Busting 5 Common Objections to Making a Will

Busting 5 Common Objections to Making a Will

Making a Will can often feel like a daunting and unnecessary task. With much of the angst in the community regarding COVID-19 beginning to subside, you may be thinking that making a Will is not an important task anymore. However, the unfortunate reality is that death is inevitable and proper creation of a Will is always an important task, regardless of the circumstances. In this article, we explore five of the most common objections to making a Will and why these objections may not always hold up in reality.

1. I’ve told my family my wishes and I know they will do the right thing.

Sometimes knowing the wishes of a loved one who has recently passed away can mean a variety of different things to different family members. Moreover, verbal instructions are an inadequate way of dealing with your estate. Verbal instructions aren’t always binding and can result in delays and expenses for the administration of your affairs. The death of a family member is already an emotionally difficult time. Through ensuring you leave behind a clearly laid out and validly executed Will, your family will have one worry taken off their hands.

2. I’m a young person – the need to make a Will is far off for me.

Unfortunately, death is no respecter of age! Even with the simplest of estates in the case of a young person, the creation of a Will, enduring power of attorney and advance care directive helps ease the burden on those left, and may prevent the need to apply to the court for clarity.

3. My affairs are just too complex.

The issue with this objection is not that your affairs are too complex, but rather a solution seems too difficult to find. Yet, what is required is an experienced legal professional who can talk through your affairs and find an appropriate process to deal with your affairs.

4. What’s the point? Wills are successfully challenged a lot.

This is a common misconception. Wills and Estates lawyers are highly qualified in assessing the risk of a successful challenge and can suggest ways to reduce the value of the assets that are vulnerable to a challenge. Assets vulnerable to a Will challenge are assets that are owned under your own name. Your lawyer can advise you on mechanisms to reduce this risk, for example through transfer to a trust, jointly owning bank accounts and changing ownership of property to ensure your assets are dealt with in your desired way.

5. I already have a Will from quite a few years ago.

It is important that all Wills are regularly reviewed. Circumstances will inevitably change in life, such as the birth of a child, the start or breakdown of a relationship or assets being bought or sold. It is commonly suggested that Wills should be reviewed at least every three (3) years to ensure they reflect your most current circumstances. Old Wills could be obsolete and result in your estate not being dealt with in accordance with your wishes or being challenged by disgruntled and self-entitled beneficiaries.

Further Information

Making a Will is vital to ensure your estate is dealt with in your desired way. If you would like more information on how we can assist you in making or updating your Will, do not hesitate to contact us on 9963 9800 or at law@etheringtons.com.au. For more information, check out our blog here.

Writing a Will. Do I need a lawyer?

Writing a Will. Do I need a lawyer?

Writing a Will can ease the stress for both you and your loved ones when you die by providing you with peace of mind in making sure that your loved ones will be provided for when the time comes. However, often people wonder whether it is worth getting a lawyer to write a Will for themselves.

Are Lawyers Necessary to Write a Will?

While DIY Will kits can be found on websites, in post offices and sometimes from life insurance companies, it is not advisable to use these services.

Common mistakes made by people who choose to do their own Will include not signing the document properly, not having it witnessed correctly, and trying to bequeath assets or part of their estate when they don’t have full ownership over it. Not only does this create a massive conflict after the death, but it also takes longer to resolve, and more importantly costs more, and creates heartache at a time when you don’t need added stress in your life.

Step 1: Drafting Your Will

Though fees can vary, you can organise a fairly simple Will with a lawyer for approximately $500–$800. It is advised that you update your Will every five years, or when significant life events happen, such as buying a house, marrying, having children or a divorce.

Step 2: Consider All Possible Situations

Try to think of future scenarios that may impact you and your family significantly. It is often concerning to think about but it is vital to address possible scenarios where you and your named beneficiaries in your Will pass away at the same time, for example in an aeroplane or car accident. In this case you may want to name someone outside of your immediate family members, or a charity as an alternative beneficiary. By anticipating these alternative situations, you effectively have a number of alternative scenarios built into your Will.

