If you currently have some form of will, congratulations! You are already ahead of around half the population, who don’t have one at all. While having a will might be better than nothing, the harsh reality is that many wills are inadequate, out of date, and not very effective documents for giving proper and fair direction over your assets when you’re gone.
It is very easy to make simple mistakes on a will, which can have far reaching effects in how your assets are divided. Add complicated issues such as estranged spouses, step children, family conflict, or unresolved property settlements, and a poorly structured and out of date will can leave your estate open to all sorts of unwanted outcomes.
What happens if you die without a will?
If you think it is all too hard, or don’t have time to worry about it, or you are happy to let those left behind to sort it out for themselves, then you may choose not to have a will at all. If that is the case, your estate will have a standard formula applied to it with prescribed percentages of assets being directed toward your spouse and children. This formula varies from state to state.
For those who don’t want the state to distribute their inheritance — or who don’t want to leave things to chance — a will is essential, but it needs to be properly structured and accurately drafted to take care of all contingencies.
Will a DIY will kit do the job?
In an age of DIY mania and online access to information, making your own will using a DIY kit from the local post office may seem like a quick and easy way to take care of the situation. After all, you know best about what you want to do with your assets, so why not just do it yourself? While this may seem like the obvious choice, the problem is that translating your wishes accurately can be complicated.
Sure, you may save a few dollars and the hassle of getting advice if you go it alone, but what are you potentially putting at risk if you get it wrong? A DIY may be a suitable option in the most simple of cases, but the reality is that your situation may not be as simple as you think.
What are the traps to watch out for?
There are many hidden traps that can be overlooked when trying to do things yourself. For example, any debts you have don't die with you. Your estate is responsible for paying them and if you haven’t made provision in your will for their payment, this can cause problems.
This is especially true if you have left different assets to different beneficiaries but you haven’t accounted for a debt that may exist over one of those assets (such as a mortgage on a property). This can end up throwing your intended bequests out of balance.
Taxation is another complicating factor that often gets ignored with a DIY approach. In particular, capital gains tax can have an impact when asset values are realised by whoever is receiving the asset.
Further complications can arise if you bequest assets that you don’t actually own outright or which are subject to other legal constraints, such as family trusts or property jointly owned with an estranged partner.
Superannuation is another area where wills can come unstuck because a will generally cannot be used to control the direction of your super assets. The assets in your super are ultimately distributed at the discretion of your super fund trustee, and while they may take the intentions mentioned in your will into account in their deliberations, there will be other factors that they will also be obligated to consider in relation to adequately providing for your dependents.
Choosing an executor
The natural inclination for many people is to appoint a close, trusted friend or family member as the executor of their will. This may seem logical in terms of making sure your wishes are carried out faithfully, but can have some unintended repercussions: such a person may be trustworthy, but may not possess the required financial understanding or skills if things get complicated — or challenges to the will are made.
To avoid such a problem and to remove any potential conflict of interest, it may be preferable to appoint an independent and objective executor.
Advice can be vital
All these issues add up to a considerable risk if you pursue a DIY will option. The best alternative is to get some expert advice. Qualified professionals can pre-empt family and financial issues to help you build a will that is resilient and robust enough to take care of any contingencies, threats, and disputes.
A solicitor can take care of the legal side of things, and your financial planner can offer invaluable advice on the financial aspects of how your will deals with your investments and superannuation.
Have you heard any will horror stories? Share your experience below.