will be treated once transferred to beneficiaries (e.g. taxation)
When dealing with lots of money or considerable consequences, it's important not to rely on "common knowledge" or what you've been told by non-experts.
For example, whether capital gains tax will be payable on an inherited home depends on whether it was bought before 1985 or not (when CGT was brought in), whether it is sold within two years of being inherited, whether it was rented out just before the owner's death, and whether the beneficiary used it as their principal place of residence.
It is recommended you do your research on major uncertainties and make the wisest decisions, particularly regarding property.
"Myth No 1: the family home is free of capital gains tax (CGT)
A principal place of residence is ordinarily a capital gains tax free asset. But it can become subject to CGT in the hands of the beneficiary, says Aged Care Steps' Hansen..."
> AFR - Six myths that could bungle your inheritance
5. Should you appoint a guardian for your children?
I recommend reading the below article on appointing a guardian:
So, I reasoned, as we set about making a will, we didn't know what the children would be like, when they grew up, or what their needs might be, and the perfect guardians for our children might be people we had not yet met.
In the end, we drew up a list of family and friends and asked that they form a committee and decide what should happen to the children, should anything happen to both of us. It might be that one of them becomes the guardian, but it might be that someone whom none of us yet knows.
Leaving the decision to be made by people I trust, taking into account the circumstances at the time, seems like a good solution and reaching it was strangely life-affirming.What the author drew up as a legal arrangement is really no different to what would happen in the complete absence of any instructions. The people around at the time who care and whose circumstances are suitable will have to figure out the best solution. It's much more important to focus on having such strong, trusting relationships throughout one;s life than trying to create written legal instructions that are ultimately irrelevant compared to the wishes of those around at the time.
The Guardian - If the worst should happen
Further Info:
Finder
> What happens if I die without a will in Victoria: Intestacy rules
> Estate planning
Victorian Law Reform Commission
> Intestacy
SMH/The Age
> Will power: get it right before you go
AFR
> Wills, inheritance and other ways to avoid the big family fight
> Six myths that could bungle your inheritance
MoneySmart
> Money musts before you die
Atwood Marshall Lawyers
> Wills and Enduring Powers of Attorney
Buller McLeod Lawyers
> Victorian Estate Planning lawyers
> Blog
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