Step 3: Select an Executor

It is important that you choose someone you trust to be the executor of your Will and who will be able to administer your estate according to your wishes. You must notify the executor that you have chosen them so they can be prepared. This is the person you name in your Will to administer your estate – your money and assets. That person hopefully understands your ‘view of the world’.

Step 4: Decide on Your Power of Attorney

Take this opportunity to discuss with us a power of Attorney. You need to prepare for a situation where you are incapable of making decisions due to being injured or sick or you’re not of sound mind. You can prepare for this by organising a Power of Attorney, so that the person of your choosing can act on your behalf to make financial and legal decisions. You can appoint more than one person as the Power of Attorney or put in place a substitute situation.

Step 5: Draft a Care Plan

In a care plan you are able to leave detailed instructions around your future care. You may have certain decisions already made around resuscitation on life support, pain relief and organ donation. Put your preferences in writing by completing an ‘Advance Care Directive’ and nominating someone to make medical decisions on your behalf if you are unable to do so. Some care plans are incorporated in a Deed of Enduring Guardianship.

Step 6: Store Your Important Documents Safely

Finally, it is advised that you draft a document with all your important passwords and account details. This may include bank account details, debts (including loans), investments, insurance and superannuation details. You may choose to store this information in an envelope with your Will, saying, ‘Open in the event of my death’, or something similar. We allow clients the opportunity to store important documents with us (in safe custody) without charge to them.

Further information

It is important to be fully aware of what it takes to make a Will and other related documents and obtain professional legal assistance to ensure your wishes are accurately represented in those documents. If you would like further information regarding Wills or general Wills/ Power of Attorney / Guardianship advice, please do not hesitate to contact one of our experienced estate planning solicitors on 9963 9800 or via email at law@etheringtons.com.au.

Challenging a Will when the beneficiaries have been changed

Challenging a Will when the beneficiaries have been changed

Through persistence and dedication, Etheringtons Solicitors successfully challenged a Will and recovered a significant sum for the rightful beneficiary, a Children’s Charity.

A married couple with no children or relatives executed mirror Wills and left everything to a good cause – a charity for children. When the wife passed away, unbeknownst to the charity, the husband suddenly changed his Will (new Will) to leave everything to various people who “helped” him after his wife passed away, including a man who claimed to be his brother. Subsequently, the husband was uncontactable and abruptly moved in with his “brother”.

On behalf of the charity, Etheringtons Solicitors regularly checked the court website for probate notices and after twelve months of persistent checking, there was a probate notice for the husband. Etheringtons contacted the solicitor who drafted the new Will. Much to the charity’s surprise, Etheringtons was advised that the charity was no longer a beneficiary and that the funds from the estate had already been distributed to the late husband’s newly added beneficiaries.

Our principal knew something wasn’t right and decided to look into the matter further. Consequently, Etheringtons uncovered that at the time the new Will was executed, it was evident the husband showed signs of dementia and therefore lacked capacity to execute a new Will.

Etheringtons, on behalf of the charity, commenced proceedings seeking to revoke the grant of probate. Various medical documents of the late husband showed that he suffered from serious cognitive impairment and after the wife had passed away, his symptoms had deteriorated further. Not long after the proceedings were commenced, Etheringtons conducted a settlement conference with the charity, the executor and the new beneficiaries and as a result, successfully convinced the new beneficiaries to return close to one million dollars to the rightful beneficiary, the children’s charity.

If it wasn’t for Etheringtons’ perseverance, victory would not have been achieved for the charity and, more importantly, for the vulnerable children the charity helps.

If you would like to know more, please call us on (02) 9963 9800 or email law@etheringtons.com.au.

Estate Planning: What is an Estate Plan?

Estate Planning: What is an Estate Plan?

An estate plan involves more than just preparing and signing a Will. Estate planning requires a holistic approach in considering a person’s present circumstances and foreseeable future.

