FocusOn - Wills: what you need to know

It is important that everyone has a Will that is valid, current, and adequately plans for all of your requirements, including ensuring your interest in business and investment structures is considered.  Your accountant is well placed to advise you on all aspects of Estate Planning.  We can guide you through this often daunting process and liaise with your nominated solicitor who will prepare your Will.

What if I die without a Will?

If you die without a Will, the courts will appoint an administrator to distribute your Estate via a statutory formula. This is a costly process that can take months to complete and there is no guarantee that your Estate will be distributed in accordance with your wishes.

How does a Will work?

A Will is a legal document detailing how you wish your assets to be distributed after your death. It also nominates an executor to administer your Estate upon death. Your Will can also:

	Provide for children from a previous relationship
	Provide for children with special needs
	Meet charitable and philanthropic goals

Executors

The choice of executor is an important decision.  This person will be responsible for all aspects of dealing with your Estate, including:

	Liaising with solicitors and other professionals on your behalf
	Administering your assets in accordance with the wishes stipulated in your Will
	Preparing and lodging final income tax returns
	If necessary, attending to the legal and taxation obligations of your Estate, including probate.

Many people automatically assume their spouse is the correct choice for executor.  However, for many reasons this may not be appropriate.

Another issue to consider is executor’s fees.

Guardianship

Your Will should specify your requests for guardianship of any minor children.  Please note that clauses regarding guardianship are not legally binding, but merely an expression of your wishes.

We recommend that you discuss your wishes with your family and chosen guardians before your Will is drafted.

Specific gifts

This section of your Will deals with any specific gifts (cash or kind) you wish to make from your Estate, before the residual is dealt with.

Beneficiaries

Beneficiaries are the people you are leaving assets to in your Will.  You can leave specific assets to each beneficiary, have assets split between certain beneficiaries, or have your Executor sell all of your assets, pay any related taxes and split the proceeds between your beneficiaries.

You should ensure that your Will covers all eventualities.  What happens if you have left your Estate to one person such as your spouse, and that person dies at the same time as you?  Your will should be flexible enough to deal with issues such as this.

Any loans, gifts or pre-inheritances given to beneficiaries should be documented, with a copy of this document retained with your Will. Your Will can contain a balancing clause to ensure that if a pre-inheritance is given to one child, the others will receive the same amount from your Estate before the residual is split.

Taxation implications of gifts

While there are no death taxes in Australia, your beneficiaries will be subject to tax on any income arising from their inheritance (interest, dividends) and potentially also to capital gains tax on the eventual disposal of those investments.

The capital gains tax (CGT) payable on the disposal of an inheritance is dependent on the original cost base information of the deceased.  Using a parcel of shares as an example, if you acquired the shares before the introduction of CGT in September 1985, the beneficiary will be deemed to have acquired the investment at its market value on the date of your death.  If your beneficiary sells these shares within 12 months of your death, no CGT 50% discount is available.

If you acquired shares after the introduction of CGT, the beneficiary takes over your original purchase and is deemed to have acquired them with your original cost base details.

If the shares were on dividend reinvestment, each reinvestment is a new acquisition.

For this reason, you must ensure that you keep adequate, detailed records of all of your asset purchases.  Your executor should ensure that this information is passed on to the relevant beneficiaries.

We can assist you with establishing and maintaining a suitable investment register.

Exclusions

The following items are not covered by your Will:

	Jointly held assets
	Superannuation
	Life Insurance
	Interest in trusts and other structures.

For more information please refer to FocusOn Estate Planning.

Ongoing reviews

Once your Will is completed, ensure that the original is kept in a safe place and that your executor knows the location of the Will.  Your Will should be reviewed on a regular basis and when major milestones and events occur in your life, to ensure that it is still accurate, up to date and fulfils your wishes.  For example:

	Is the executor still willing and able to administer your Estate?
	Are there any new beneficiaries that you wish to include?
	Have you acquired any new assets that are not covered by your Will?
	Family breakdowns and divorce

Published : April 2010