Wills and Estates
Why make a will?
A will is a legal document which sets out how you want your assets to be distributed on your death. It gives you the opportunity to provide for your family and friends after you die. A will also lets you choose an executor who will manage your estate after you die. This can be a family member, friend or professional, such as a lawyer, an accountant or trustee company. In some circumstances, the result of dying with no legal will can be disastrous for your family or loved ones. If you do not have a will, your estate will be distributed according to a formula set out by the law. Having a lawyer prepare your will now ensures your assets will be given out according to your wishes.
Who can make a will?
Any person over the age of 18 years who has the mental capacity to understand what they are doing can make a will. In limited circumstances, the court can approve a will made by a minor. Those who are mentally incapable of creating a will can have wills made for them, which are then approved by the court.
What if there is no will?
When there is no will or no valid will, you are said to die “intestate”. The Administration and Probate Act 1958 (Vic) sets out a formula (rules of intestacy) for how your estate will be distributed and to whom.
Disadvantages of not having a will
- You have no control over the distribution of your estate.
- The rules of intestacy may not accord with your wishes.
- Your spouse may be forced to sell the family home in order to pay a share to your children.
- You do not control who is chosen as guardian for your children.
- Your children or grandchildren may not receive the financial protection you desire.
- Partners, stepchildren, friends and favourite charities may miss out.
- Incapacitated members of your family and their own assets may be put at risk.
- Your estate may be administered by someone you would not appoint.
- Your estate may not be handled in the most tax effective manner.
Why should I revise my will?
A will should reflect your current domestic and financial situations. As circumstances in life change, so should your will. Revise your will at least every five years or when a significant event such as marriage, the birth of a child, or the death of a family member takes place.
Even if you haven’t changed your will, certain events such as marriage and divorce may still affect it. Generally speaking:
- a will made prior to a marriage is not valid following the marriage
- separation (but not divorce) from a spouse does not affect the will
- any gifts to your spouse or his/her appointment as executor are automatically revoked on divorce, unless your will indicates that you did not want dispositions to your spouse revoked on divorce.
It may also be necessary to appoint a guardian for your children after their birth or to review your appointed executor.
Executor of the estate
When you make a will, you appoint an executor. The role of the executor is to deal with your estate after your death. Your estate consists of any money, houses, land, cars, shares, clothes, jewellery and any other goods owned by you at the time of your death.
The executor performs a number of duties in relation to the deceased. These include:
- attending to funeral arrangements
- notifying any financial institutions and other relevant organisations of the deceased’s death
- ascertaining the size of the estate and taking control of all assets
- identifying the beneficiaries and their entitlements
- obtaining the grant of probate or letters of administration
- resolving all estate liabilities and disputes. This will include settlement of income tax liability. It can also include waiting for the expiration of the six-month period after the grant of probate in which family claims against the estate can be started
- distributing assets to beneficiaries either by transfer of ownership or by the sale of assets and distribution of the proceeds
- investing funds or managing the assets of the estate on behalf of beneficiaries;
- keeping property held in trust for the life of beneficiaries in good repair, insured and covered for rates and taxes
- acting impartially and in the best interests of all beneficiaries.
If your spouse or another person is to be named as your sole beneficiary in your will, it is often appropriate to name that person as your sole executor. There is nothing to prevent a beneficiary from being an executor. Otherwise you should appoint another adult - a member of your family, a friend or a professional adviser to act as executor. You can also appoint a trustee company as your executor.
A testamentary trust can be established under a will. It appoints a trustee or trustee company, who may also be the executor of the will, to use property of the estate in a way specified in the will, for the benefit of the beneficiary or beneficiaries.
Probate and letters of administration
When a person dies leaving a will and assets registered in his or her name (except jointly held assets),a grant of probate must generally be obtained from the Registrar of Probates in the Supreme Court. A grant of probate is a court order confirming the validity of the will and the appointment of the executor.
When a person dies without a will,or there is a will but an executor has not been appointed, an application for letters of administration must be made to the Registrar of Probates in the Supreme Court.
The procedure for both is similar and your lawyer can advise you of the requirements.
A grant of probate or letters of administration is required to collect the assets of the estate It will be required for:
- access to the deceased’s bank accounts
- the sale or transfer of the deceased’s property
- the collection, administration and protection of the deceased’s property.
A grant of probate or letters of administration provides protection to the executor and the beneficiaries. It ensures they are the only ones who will receive the deceased’s property. Any challenges to the validity of the will must be heard in the Supreme Court.
The rights of beneficiaries
Beneficiaries who are left a specific gift of land, money or goods are not entitled to obtain general information about the estate. They are however entitled to reasonable diligence from the executor(s). If a gift has not been transferred within a year of death, then an explanation should be provided.
