Top 10 Estate Planning Mistakes
A common question we are asked by clients is why they can’t “just do their own” Will using will kits from the newsagency to record their wishes and avoid paying legal fees.
While will kits can be sufficient if your testamentary wishes are very basic, it is important to be aware of the many risks and things that can go wrong which will increase the expenses incurred by your estate if you do not receive proper legal advice.
Below we look at the top 10 estate planning mistakes which have been made by clients who have not obtained legal advice on their estate planning and have done their own Wills:
It may seem like an easy thing to avoid in a legal document, but you would be surprised how many Wills contain spelling mistakes or grammatical errors. Having either of these in your Will can cause specific gifts to beneficiaries to fail or can change the meaning of your Will altogether;
For example, if you have left 70% of your estate to Beneficiary A, 20% to Beneficiary B and 20% (instead of 10%) to Beneficiary C, this will not add up to 100% and could cause angst amongst the beneficiaries, particularly in a large estate.
- Not understanding Executor Duties
When choosing an executor/s for your estate, you need to have a good understanding of the role and responsibilities of the Executor of your Will. Selecting an unsuitable person to administer your estate can cost your estate in the long term if mistakes are made.
For example, if your Executor automatically assumes that they will need to apply for Probate (where it may not be necessary) can result in your estate having to pay costly advertising fees and Supreme Court filing fees unnecessarily.
It is also common for people to nominate executors who reside overseas. Whilst it is possible to have a relative or friend who lives overseas act as the executor of your estate, you must consider – is it really practical?
- Not considering marriage or separation or updating your Will when you should
If you are about to marry or have just separated, it is imperative that your Will contains a clause stating that your Will is make in anticipation of marriage or divorce, as these events can revoke your will in part or in its entirety.
It is also important to update your Will once you have married, divorced or your circumstances have changed. For example, if you have children, if your executors or beneficiaries have passed away, if you receive an inheritance or large lump sum etc.
- Not minimising the risk of a claim to your Estate
If you have excluded a child, dependent or other family member, it is not sufficient to just not include them in your Will. You need to specifically exclude them to best protect your estate against a claim being made on your estate. This is called a Family Provision Application (i.e. someone contesting your Will for further and better provision).
A Do-It-Yourself will kit will not accommodate for this exclusion, but a further statutory declaration drafted by your solicitor will. Further, if your will is disputed in the future, it is beneficial for your executor to have your solicitor’s file notes to rely on as to your intentions at the time your Will was made.
- Not correctly providing for what will happen if one of your beneficiaries die
If you are leaving your estate to your children in equal shares, what happens if one of them predecease you? Would you want their share of your estate to go to their children (your grandchildren) or to your other surviving children? Most people don’t think that far in advance, but it is an important consideration once grandchildren are born or if you don’t update your will regularly.
The same goes for any of your beneficiaries – if they predecease you, have you stated who you would like to receive that beneficiary’s share in your estate instead?
- Not getting correct taxation advice
Depending on your level of wealth, it is prudent to liaise with your accountant to ensure that the affect of the wishes stated in your Will are tax effective for your beneficiaries. Otherwise, you could risk a large portion of your estate being lost through tax.
For example, if your superannuation goes to an adult child it could be taxed at the top marginal rate.
Also, would it be worth considering whether you should be establishing a testamentary trust/s in your Will. This is something that needs to be discussed with a solicitor and is far too complex to be dealt with in a Do-It-Yourself will kit.
- Not providing an age for minors to inherit
If you are providing for a minor child in your Will, it is important to consider and nominate a certain age at which you wish for them to inherit. If you forget to provide an age for minors to inherit, the consequences, generally, are that the child can inherit their share of your estate immediately. This is not ideal for very young children or immature teenagers.
It is also important if you have children, to ensure that you nominate a guardian to care for them and even a back-up guardian in the event that your first guardian is unable or unwilling to be the guardian.
- Not correctly executing or witnessing your Will
The Succession Act Qld sets out the requirements for a valid Will, including execution and witnessing requirements. Your execution of your Will must be witnessed by two independent witnesses (not your executor, beneficiary or family member) and it must be signed on the bottom of each page by both yourself and each witness. The witnesses do not need to witness your Will at the same time, or know what they are signing, but they must be independent.
- Not providing your superannuation fund with a binding death nomination
There is a common misconception that superannuation forms part of your Will. However, this is not the case. Superannuation is separate to your estate and it is left to the discretion of the trustee of your superannuation fund to determine who is to receive your superannuation.
Every superannuation fund is different in terms of how you are able to nominate a beneficiary. If your superannuation fund allows you the option to make a binding death benefit nomination, you not only need to ensure that you provide your fund with your nomination, but also that you keep renewing it every 3 years to ensure that it remains binding.
- Not having an Enduring Power of Attorney
An Enduring Power of Attorney (EPOA) is an important legal document as it allows you to nominate an attorney to act on your behalf and manage your affairs in the event that you are living, but lose the capacity to make decisions for yourself (for example, being in a coma). You can nominate an attorney/ies for financial and personal/health matters.
Not having an EPOA in place means that your loved ones will have difficulty undertaking small tasks for you, such as paying bills, buying medication, contacting authorities on your behalf etc.
Having an Enduring Power of Attorney whilst you are alive, is just as important as having a Will in place for when you pass away, but often they are forgotten about and more focus is placed on having a Will.
For more information on these common estate planning mistakes or if you would like some estate planning advice, please contact us and we would be happy to assist you.