A plan needs to consider who matters, what you have now, what you may have in years to come, and what your final wishes will be. Your lawyer’s role is to document these wishes to ensure they are legally enforceable and can be carried out when you pass.

This article considers what an effective estate plan entails and explores the thought processes involved in preparing an estate plan.

What is effective estate planning?

An ideal estate plan will:

  • Appoint a trusted person or persons (attorney / guardian) to manage your affairs both financially and personally if you are incapacitated; and a legal personal representative (executor / trustee) to administer your estate (and associated trusts) after you pass.
  • Nominate your intended beneficiaries with certainty or provide for a class of beneficiaries to ensure that your assets pass only to those you intend to benefit.
  • Prevent uncertainty, undue stress and expense by reducing the likelihood of a family provision claim, which can undermine your wishes.
  • Safeguard your assets from unintentional distribution to estranged partners or creditors of insolvent / bankrupt beneficiaries and protect vulnerable beneficiaries such as those with a disability, drug, alcohol or gambling problem.
  • Provide flexibility in distributing assets in anticipation of the present and future needs of beneficiaries.
  • Maximise the value of your estate through effective tax planning to minimise capital gains, and income tax payable by beneficiaries on their inheritance.
  • If relevant, provide for effective business succession or the winding up of a business.

Steps in estate planning

Your family

Every family is different and there is no one-fit solution for all. You should start with an overview of your family circumstances and a list of all family members whether or not you would like them to benefit from your estate.

Acknowledging where there is conflict between family members and identifying any eligible persons who might claim on your estate will assist in devising strategies to reduce the potential for future claims.

Blended families are common and require special attention as there may be competing interests between past and present partners, and biological children and step-children.

Choosing your executor and trustee

The executor and trustee will be your personal legal representative who will administer your wishes when you have passed on so the person filling this role should be chosen with care. For simple estates, a spouse or child / children (or combination) are usually appropriate choices to oversee the administration and finalisation of the estate.

For more complex estates, with business interests or which will have ongoing trusts, it may be preferable to appoint a professional with expertise in this area.

Similarly, if there is conflict within the family a neutral executor may be more appropriate to ensure that the role is carried out with impartiality.

Powers of attorney, guardianship and advance care directives

New South Wales allows for the appointment of an attorney, guardian or decision-maker to manage your financial, legal and / or personal affairs for a defined or ongoing period and to make health-related decisions if you are incapacitated. A power of attorney relates to financial decisions and a guardianship relates to health and lifestyle decisions.

These documents provide for flexibility in choosing the type of functions to be carried out, and the duration for which the authority is given. Powers of attorney can be made enduring so that a person can manage your affairs indefinitely if you lack decision-making capacity.

These documents form an important part of your overall estate plan by ensuring the ongoing management of your affairs by a trusted person if you are incapable.

Your assets

A detailed list of assets and liabilities will assist in determining the overall value of the estate, how and when assets should be distributed, the appropriate structure of the Will and whether a testamentary trust would be beneficial (see below).

You will need a precise description of the assets, their location, whether they are held individually or jointly and their value. Whether certain assets are encumbered will also be a relevant consideration.

If you are including specific gifts, such as items of sentimental value, antiques or artworks, these should be clearly identifiable and described in the Will.

Remember, your assets are likely to change over time and this needs to be factored into your estate plan. A gift of a specific asset of considerable value which is later disposed of will fail and may cause an unintentionally unequal distribution amongst beneficiaries.

Using a testamentary trust

In many cases, it will be advantageous for a Will to establish a testamentary discretionary trust. This is a trust that comes into effect after the Will-maker passes. Administration of the trust is carried on by a trustee pre-appointed by the Will-maker. The trustee determines how and when estate assets are managed and distributed.

If properly managed, the flexibility of a discretionary trust allows beneficiaries to access favourable taxation treatment with respect to their inheritance and provides protection for at-risk or vulnerable beneficiaries from claims by creditors or ex-partners. With careful planning, the timing of transferring estate assets can postpone or minimise capital gains tax liabilities.