Beneficiaries entitled to a share in the residuary estate, which is the estate left after specific gifts are distributed, are entitled to:
- a copy of the statement of assets and liabilities
- a copy of annual accounts
- inspection of share certificates, bank books, land titles, art works, jewellery, etc. and to see any valuation of these assets
- a copy of the will.
If beneficiaries request copies of these documents, they must be prepared to pay any costs incurred by the estate in providing this information.
Beneficiaries who have particular wishes in relation to funeral arrangements should consult with the executor to establish whether there are any specific funeral directions in the deceased’s will.
A gift of income-earning property, such as rented land or shares, carries with it the income earned from the date of death. The beneficiaries will also have to bear all costs of maintaining the asset after the date of death.
The estate must pay interest on a cash gift to a beneficiary commencing one year after death. Your lawyer will be able to advise you of the rate of interest.
Contesting a will
A will can be contested or challenged when it is alleged:
- the will was incorrectly executed or was tampered with
- the will was executed under pressure from others or the will maker was incapable of making a will
- the meaning of the will is unclear
- insufficient provision has been made in the will for a spouse, children or other people the will maker had an obligation to provide for (Testator’s Family Maintenance (TFM)) applications.
Under TFM laws, eligible persons can apply for a share or an increased share in an estate if they can show the deceased had a moral duty to make provision for them and did not do so. Applications must be commenced within six months of probate or letters of administration being granted.
Challenging a will is complicated, expensive and time consuming. Legal advice should always be sought before doing so. Your lawyer can advise on the best ways to avoid future challenges to your will.
An estate may incur various expenses, including:
- Income tax: This will be payable on income earned by the estate until all the assets have been distributed.
- Legal fees: Lawyers’ costs for assisting the executor to obtain a grant and for Land Registry matters are set by a scale and will depend on the value of the estate. Your lawyer will advise you of this scale. Lawyers costs for other assistance in estate administration will be advised in advance and can be negotiated. When a will is contested, a successful claimant will generally have their costs paid from the estate. If a claim is unsuccessful, there is the risk that the claimant will have to pay some of the estates costs as well as their own costs.
- Executor’s commission: An executor is generally entitled to claim all costs and expenses incurred in administering the estate. An executor is not entitled to be paid unless this is stated in the will or the beneficiaries agree to the payment. The executor can also apply to the Supreme Court for an executor’s commission of up to 5 per cent of the value of the estate if the administration is particularly complex and time consuming.
- Trustee companies: Trustee companies are entitled to charge a commission of up to 5.5 per cent of the total value of the estate for administering the estate. They can charge up to 6.6 per cent on all income received by the estate. Each company publicises its rates and sometimes they can be negotiated.
- Some small estates may be administered by the Small Estates Office for a reduced fee. Generally, small estates are those which do not exceed $100,000, but you can speak to your lawyer for potential variations on this amount or phone (03) 9603 9296 for more information.
What a lawyer can do for you
A lawyer can give you an unbiased and objective opinion on how you should go about disposing of your estate and the procedure you need to follow. Your lawyer can:
- ensure compliance with legal requirements so your will is properly drawn up, correctly signed and witnessed
- ensure beneficiaries are provided for, for example, through the creation of a trust
- ensure your wishes are clearly expressed in the will and the will suits your situation and circumstances
- carry out a complete review of your assets , including assets that will not be affected by your will (such as jointly owned assets, discretionary trusts set up during your life-time, superannuation, private companies and guardianships) and advise you how to deal with them
- advise on testamentary trusts
- advise on whether your current will should be changed to reflect new circumstances
- advise whether your will could be contested and how you can prevent or reduce the chances of this occurring
- advise on whether you can make a claim from an estate and the likelihood of success;
- pursue a claim on your behalf
- advise on the role of an administrator
- represent your interests in relation to any court matter
- advise executors on their obligations under a will and pursuant to the law;
- advise on what happens where there is no executor
- provide advice where there appears to be an ambiguity in a will
- provide safe custody of your will free of charge
- provide ancillary services relating to advice on and preparation of powers of attorney.
Further information on this and more than 100 other legal topics is available online at www.liv.asn.au/For-the-Community/Find-a-Lawyer-Directories or by contacting your lawyer. If you do not have a lawyer, the LIV Find a Lawyer directory can connect you with the right lawyer for your needs. The Find a Lawyer directory includes:
- legal referral Service
- legal practices
- accredited specialists and mediators
- collaborative lawyers
- law associations
- notary publics
- legal organisations.