If you’re like most people, thinking about Wills and your own mortality seems about as pleasant as having root canal treatment. Yet being a responsible adult requires many tasks that we might not wish to perform. Making a Will or estate plan needn’t be a stressful or morbid experience. In fact, once everything is in place, we guarantee you’ll feel relieved and confident that you’ve taken steps to protect your family.
During meetings with clients we often come across some commonly held misconceptions about Wills, Powers of Attorney and Superannuation which this article will attempt to dispel.
1. I have a Will, so I don’t need an Enduring Power of Attorney
A Will is a legal document that only comes into effect after you die, whereas, an Enduring Power of Attorney is only valid while you are alive. They are entirely separate documents with separate functions.
Your Will outlines how you would like your assets (estate) distributed and appoints the person who will be responsible for the administration of your estate (executor). A Will also provides you with an opportunity to distribute your assets in the most tax advantageous way possible.
An Enduring Power of Attorney is a legal document that outlines who you would like to manage your affairs if you no longer have capacity to do so. This may be in the event of intellectual or psychiatric disability, acquired brain injury, dementia or due to a temporary illness.
Attorneys (the person you nominate to manage your affairs) can be appointed to manage your personal and health matters and/or your financial matters.
Every Australian over 18 who has capacity should make both a Will and an Enduring Power of Attorney.
2. If I lose capacity, my husband or wife will ensure I am looked after therefore I don’t need an Enduring Power of Attorney
Before a person loses decision-making capacity, it is wise if they outline who they would like to be their attorney for health, personal matters and financial matters. There are specific duties to be undertaken by an Attorney and you should consider if your spouse would be able to undertake all these requirements at a time when they are likely to be under enormous stress. You should consider a substitute decision-maker in case your spouse is not able to perform this role.
If there is conflict in your family, or you have a blended family, it is also wise to specify your wishes so there can be no misunderstanding.
3. I don’t need a Will because everything will automatically be given to my spouse or partner
This is not always the case. If you die without a Will, you are said to have died intestate. Not having a valid Will can mean:
- Your estate may not be distributed to your beneficiaries in the way that you would wish.
- You may be placing an extra burden on your loved ones at a time of stress and grief.
- It may take more time and expense to finalise your estate.
The Queensland intestacy laws have a formula for the distribution of assets from deceased estates. This distribution can include children, as well as spouses.
4. My Will is very simple so I can just write my own using a DIY kit
Will preparation can be quite complex so be cautious if you are using a do-it-yourself Will kit. You may not prepare your Will accurately, or have it witnessed correctly, which may result in the Will being challenged in court due to confusion about your wishes.
5. I don’t have many assets so I don’t need a Will
This view is most often held by young adults who may not think they have assets because they don’t own a house or a business. But if you have personal items, a car, superannuation and life insurance (maybe through your super fund), your estate might hold a higher value than you think.
6. I made my Will years ago and don’t need to update it now
Your Will should be routinely reviewed, as you do with your insurances, mortgage etc.
If your Will is lost or out of date, it may be difficult for it to be proven in Court as your last will, or it may not serve the needs of your estate as it is currently.
Important life stages for updating your Will are: marriage, separation or divorce, entering into a de facto relationship, the birth of a child or grandchild, or any change in your assets or financial circumstances such as entering into a business venture.
7. My superannuation will be dealt with by my Will
Superannuation death benefits do not automatically form part of an estate which is dealt with by a Will. Superannuation is only dealt with by your Will if the trustee of the fund elects to pay it to your estate.
There can also be varying tax consequences depending on who receives a superannuation death benefit. As a result, it is critical to develop an appropriate strategy for how to distribute these funds.
Share this article on LinkedIn:
Subscribe to our newsletter:
Get tax updates, business advice and seminar invitations delivered straight to your inbox.
GENERAL ADVICE WARNING: This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. We suggest you obtain specific financial advice from a licensed financial advisor.