Understanding why it’s essential to have a Will is the first step in effective estate planning. Estate planning is the strategic process of managing and protecting assets. This is to ensure their distribution following an individuals passing is in accordance with their wishes. The usual steps involved in estate planning are:
- Identify your assets and liabilities (both solely and jointly held);
- Appoint an executor;
- Identify your beneficiaries and how you would like your estate to be distributed;
- Consider all of the scenarios and potential claims against your estate;
- Prepare your will in accordance with your wishes;
Identifying Your Assets and Liabilities
It’s important to identify all your assets to understand what will happen to them once you pass, with or without your will. Understanding why it’s essential to have a Will ensures that your estate follows your intentions rather than a statutory formula.
An asset includes:
- Cash
- Bank Accounts
- Superannuation
- Investments
- Debts
- Real Estate
- Physical possessions
It is also important to determine how your assets are held. Some assets may automatically transfer to another person i.e. real estate, dependent on how it was purchased, but most of the time, it is your will that sets out how your assets are distributed.
Appoint an Executor
An executor is a person appointed under a Will to administer the deceased person’s estate.
Their primary role is to ensure that the terms of the Will are carried out. The key responsibilities of an executor are:
- Locate the Will
- Apply for a Grant of Probate (if required)
- Pay all liabilities using the estate funds
- Distribute remaining assets to the intended beneficiaries; and
- Manage the estate per the Will
An executor is not expected to complete this without assistance. Executors should seek legal advice, as some assets and legal processes require a solicitor.
Identify your Beneficiaries:
You must select beneficiaries and decide how to distribute your estate as part of estate planning. Understanding why it’s essential to have a Will allows you to clearly document your intentions, reduce the risk of disputes, and prevent distribution under intestacy laws.
When choosing beneficiaries, it is important to consider both immediate and extended family members, as well as any close friends or charitable organisations you wish to support. Clear instructions in a legally valid Will prevent ambiguity and ensure efficient distribution of your estate. You should also assess factors such as the age and financial stability of beneficiaries, tax implications, and the potential need for testamentary trusts.
You should also ensure that you adequately provide for your spouse and children as to prevent any future family provision claims against your estate.
Create Your Will or Don’t!
Wills are important legal documents that all individuals should have. Understanding why it’s essential to have a Will can help you avoid unintended outcomes, disputes among family members, and unnecessary delays in the administration of your estate. However, if you do not have a Will, the intestacy laws in the Succession Act 2006 (NSW) govern the distribution of your estate in New South Wales.
Dying without a valid will leaves a person intestate. The distribution of the deceased’s estate, in accordance with the Succession Act may not align with the deceased’s personal wishes. This may create significant legal and financial complications for loved ones.
Some complications include unintended beneficiaries, delays in estate administration, and potential disputes among family members. Additionally, without clear instructions, the process can be more costly and time-consuming.
Under the Succession Act, the distribution of an intestate estate depends on their surviving immediate family and relatives. The key scenarios are as follows:
- Spouse and no children à The spouse inherits the entire estate.
- Spouse and children à If all children are also the spouse’s children, the spouse inherits the entire estate.
- Spouse and children from a previous relationship à The spouse receives the deceased’s personal effects, a CPI-adjusted statutory legacy (approximately $573,866 as of 31 July 2024), and half of the remaining estate, with the remainder distributed equally among the children.
- No spouse, but children à The children inherit the entire estate in equal shares.
- No spouse or children à The estate passes to the deceased’s parents, then siblings, then grandparents, aunts, uncles, or their children (first cousins), in that order of priority.
- No surviving relatives à The estate escheats (or reverts/is forfitted) to the State of New South Wales.
Conclusion
In summary, proper estate planning, including preparing a legally valid will, ensures assets pass according to one’s intentions and minimises the risk of conflict.
To read more about intestate or intestacy, please read the publication Dying Without a Will: What Happens in NSW?
Jake McKinley notes that this article is written for the purpose of providing generalised information and not to provide specialised legal advice. If you require qualified legal advice on anything mentioned in this article, our experienced team of solicitors at Jake McKinley are here to help. Please get in touch with us on 02 9232 8033 today to make an enquiry.
