A valid Will details how you want to give your estate after you die who will carry out that task (i.e. your executor). An executor can be a family member, friend or a trusted professional. Your Will can also nominate guardians for any non-adult child that is left behind, and also provide directions to your executor about your funeral and farewell preferences.
Without a Will, the control of your estate could be left to somebody you would not wish to act. Also, the distribution of your assets, by operation of certain laws, may default to people that you do not wish to benefit from your estate. When such situations arise, estates become complex and costly for your loved ones.
No matter your health status or financial circumstances, dying intestate (without a Will) can create an additional financial and emotional burden on your family or preferred beneficiaries. Non-family members, whom might be your preferred beneficiaries in a Will, will not have the legal standing to make a claim for provision from your estate if the default laws were to apply.
What happens when your estate is intestate?
If you die intestate, your assets will be distributed typically by your next of kin and according to laws that operate in default. This default distribution is referred to as the rules of intestacy, and each jurisdiction has a slightly different process. Importantly, in all jurisdictions the operation of the intestacy rules do not consider the wishes of a deceased person, irrespective of whether such wishes are broadly known.
An intestacy situation could still arise even if you have made a Will before. Certain events, such as divorce or marriage, effect the operation of Wills. Alternatively, you may acquire an asset after making your Will, which specific asset may not be included or dealt with in your Will, resulting in a partial intestacy.
What can go wrong?
The rules of intestacy attempt to reflect society’s expectations as to whom should benefit from a person’s intestate estate. However, family types and family relationships differ from household to household, and the application of the intestacy laws can be more detrimental, unfair or undesirable to some families than others.
An example of such detriment can be seen in situations like the following hypothetical:
Person A has no Will and has recently separated (but is not divorced) from their spouse, Person B, whom has re-partnered. Person A has children from their first marriage, and Person B has no children. If Person A dies intestate, Person B is likely to (subject to the jurisdiction and size of the estate), and notwithstanding the separation, inherit more than half of the estate of Person A, leaving Person A’s children to share equally in the remaining part.
From the above hypothetical, it is unlikely that Person A would want Person B to receive more than their children (or at all) from their deceased estate; however, that would be the case for the intestate estate.
More convincing reasons to make or update your Will
An executor is the estate’s legal personal representative and is appointed in the Will. An administrator has an identical role to an executor but is appointed by the Court.
Generally, the next of kin may apply for the role of Administrator; however, this may not be desirable in some circumstances. There are many dynamics within families and sometimes it may be preferable for a third party to be involved in the administration, removing the emotional factor, conflicts of interest, and bringing impartiality to the role.
Finally, the failure to make a Will may forego opportunities for estate assets to be treated more tax effectively or to protect vulnerable beneficiaries. Such tax or protection strategies are usually effected through a testamentary trust, which is a trust created in a Will for the benefit of a beneficiary or beneficiaries following the death of the deceased.
A testamentary trust can provide flexibility and control in asset distribution amongst beneficiaries and may assist in protecting or preserving assets for future generations.
Summary
The end of life is inevitable. Having a Will gives you a voice after you die. Good estate planning can also preserve the value of your assets, allow for more tax-effective distribution(s) and protect vulnerable beneficiaries.
This information is of a general nature only and you should obtain professional advice relevant to your circumstances. If you or someone you know wants more information or needs help or advice, please contact us on 08 8443 4888 or email [email protected].