Even modest estates may benefit from having a testamentary trust, particularly where the Will-maker is part of a blended family. The trust can allow the Will-maker to provide immediate benefits for a current partner (such as a right of residence and income), whilst preserving assets for residual beneficiaries, such as the children.

Trusts can also include separate suites of provisions to apply depending on whether the current partner survives or pre-deceases the Will-maker.

Your superannuation

Superannuation does not automatically form part of your estate assets. Death benefits, comprising the superannuation account balance and any life insurance payments, are paid to a ‘dependant’ determined by the fund trustee, or in accordance with a Binding Death Benefit Nomination (BDBN).

Most funds allow members to nominate their intended beneficiaries through a BDBN. This process forms an important part of estate planning – without a valid BDBN, the beneficiaries are decided by the trustee in accordance with the terms of the trust deed and the relevant legislation. This decision may not reflect what the Will-maker intended. A BDBN does not last and needs to be updated every few years to remain valid.

Consideration of the way death benefits are taxed in the hands of the recipients is also an important issue. Essentially, a spouse or partner will be considered a tax-dependant under taxation law and accordingly will receive death benefits tax free. Alternatively, whilst adult children are considered dependants under superannuation legislation, they are not ‘tax-dependants’ and will need to pay tax on any death benefits.

Business succession

If you are carrying on a business, whether as a sole trader, partnership or through a company, you will need to think about how you would like these interests dealt with after you pass.

If you are a sole trader, you may include terms in the Will for the continuation of the business by your partner, children, friend or trustee.

If you conduct the business as a sole director through a corporate entity, you will need to consider who will take your place as shareholder and managing director. Alternatively, you may wish for the business to be wound up.

Some partnerships will have buy-sell insurance in place. This is a policy allowing a surviving partner to acquire the deceased partner’s share so the business can continue. Generally, the surviving partner or partners receive lump sum funding to purchase the deceased partner’s share from the estate.

Business succession planning requires consideration of the intended beneficiaries and whether they have the desire, skill and competence to continue managing the business.

Conclusion

Effective estate planning takes time and careful contemplation. Your estate plan will usually comprise various documents to ensure the effective management and finalisation of your affairs so that your life’s efforts reward those you intend to benefit.

If you or someone you know wants more information or needs help or advice, please contact us on (02) 9963 9800 or email law@etheringtons.com.au

Inheritances and Family Law

Families and money can sometimes be a volatile combination. This can be especially complicated when a divorce or separation occurs and a new will isn’t drawn up to reflect the changed circumstances.

When is an inheritance an asset for family law purposes?

The simple answer is “almost always”. But the answer is not always as simple as that.

Why is an inheritance an asset?

When a separating couple needs to divide their assets, they must work out the pool of net assets first before assessing the appropriate split of the parties’ assets. That pool includes all the assets and liabilities in each person’s name and in the parties’ joint names, as well as each person’s share of an asset owned jointly with another person.

If one person received an inheritance before or during the relationship, that inheritance would normally form part of the pool of assets available to be divided.

Does that mean my partner gets half my inheritance?

No, not necessarily. Just because an asset is included in the pool of assets available for distribution does not mean that the asset or the whole pool will be divided 50/50. Each matter is considered on a case-by-case basis.

Importantly, once the parties have worked out what is in the pool of net assets, they must then consider what contributions they each made and their respective future needs, in order to assess their entitled percentage split of the net assets they will each receive.

What are contributions?

When working out which party made what contribution, the Family Court considers the parties’ financial contributions – i.e., who earned what, who brought what lump sums into the relationship, who bought what and who paid for what – and also non-financial contributions – such as being a homemaker and parent, physically renovating a home or landscaping a garden, managing the parties’ financial affairs, etc.

After a long relationship where there haven’t been any significant inheritances or other financial windfalls, the Court usually finds that financial and non-financial contributions during the relationship were roughly equal, unless special circumstances apply.

