7 Estate Planning Mistakes
How to avoid common pitfalls and ensure you leave a lasting legacy.
Estate planning is an important process that all of us eventually need to address.
During the Estate administration process we have encountered a number of issues that had the Testator considered during their lifetime, a significant amount of time, stress and financial consequences could have been avoided.
7 common Estate Planning mistakes we see here at Streten Masons Lawyers are:
The testator appoints an inappropriate Executor.
An Executor will be responsible for carrying out the terms of your Will upon your death. As such it is important that the Executor be a Trustworthy and competent person.
Problems often arise when a testator appoints an Executor who will be too old to carry out the necessary requirements, such as a Testators’ parents. Conversely, issues arise where the Executor is too young and either does not have capacity to carry out the necessary function, for example, infant children, or is too young to be able to competently and confidently carry out the role of Executor.
The role of Executor is an important one and must be paid appropriately chosen.
When you start a family there are a huge range of considerations that need to occur to ensure that you are better able to plan for what will happen to your children once you are gone.
Not only is it important to note your children as beneficiaries under your Will, it may be necessary to appoint a person as guardian in the event that you pass away before your children are adults.
Further consideration needs to be taken regarding what sort of remuneration and rights any guardians of your children will have.
We also commonly see that a family drafts a new Will naming a specific child and does not update their Will when they have subsequent kids, potentially excluding a descendent as a Beneficiary.
We suggest that young families or people intending to have more children, do not specially name their children, and rather leave their Estate to all children you may have at the time of your death. While some people are concerned if their children are not specially named, this provides for a Will which can be more flexible as your family grows.
3. Specific Gifts
Careful consideration must be paid when giving of specific gifts particularly if one of the gifts fails because the gift is no longer in the testator’s possession (for example where it has been sold, stolen or given to someone else).
Where the gift is valuable, but cannot be given to the Beneficiary you run the risk of excluding a person.
Issues can also arise when the gift is not adequately described. While you may clearly know what ‘my grandmothers antique necklace’ is, during the administration of the Estate it may be difficult for your Executor to figure out which necklace you meant.
One method of dealing with this issue is to draft a letter of wishes to accompany your Will. While this document does not form part of your official Will, it has the benefit of being able to be easily amended by the Testator throughout their life. One word of warning when using this method is that it is not binding on any Executor and as such, we recommend that you discuss the contents with you Executor and ensure you trust them to comply with your wishes (see comments above).
The rules of intestacy strictly set out the way an Estate is to be distributed.
If you do not have a Will it is unlikely that your Estate Will be distributed the way you want it to be. If someone passes away without a valid Will, the Estate is distributed in accordance with the law.
For further discussion of the rules of Intestacy please see our blog ‘Intestacy Rules: What happens on your death if you do not have a Will’
This may also be an issue if a Will, or part of a Will is not valid, for example, where you have completed a DIY Will kit but it has not been validly executed.
The main assets such as a house, savings and personal possessions are usually considered, however we often see people not considering all potential Estate assets such as superannuation proceeds (depending on the binding nomination) or life insurance proceeds which Will form part of the residual Estate.
As such, people can be surprised at the value of potential Estate assets. This means that in most circumstances the residual Estate is the largest portion. Careful and proper consideration must be had for the nominated residual beneficiaries and the proportion of the residual Estate they will take.
6. Failing to review your Will
People often fail to review or consider their Will on a regular basis or when circumstances change.
You should review your Will every 3-4 years. A change in conditions including any births in the family, deaths, new marriages & divorces or any substantial asset acquisitions.
Similarly, it is important that when you consider changing your Will that you take action and make the necessary changes. If you fail to consider your Will or discuss changing the Will and fail to do so, after you death there may be an argument that the final Will does not reflect your intentions and thus it is invalid.
7. Excluding Beneficiaries
There are a range of factors which may apply to a person’s decision to expressly exclude someone from their Will.
We find that common reasons include;
- That the relationship between you has denigrated to such a state that you do not feel any moral obligation to provide for a person;
- That a person’s situation is much better financially than another and that it would not be necessary;
- That they Will or have received significant funds from another family member; or
- That you have provided them with sufficient financial support throughout their lifetime.
Where you wish to exclude a person we recommend expressly stating the reasons for this.
Not only will this provide some clarity upon your death, but can also provide information to rebut any potential family provision claims on the Estate.
Craig Mason – Director