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Last Testament

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:

1.     Executors

 

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.

2.     Children

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).

4.     Intestacy

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.

5.     Assets

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;

  1. That the relationship between you has denigrated to such a state that you do not feel any moral obligation to provide for a person;
  2. That a person’s situation is much better financially than another and that it would not be necessary;
  3. That they Will or have received significant funds from another family member; or
  4. 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

If you would like to discuss your Estate Planning needs, get a Will, or update your existing Will please contact Streten Masons Lawyers on 07 5428 1111 or 07 3677 8966 to arrange an appointment to discuss your legacy.

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Intestacy Rules

What happens on your death if you do not have a Will?

While Estate Planning can often be considered morbid, here at Streten Masons Lawyers, we consider that Estate Planning is an important task to complete during your lifetime. It is a way to ensure that your affairs are left in order so that your loved ones are taken care of even once you are gone.

Many people are not aware of the potential ramifications of dying without a Will. Where you die without a Will (valid or incomplete) you are said to die Intestate.

Where this occurs in Queensland there are strict legislative requirements regarding how your Estate must be distributed.

As such, even if you have discussed your wishes with your family members, they may be unable to comply with your wishes without a valid Will. Further, your Estate Administration may be more complex.

Under the intestacy rules set out in the Succession Act 1981 (Qld) there is a hierarchy of beneficiaries upon your death intestate. These can be summarised as follows:

  1. Where the deceased has a spouse, but no children, the spouse is entitled to 100% of the Estate;
  2. If the deceased has a spouse and one child, then the spouse is entitled to $150,000.00, all household chattels and ½ of the residual Estate and the child is entitled to the remaining half of the residual Estate;
  3. If the deceased has a spouse and more than one child, then the spouse is entitled to $150,000.00, all household chattels and 1/3 of the residual Estate. The remaining 2/3 is to be equally divided amongst the deceased children;
  4. If the deceased has no spouse, but has children, the children are equally entitled to the Estate;

From here on the Estate can be distributed as follows:

  1. Parents;
  2. Brothers and sisters, nieces and nephews;
  3. Grandparents;
  4. Uncles, Aunts and Cousins; and
  5. Bona vacantia; the crown is entitled to the Estate.

A persons ‘Spouse’ is legally defined, for the purposes of the Succession Act to be a person’s husband or wife, de-facto partner, or registered partner.

A de-facto partner refers to people living together as a couple on a genuine domestic basis, but are not married. There are a wide range of factors that contribute being classified as a de-facto. In addition, for the purposes of the Succession Act, the couple must be living together for a period of at least two years at the deceased death.

This definition can be problematic; particularly if you are separated from your spouse but legally married they may be entitled to a significant portion of the Estate.

This distribution on intestacy is often not in accordance with a deceased desires and does not provide any way for an Executor to distribute valued or sentimental possessions in accordance with their wishes.

It is important to consider your Estate Planning requirements for your own peace of mind and to allow your family to comply with your wishes upon your death.

If you don’t have a Will or need to update your Will, contact Streten Masons Lawyers on 07 3667 8966 or 5428 1111 to arrange an appointment to discuss your Estate planning needs.

Charlotte Streten – Solicitor

Five reasons why you need a Testamentary Trust

 

testamentary trustsWhen making plans for your Estate many people believe that drafting a standard Will automatically ensures that your Beneficiaries receive your gifts to them. However in many cases, unforeseen or remote events occur which threaten the gift left to your Beneficiary.

This is where a Testamentary Trust can be beneficial. A Testamentary Trust commences upon the death of the Testator, and allows for a Trustee to hold your Estate and deal with it on Trust for your Beneficiaries. In effect it creates a separate entity which has control over the property once you have passed away, and who can distribute it to your Beneficiaries in accordance with the powers you grant them.

There are a number of reasons why a Testamentary Trust may be required.

1. Asset Protection

Gifts under standard Wills are vulnerable as they are often available to the Trustee in Bankruptcy. Therefore, if any of your Beneficiaries are at risk of going bankrupt, there is a distinct possibility that they may not receive the benefit of your gift which will instead go towards paying off Creditors. The Trustee of the Testamentary Trust will have a discretion when and how to give the gift to the Beneficiary, and as such, a Testamentary Trust can protect your assets and ensure they go where you intend them to go.

2. Enduring Legacy

Another benefit of a Testamentary Trust is that it can operate for many years, as such you can set up the Trust so that your children, grandchildren and great-grandchildren can benefit from your Estate. Alternatively, depending on the Terms of the Trust, it can be wound up and distributed when the Beneficiaries agree or when the beneficiary reaches a certain age. Testamentary Trusts therefore can provide for a range of options which are flexible and can be utilised for a broad range of life’s possibilities.

3. Beneficiaries who are unable to care for their own assets

A Testamentary Trust may also be used when a Beneficiary is unable to look after their financial needs. While a Beneficiary may be the Trustee of their own Trust, you may alternatively choose to appoint another person to act in this role on behalf of the Beneficiary. This may be used when, for example, a beneficiary is a minor or has a mental or physical incapacity and may require assistance in exercising their finances.

Alternatively, where a Testator is concerned that their Beneficiary is financially irresponsible and will use the money left to them irresponsibly, for example, on gambling or an addiction, a Testamentary Trust can be established to protect the funds and Beneficiary. This may occur, for example, where the Trustee only gives the Beneficiary a monthly allowance out the Trust Funds.

4. Family Law

As interest in a Testamentary Trust may provide greater protection for Beneficiaries in the event of a Family Law proceeding than would a straight out gift. If your Beneficiary is at risk of a breakdown in their relationship with a spouse or partner, then a Testamentary Trust can assist in protecting your property from being given to your Beneficiary’s ex-spouse or partner.

5. Tax reasons

Testamentary Trusts can also have a number of Taxation benefits for Capital Gains Tax as well as Taxations issues for the Beneficiaries themselves. Please contact an Accountant if you are interested in the Taxation benefits of a Testamentary Trust.

How We Can Help

It is your legacy, so you should know where it is going. If you are concerned that your estate may not be distributed the way that you want it to be once you are gone, it is worth considering setting up a Testamentary Trust. Call our office on (07) 3667 8966 to set up an initial meeting and have one of our experienced solicitors walk you through the process.

Charlotte Streten – Paralegal