An inheritance received by one party before the commencement of the relationship would be treated as an initial financial contribution by that person – i.e., money or assets that person brought into the relationship. Similarly, an inheritance received by one partner during the relationship is usually considered to be a financial contribution by that person.

In these circumstances, depending on factors such as the size of the inheritance, when it was received, what it was used for and the parties’ other contributions, this would generally mean that the person who received the inheritance would be treated as having made greater contributions during the relationship.

What about an inheritance received after separation?

This situation is less clear cut. The Court usually considers an inheritance by one party as a sole contribution by that person. Generally, this will usually mean that the other party did not contribute to the post-separation inheritance and it should not be included in the pool of assets to be divided. However, each matter is dealt with on a case-by-case basis and while this may be a potential result, it is always dependent on the facts of the case and the circumstances of the lead up to the inheritance.

For example, if the post-separation inheritance had been received from the husband’s mother and the wife had had a close relationship with her mother-in-law and had cared for her during an illness, the Court might find that both parties had contributed to the receipt of the inheritance and therefore both parties will be entitled to a share of the inheritance.

Future needs

After working out financial and non-financial contributions, the future needs of the parties are assessed  before determining a split of the net assets and whether any adjustments should be made in favor of the party in need. Future needs include things like income, earning capacity, financial resources, ongoing care of children, age, health, etc.

An inheritance, even one received after separation, may be on this final step. The reason for this is, the recipient of the inheritance would have greater financial resources and may be receiving income from an inherited investment which may well mean that person’s future financial circumstances may significantly outweigh the other person.  In such a case, the court would probably rebalance the division of the net asset pool in favour of the other partner by way of an adjustment which is derived from section 75(2) of the Family Law Act (Cth).

Summary

An inheritance received before or during a relationship will almost always be treated as an asset available for distribution between separating parties, whereas an inheritance received after separation will usually be found not to fall into that pool of assets. However, that does not necessarily mean that the other person is entitled to half the inheritance.

The receipt of a large inheritance will almost always have a significant impact towards the determination of contribution of the parties. In addition, an inheritance, including one received after separation, could have an impact towards the last step, being the determination of future needs of the parties and whether any adjustments ought to be made.

Finally, once the parties have been assessed as to the net assets, what contributions were made, whether there are future needs, the Court then looks at whether the proposed split of net assets is just and equitable.

 

Every case is different and how an inheritance might be treated in your situation will depend on your particular circumstances. If you need assistance or advice on how to proceed please call us on (02) 9963 9800 or email law@etheringtons.com.au.

Accessing digital assets – Estate planning essentials

The recent death (or purported death) of Gerald Cotton, former Chief Executive Officer of Canadian cryptocurrency exchange company, Quadriga CX, emphasises the importance of planning your electronic after-life.

Mr Cotton’s death in India at the age of 30, has not only raised suspicion as to its authenticity (and allegations of an exit scam), but reiterated the chaos that can be created if digital assets have not been considered in an estate plan.

Mr Cotton was the sole custodian of encrypted passwords ‘protecting’ over $200 million worth of digital assets. His untimely death has left numerous Quadriga customers unable to access their assets with trading on the Quadriga platform suspended while authorities try to work out what to do next.

Mr Cotton’s widow states that she played no role in the running of Quadriga and, despite efforts, has been unable to unlock the laptop used by Mr Cotton nor access any of his accounts.

The digital assets referred to in the Quadriga saga are held in cryptocurrency (virtual currency created and stored electronically such as Bitcoin, Litecoins and Ethereum). The cryptocurrency system is decentralised and not subject to a governing authority, raising unique challenges in identifying and ‘locating’ the assets.

Regardless of how the Quadriga saga unfolds, it is a timely reminder of how important it is to consider what happens (or should happen) to our digital assets when we die.

What are digital assets?

A person’s ‘digital life’ may encompass a range of online transactions, activities and accounts such as:

  • cryptocurrency;
  • financial assets including online bank accounts and shares;
  • intellectual property attached to domain names or online literary works;
  • online sporting and gaming accounts;
  • loyalty programs such as Flybuys, Rewards and Frequent Flyers;
  • online shopping accounts such as eBay and Amazon;
  • personal / business social media accounts such as email, Facebook, Linked-In.

