Not all Australians are fully aware of the importance of having a will in estate planning. In fact, research shows that approximately 45% of Australians* die without a will, a situation that is termed as ‘intestate’.
The word intestate is derived from the Latin word intestatus meaning a person who passes away without a will. More often than not, intestacy may result in a lot inconveniences such as delays and expenses that you should not be experiencing at a difficult time when you’ve just lost a loved one.
Here’s a few reasons why a will should be well-drafted
Intestacy may also occur even if your loved one has a will. Some of the other reasons,are:
- The will does not properly dispose of all their assets.
- The will was not properly signed and witnessed according to the law, making it invalid.
- Your loved one did not have the mental capacity to make the will, and,
- The will was not properly drafted based on the legal rules of construction.
When you’re thinking of creating a will as part of your estate planning, you might have the notion that the task is just a simple one. You might even be tempted to consider using Do-It-Yourself wills since there are a lot of options available, not only online, but through your local news agency or post office.
However, you need to know what the experts are saying with regards to the issue.
Characteristics of DIY wills
Recently, Choice, in consultation with several estate planning professionals, made an analysis** of some DIY wills available.
Here is their summary comment:
“Will kits can be an excellent research tool. Depending on your situation and skills, they can help you to write your will, but they can’t adequately handle complex situations such as blended families or self-managed super funds. So we recommend you get some expert advice as well. Making sure your loved ones are provided for is far too important to leave to chance, and the consequences could be disastrous if you get it wrong.”
These are the main points that led to this conclusion:
Will Kit 1
- Instructions are very basic and oftentimes confusing
- Does not adequately cover issues relating to children, taxation, superannuation and executors
Will Kit 2
- Does not touch on taxation
Will Kit 3
- No space provided for witnesses to sign on each page, so will may not be valid
- Some portions are not entirely correct specifically the discussion regarding who could challenge the will
- Issues on superannuation not properly explained and discussed
Will Kit 4
- Explanation on distribution of superannuation is unclear and highly debatable
- No discussion as to when is the appropriate time to seek tax advice
Will Kit 5
- No appropriate discussion on taxation and superannuation
- Does not provide clear instructions to get expert advice when in doubt
Why you need professional advice from the experts
Based on the main points discussed above, these are the common inadequacies of DIY wills:
- Lack of informative discussion on important areas such as taxation and superannuation
- Not properly formatted
- Many DIY will kits do not offer the capacity for establishing testamentary trusts (to protect assets after your passing or for tax-related purposes)
- No provision for amending with a codicil (an additional document that allows you to change details in your will such as an Executor or a change in a beneficiary’s name).
In contrast, when you seek professional advice from an estate planning professional, together with your financial adviser and accountant, the chances of you leaving behind a partial or fully intestate estate is greatly reduced. It will also ensure that your will is properly drafted to reflect your full intentions, and the actual complexities of your personal finances, such as personal insurances, investments, superannuation and taxation considerations.
Reviewing your estate planning situation and needs at least every 5 years or if a major event happens, is a good habit that would provide a significant payoff in the long run.
Estate planning is an important part of the Stonehouse service offering. Feel free to contact us for more information.
*NSW Government, NSW Trustee & Guardian. Retrieved from: http://www.tag.nsw.gov.au/wills-faqs.html
**Choice. (2016). DIY will kit reviews. Retrieved from: https://www.choice.com.au/money/financial-planning-and-investing/financial-planning/articles/will-kit-reviews