There has been so much in the media lately about excess death and people (some very young) who have died suddenly, I am reminded of the importance of Wills. Unless you LOVE the idea of leaving a lot of your wealth to the Taxman when you die, or you want to cause a lot of grief to those you leave behind, you MUST do at least some estate planning. For this to happen, you MUST make your Will (often referred to as your Last Will and Testament).
I know many people to have not even thought about it. It is one of those task that you promised you would do as soon as you have some spare time. The trouble is that – we never have that spare time. And when we do, there are so many more important jobs to be done! Or, more likely, you think that you can get around to preparing your will when you’re, say, in your fifties or sixties. Do you know what happens if you don’t make a Will? If you don’t know, I strongly recommend that you research “What happens if I die without a will in [country]”. You won’t like the answers!
It is a necessary boring must-do if you want to protect the family wealth that you have worked so hard to build. It’s all about the creation, conservation and transfer of property and wealth. In simple English, it’s about making sure that your family is looked after when you pass. Its objectives are:-
- To minimize capital gains tax, inheritance tax and other taxes that governments love to impose when your assets are passed on either during life or at death. After all, this will be the government’s last chance to dip into your estate!
- To ensure that the people who inherit your estate are the ones you WANT your estate to pass to!
Preparing a Will is a daunting task. First, you must accept that you are a mere mortal and you WILL die! None of us will live forever. Second, don’t let superstition get in your way. I know of many who refuse to make a will simply because they believe that if they make one, they will die!
Making a Will is your chance to say what happens with your wealth (no matter how big or small) you have built up over your life. If you have young children it is also your chance to say who brings them up. If you don’t make a Will, then others may have this say for you … others whom you may not want to have a say. (We ALL have one or two of these in the family!). Or worse, the government may step in!
Even your choice of Executor could be the difference between “happy families” or the total disintegration of whatever frail relationships did exist. Trust me – I’ve seen some real big family fights you would not wish on your enemies. Sadly, I have also seen families where the siblings no longer talk to each other because the last surviving parent did not, would not make a Will.
By making a Will you will be doing all your relatives and friends a BIG favour…unless you prefer that they suffer. Assuming they are grieving (sometimes a big assumption), your Will helps them get on with life. It gives them certainty at a time they need it.
Estate planning can be complex and is far too extensive to cover it in full here. Besides, every country has a different law. Some countries have an inheritance tax, others do not. Others have a capital gains tax which taxes you if you attempt to give away your assets before your move on. We will however attempt to cover some of the more general considerations that you need to address – irrespective of which country you’re in.
To help you understand the need for estate planning, we have included a checklist (which is certainly not exhaustive) of questions for you to consider.
The most important question you need answered
Once you decide to make your will, the most important question you must get answered is – Who will act as your Executor or Executrix and do they know what they have to do?
- How many should you have? Whatever you do, don’t forget to get their consent to act. (After all, think how you would feel if you didn’t know!)
- A relative or friend who is familiar with your life, hopes and aspirations is usually the best person to act (especially since they’re likely to do it for free! … or at a relatively low cost) but they should seek legal advice on the administration. On the other hand, a professional person such as your accountant or solicitor is more experienced in dealing with Estates and are usually independent (but they can be more expensive than a friend or relative). Whatever you do, don’t use the public trustee – I have heard many stories of the estate being plundered dry by public trustees who may not care about preserving your estate.
- You can appoint a single executor or (in some countries) up to 4 joint executors but remember, appointing more than one person can lead to disputes and delays in the administration. You can always appoint a “reserve” if the main one is unwilling or unable to act.
Do you have children or grandchildren that you would like to be looked after?
If you have, then the next most important question is – Who will look after the children? Your Will is the place to name your choice of guardian. This will only apply if your spouse pass before you or tragically, you both pass together. Again, remember to seek consent from the would be guardian. Don’t just spring the “happy news” on to the unsuspecting guardian!
- Do you know how they will be looked after if they predecease you?
- Does your will contain adequate Investment powers so the share of your estate held for minor children can be efficiently invested?
Who gets your assets?
This does not usually cause any difficulty – as long as you have some documentation somewhere that tells your Executors where to look for your information.
- If you wish to leave special gifts to certain people, such as family heirlooms to family members, then these should be clearly identified.
- Should you leave the gift to a person direct or have it held in trust? If you would like it held in trust, you create what is known as a “testamentary trust”. In some countries, the use of testamentary trusts (which can only ever arise on death) will provide young children with the opportunity to earn some tax free income. In this case, your Executor is given flexibility as to whom he distributes assets and when. This can give rise to major tax savings. Your lawyer and accountant can help you with planning this.
- Do you know which assets are not included as part of your estate? In Australia, family trust do not form part of your will. The question becomes – Who takes control of your trust when you die? The most important task here is to make sure you nominate a replacement appointer, trustee or guardian on your family trust. Does your trust contain loan accounts which may result in some beneficiaries “inheriting” much more than others?