All should be considered, and included, in an effective estate plan.

Issues unique to certain digital assets

Traditional cash-based assets such as money deposited in a bank, shares or other paper-based investments are held by title to the owner and can be transferred to the beneficiary of a deceased person with the relevant documentation. Ownership of digital assets like Bitcoin, however, is anonymous with owners accessing their cryptocurrency with private keys which are used to unlock and deal with the assets. This information may be held on a computer device (via a digital wallet), on a USB, or printed separately. These assets can easily be overlooked or ‘keys’ misplaced, representing unique challenges when it comes to administering an estate.

Many digital assets are also held globally and may therefore raise jurisdictional issues from an estate planning perspective. In most instances, there is no uniform legislation governing access to a deceased person’s online accounts, so it is imperative that these matters are dealt with specifically in an estate plan.

Following are some steps you can take to ensure your online life is appropriately dealt with when you are gone.

Identify your digital assets

You should start by making a list of your digital assets (including online accounts) and determining what you would like to happen to them when you die.

Keep records of your online accounts and subscriptions including user names and passwords and store this information in a secure place.

Remember your online accounts and login details are likely to change frequently and your list should be maintained accordingly.

Understand your online accounts

Understanding how various accounts are dealt with by service providers will help to determine the type of action you would like taken when you die.

For example, Facebook account holders can advise in advance whether their account is to be deleted or memorialised. A memorialised account can provide a place for family and friends to share memories after a person dies on the deceased’s profile, and any content shared by the deceased person remains visible to those with whom it was shared. Nobody can log into a memorialised account.

Some loyalty programs such as Frequent Flyers may not be transferrable or redeemable after a person dies, so it may be wise to keep tabs on these types of accounts to utilise benefits regularly.

Include digital assets in your Will and appoint a technology custodian

Your Will should define and identify important digital assets and provide executors and trustees with appropriate directions and powers to deal with them.

Assign your executor, or other trusted person who is familiar with technology, the role of managing your online life after you die and ensure this direction is included in your Will.

Record your after-life technology instructions with respect to each account separately and ensure these instructions are secure, but accessible to your technology custodian. Never disclose passwords in your Will.

Online maintenance

Online accounts contain personal information which should be protected. Technology presents a real risk of identity fraud and unmonitored accounts can be particularly vulnerable. Regular monitoring and unsubscribing or deleting unused accounts can help minimise risk and keep your technology life tidy.

Regularly downloading photos and videos from your mobile to a storage device can ensure that memories are accessible to your family when you die.

Consider incapacity

It is also important to consider what happens to your online life in the event that you are incapacitated. Appointing a trusted person to manage your online affairs and including specific instructions in an enduring power of attorney is a logical step to ensure the appropriate management of your digital wealth if you are incapacitated.

The instrument making the appointment should be specific to the jurisdiction in which the assets are held, and in this respect, more than one document may be required.

Consider trusts

It may also be beneficial to hold substantial digital assets through a trust structure, if possible, for greater protection and better taxation outcomes. In doing so, the trust must be considered and dealt with under the Will, which should nominate beneficiaries of the trust or shares in the trustee company and include provisions to ensure the trust can achieve the desired objectives.

Conclusion

It has become increasingly difficult for executors, lawyers and family members to ascertain and access online assets after a person dies, with many financial and other institutions operating in a ‘paperless’ environment. Certain digital assets such as cryptocurrency can present additional problems for a deceased’s family.

Inaccessible online accounts make it difficult to identify assets, and leaving online accounts open indefinitely raises concerns of potential identity theft.

Good online management and ensuring your digital assets are included in your estate plan will help your executors and family manage your online life after you are gone.

If you or someone you know wants more information or needs help or advice, please contact us on (02) 9963 9800 or email law@etheringtons.com.au.