Estate Planning Myths Series: “I don’t have any assets, so I don’t need a Will”

by | Mar 28, 2016 | Estate Administration and Litigation, Powers of Attorney and Estate Planning, Succession Law, Wills

It is a common phrase heard, particularly from young adults – “I don’t have any assets, so I don’t need a Will”.

Young adults and non-homeowners are often of the opinion that, because they do not have “significant” assets – they do not need a Will.  This article considers two of the most basic reasons to have a Will.

Firstly, everyone owns something – and the majority of young people have potentially significant superannuation death benefits.

Remember opening a “Dollarmites Club” account with Commonwealth Bank when you were in early primary school (or opening one for your children)?  At a young age you started to accumulate assets.

In addition to many young adults concluding that their assets are not significant enough to necessitate a Will, there is generally one asset that they do not consider – superannuation death benefit proceeds.

Superannuation is held by the Trustee of your superannuation fund(s) on your behalf.  Although you are beneficially entitled to the funds, they are not owned by you (but rather held for you).  Therefore, the Trustee can pay the superannuation death benefits as the Trustee determines – which may or may not be in keeping with your wishes.

If you die having a superannuation member interest, the Trustee is obligated to pay the death benefit to any one or more of your “dependents” or your legal personal representative – unless you have made a Binding Death Benefit Nomination (and the Nomination names a lawful payment direction).

You may have significant superannuation death benefits, and have no idea!  We discover this quite often, when we ask clients to provide copies of their superannuation statements.

For example, one standard cover by Sunsuper provides a combined total and disability cover for a 30 year old in the sum of $250,000, which decreases at age 60 to $25,000. Also, many industry funds have basic insurance coverage that is taken out on joining the superannuation fund.

In a Will, directions can be made in respect to your wishes on the payment of the superannuation death benefits.  The Trustee may have regard to your wishes contained in your Will, but is not bound to act in accordance with your Will. However, your Will is an excellent starting point for the Trustee to consider, in assessing how the superannuation death benefits should be paid.  Of course, making and maintaining a valid Binding Death Benefit Nomination in the form required of the Trustee is the best approach to ensuring the benefits are paid to the correct beneficiary.

You do need to be aware, however, that the Trustee is limited to who it can pay – including generally your parents, your children, your partner or spouse and your dependents and interdependents (in general terms – people whom you live with or whom rely on you for some level of financial assistance, or vice versa).  Excepting in respect to any one or more of these, the Trustee must pay the death benefit to the Legal Personal Representative of your Estate.

Assuming the death benefits are paid to the Legal Personal Representative of your Estate, if you have no Will – the superannuation death benefit will be distributed in accordance with the intestacy rules set out in your state of residency’s intestacy rules (see, for example, the Succession Act 1981 (Qld)).  But, you may not want to leave your death benefit to those who would take intestate, so it pays to draw a Will – regardless of the value you believe your Estate to be worth.

Secondly, if you do not have a Will, there is a question over who controls your Estate.

A properly drawn Will appoints an executor, which person (or people) has the authority to administer your Estate.

In the event that you die without a Will, the only way that a person can be granted authority to deal with your estate (in a way that is recognised by financial institutions and asset holders) is for that person to obtain a grant of Letters of Administration from the Supreme Court.

The cost and time involved in obtaining the grant of Letters of Administration is generally greater than that of obtaining Probate of a Will.

If you would like to speak to our estate planning team about drawing a Will, please contact our office on 07 5574 3560 or via email.

Estate Planning Myths Series: “If I die without a Will, everything goes to the government”

by | Mar 14, 2016 | Estate Administration and Litigation, Succession Law, Wills

When we meet with clients, we often ask why they have decided to come to see us – often they are looking to clearly define an estate distribution for blended families to make sure that everyone is provided for – other times our client is simply looking to put in place a Will that establishes a level of protection for their beneficiaries’ inheritance.  For those who haven’t been through an estate planning exercise before, we often hear that “I want to make my Will because I don’t want everything to go to the government”.

“The government” is a broad term, and the assumption we generally encounter is that, if a person hasn’t left a Will naming a beneficiary of their estate, the residue of the estate (being the balance after the payment of funeral costs, debts and testamentary expenses) will simply be distributed to the government, without consideration of the deceased’s family.

In reality, this is not the case. While there are circumstances under which “the government” can receive payments under a Will, these are generally limited to estate debts and taxes – such as capital gains tax and income tax for gains realised and income received by the deceased during their lifetime and in the course of administering their estate.  Aside from this, there are very limited circumstances in which the government will become the beneficiary of your estate.

A person who dies without a Will, or who leaves a Will which does not effectively dispose of their estate, is said to die “intestate”.  The Succession Act 1981 (Qld), at Part 3, provides the direction for the distribution of an estate of an intestate person.  The rules of intestacy consider the persons relationship to the deceased, and the deceased’s relationship circumstances at their date of death.

For example, as set out at Schedule 2 of the Succession Act, if a married person dies leaving two children, the spouse of the deceased is entitled to receive $150,000 plus the household chattels, with the balance of the estate divided with 1/3 distributed to the spouse and 2/3 distributed equally to the children of the deceased.

If a single person with no children dies, but is survived by one or both of their parents, the parents (or the survivor of them) are entitled to the entire rest and residue of the estate in equal shares.

Only in the circumstance where the deceased is not survived by a spouse, child, parent, brother, sister, grandparent, aunt, uncle, niece, nephew or cousin (defined as next of kin at section 35), does the government become entitled to the residue of the estate.

Whilst the rules of intestacy set out in the Succession Act may allay the concern that the government will take the residue of your estate upon your death, this is not to say that you do not need to make a Will.

Intestacy can create a much more complex estate administration process than administration with a Will.  Administration of an estate pursuant to a Will often requires the executor to obtain a grant of Probate; if the Will has been correctly prepared and executed, this application is generally a straightforward process wherein the executors advertise and make application for the grant from the Court.  The requirement for the issue of a grant of probate will sometimes be waived by financial institutions and other asset holders, if the value of the asset held by them is a low value asset and therefore the expense and delay of obtaining probate is not justified.

However, in the case of intestacy, letters of administration from the Court must be obtained – otherwise, asset holders are unable to ascertain that the person that they are dealing with has the proper authority to administer the estate.  As this process must be completed, and there are various addition documents that must be prepared and executed, the application for letters of administration can be a costly and time consuming exercise.

Whilst the myth that the government will receive your estate if you don’t have a Will on your death is false, that is not to say that you don’t need a Will.  A properly drafted Will is the best method of ensuring your estate is administered in accordance with your wishes, that costs are minimised and that beneficiaries receive the gift you intend.

If you have any questions regarding making a Will, or the distribution of an estate where a Will has not been left, please contact Caitlin Bampton on 07 5574 3560 or Caitlin@nautiluslaw.com.au.