Do you own a business?
If yes, the whole thing just got a lot more complicated!
- Does your will prevent your executors being forced to withdraw your funds from your business? Does it allow them to carry on your business or will there have to be a forced sale of the business? Did your will take into account the business structure and assets and liabilities?
- Do you have any partners in business? Do you have an agreement which provides for a smooth transition of “shares” in the business on the death of a partner? Are your arrangements structured to avoid unnecessary possible tax implications in such a situation?
- Have you considered the possibility that your intended beneficiary may become bankrupt? Do you wish to protect your estate from your intended beneficiaries creditors and/or a Trustee in Bankruptcy? Does your will contain provisions designed to protect your estate and beneficiaries in this situation?
- Are you planning to leave anything to someone who may wish to rely on welfare benefits? Does your will protect their welfare entitlements? Sometimes, a gift of just $50,000 can wreck havoc with an intended beneficiary’s welfare payments.
- Are your concerned your will may be contested? Have you been advised on the methods of preventing such challenge? I know of a case where the deceased left his estate to his niece rather than his own daughter because he was estranged from his daughter and he was of the view that his daughter would only use the inheritance to feed her drug addiction. You guess it – the daughter challenged and the court ruled that based on “need”, the daughter was entitled to a share of the estate!
- Have you given property to a married child? In some countries, if a married child of yours and their spouse both die without children. Often, everything goes to the parents of the one who died last – if this is uncertain then parents of the youngest. The best known case is that of the author Stieg Larsson who died intestate. His life partner, Eva Gabrielsson, who shared Stieg’s life for 32 years, was left out in the cold. Larsson’s father and brother inheritedhis entire estate, including the rights to his best-selling trilogy worth an estimated $50 million.
- Are you contemplating marriage? Don’t forget, in many countries, marriage revokes a Will unless it is made “in contemplation of marriage”. If you intend to marry you should say this in your Will. And if you’ve married or remarried since making your last Will, then you should make a new Will.
In some countries (and remember, it can vary from country to country and sometimes even from state to state):
- Without a will, most of your estate goes to your children, not your surviving spouse. Maybe that’s what you would prefer to have happen :-). If not, I strongly suggest you do something about it. As a minimum, do check the position!
- If you separate from your spouse your old will leaving him or her part or all of your estate remains valid. If that’s what you want, then you can leave it as it is. If not, then do something about it!
- Property you own jointly with another may automatically go to the survivor – do not assume that your intended beneficiary will inherit your half. It all depends on whether the property is held as tenants in common or join tenants. If you’re not sure, do check!
- What happens if you leave your estate to your spouse and they re-marry a con-artist, how much will be left for your children?
- If you leave property to children without sensible limitations in place, they can spend the lot the minute they turn eighteen! In most countries, beneficiaries are entitled at 18. You can nominate a later age if you wish (i.e. 21, 25 or 30). Ask yourself, what would you have done with an inheritance at 18?
- If you leave property to a charity without a special provision in your will – the other beneficiaries may end up having to wear any taxes on the gift.
It is difficult in an article such as this to cover all eventualities. What this article is meant to do is to highlight to you the importance of having a will … wherever you may live. Many people do use off-the-shelf Will templates that they buy online. Some charities do offer a free Will service if you include a donation in your Will to the charity. However, if your estate is complicated or substantial I strongly recommend that you meet with a properly qualified professional to prepare your Will for you.
Finally, ask yourself – If something ever happen to you, would your loved ones know where to find everything they will need to wind up your estate? Will they know where to find your Will? What about the titles to the properties you may have? Will they know about the life insurance policies you may have? What about the passwords to all your important logins? I witnessed many of my clients go through the problems and emotional trauma when their partner pass without leaving sufficient information behind as they spend hours trying to locate documents that we needed to wind up the estate.
As a result, I created a Personal Organiser for my clients. If you spend a little time on this and complete the information in the Personal Organiser, AND make sure your loved ones know where to find this document, you will alleviate some of the emotional stress and trauma for those you leave behind. Isn’t it better to leave the bulk of your estate to your loved ones than to your advisors? Your family and close friends and relatives will be thankful if you make a Will. After all, you are not making your Will for YOU, you are making it for THEM.
Note: This article is not intended to constitute legal advice and must not be relied on as a substitute for legal advice. DO GET PROFESSIONAL ADVICE. Just remember, if you’re protecting (say) $10 million estate, paying $10,000 for a Will is but a drop in the ocean. Better to be safe than sorry! Having said all that … if you’re not fussed about giving all your money to the Taxman … or you don’t really care about those you leave behind, then do nothing. Don’t make a Will. Don’t make life simple for your loved ones. Make them suffer and earn your inheritance!
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