At Chapters Retirement Partners we help people to retire in financial comfort and become masters of their own time. We do this by assisting our clients to make decisions that will enable them to enjoy more of what they value in life and equip them with the tools they need to ‘finish strong’.
As specialist retirement advisers, we often discuss with our clients their estate planning wishes and desires. As part of this process, we aim to ensure that our clients have appropriate wills, enduring powers of attorney and enduring powers of guardianship in place to look after them and their families in the event of death or incapacity.
Our adviser Chris Brown recently asked Karolina Rzymkowska, Legal Practice Director at Perth Legal Collective, to discuss some common myths and misconceptions relating to wills and estates.
If I don’t have a Will, my spouse will still get my entire estate?
In Western Australia there is no automatic right for your spouse to inherit the entirety of your estate if you die without a will.
The Administration Act 1903 (WA) sets out the mechanism for dividing a person’s estate in the event they die without a Will. This formula considers the number and classes of family members left surviving the deceased.
For example, in the event you die without a will leaving a spouse and children, then depending on the value of your estate, your spouse will only receive a portion of the assets. This can be particularly problematic where the main asset is a main residence and perhaps there is conflict between the spouse and surviving children.
If you intend to benefit your spouse with your estate assets, it is important that you have a will in place.
I have married/divorced since making my will – is my will is still valid?
The impact of marriage and divorce on wills differs between each state and territory.
In Western Australia, wills are revoked in their entirety if a will maker marries or divorces after making them. This means that if you had a will in place and then got married, you are now without a valid will.
If you intend for your will to continue to apply after a marriage or divorce, a special contemplation of marriage/divorce clause needs to be included in your will.
It is also important to note that a ‘separation’ alone does not revoke a will. Therefore, if you are separating from a partner/husband/wife and you do not intend for them to benefit from your estate, you need to update your will as soon as possible.
If I leave something to a beneficiary in my Will, they won’t be able to challenge my estate?
As an estate lawyer I often get asked whether it is possible for someone to contest an estate. The next question which usually follows is, “what is the minimum amount I can leave a family member to ensure they do not contest my estate?”.
In Western Australia, the Family Provision Act 1973 (WA) gives certain members of a deceased persons family the right to dispute the division of their estate. This class of ‘eligible claimants’ includes the deceased’s spouse (of which there can be more than one) and children. In some circumstances, this also includes their step-children, grandchildren, ex-spouses and parents.
There is no magic number when it comes to disputed estates. Provided a person is an “eligible claimant”, they can bring a claim against an estate. Whether their claim is successful turns on whether or not the claimant has a need for financial provision and whether the deceased’s will has failed to make adequate financial provision for them.
In assessing what is adequate and whether there is a financial need, the Court will look to:
- The financial position of the claimant – this includes their assets and liabilities, income and expenditure and extends to the claimant’s spouse (if any).
- The size of the estate,
- The nature of the estate assets, and
- The competing claims (if any).
If you are concerned about someone bringing a claim against your estate after you have died, it is imperative you obtain specialist advice at the time of preparing your will and estate plan. Experienced lawyers can guide you through how best to structure your estate so that less of your assets are exposed to such threats. This may include restructuring some of your assets and preparing statutory declarations.
I have a will in place, I have it all covered
Wills are an important part of an overall estate plan, however sometimes simply having a will is not enough.
The diagram below demonstrates which assets will form part of an estate and which won’t.
If you simply have a will in place, all you have addressed in your succession planning is your “estate assets”. Many of us however hold the majority of our wealth in “non-estate assets”.
If you have “non-estate assets” they will not be covered by the terms of your Will. You will be required to undertake further planning in addition to your will, to ensure that the succession of those assets passes as you desire.
We often see wills (some of which have been drafted by lawyers!) that purport to gift non-estate assets by way of a Will.
For example, will makers purporting to leave “their share” of a joint asset to someone other than the surviving joint owner or leaving assets owned by companies which they control to a specific person. Both are problematic.
Jointly owned assets will automatically pass to the surviving joint owner in the event of death. This applies to property, bank accounts and share/investment portfolios. Likewise, assets owned a company cannot be transferred by way of a will. If a will maker wishes to see control of company assets pass to someone specific, then it is the shares that they hold in the company which need to be gifted to the desired individual and not the assets themselves.
Family trusts are often another misunderstood asset. Most of our clients don’t realise that the assets which they have accumulated in their family trust do not actually belong to them (even though they often tell us they own them). Instead, family trust assets belong to the trust and are held by the trustee of the trust for and on behalf of the trust’s beneficiaries.
If our clients wish to pass control of these assets to someone, then they need to ensure they appoint the right people to succeed them in the controlling positions within their family trust. For example, making sure the role of Appointor and Trustee is transferred to the right person/s and in compliance with the rules of the trust. We sometimes encounter wills purporting to appoint successor appointors where the trust deed to the trust explicitly states that successors can only be appointed by deed. Such appointments are void.
If you control non-estate assets, there is more to your estate planning than just writing a will!
Any lawyer can draft a will and estate plan
Whilst technically true, it is not advisable to visit any lawyer to have a new will prepared or updated.
Although they can engage any lawyer to draft a will or prepare an estate plan, would they go to their GP for open heart surgery, or would they want to see a cardiologist? The same holds true for estate planning.
An experienced estate planning lawyer has intimate knowledge of legislation relating to wills, trusts, taxation, and superannuation. They understand the implications of the Family Provision Act 1973 (WA) and can advise on who can claim against an estate and what to do to protect assets.
By engaging an experienced estate planning lawyer, you can rest assured that your estate planning documents are complete, legally binding and have the best chance possible of withstanding a legal dispute.
If you need to get an estate plan in order or review an existing will or estate plan, please visit www.perthlegalcollective.com.au or email karolina@perthlegalcollective.com.au.
Legal Disclaimer
This article is intended as a source of information only. No reader should act on any matter without first obtaining specialist professional legal advice which takes into account an individual’s objectives, financial situation and needs. The information in this article is current as at July 2022.
