At Tetlow Legal we believe that ‘prevention is better than a cure’ in the context of deceased estates. In a handful of cases, estate litigation is unavoidable, but far too often, the stress, expense and disruption to family relationships caused by an estate dispute could have been mitigated through better planning and advice. Here are our tips for reducing the risk of a dispute after your death.
- Have a valid Will
It may seem obvious, but leaving a valid Will is one of the simplest ways you can reduce the risk of a dispute after your death.
Research indicates that about half of all adults in Australia do not have a Will. If you die without a Will, the law (known as the rules of intestacy) sets out how your estate will be divided between your family members. For many people, this results in assets being distributed to unintended beneficiaries or leaving some family members in need. The impact of intestacy can be particularly harsh for ‘blended families’.
The strict application of the rules of intestacy mean that some families are left with no choice but to start costly family provision applications to redistribute assets in a fairer way or court applications to resolve uncertainty regarding who will administer the estate.
In recent years, there has been an increase in cases involving homemade Wills that have not been legally signed by the testator or properly witnessed. In many cases, the Will can be approved by a Court as an ‘informal Will’, but the process involves additional costly Court proceedings, which are sometimes contested.
Leaving a validly signed Will is a vital first step to having your estate administered smoothly.
- Make sure all assets are dealt with
It can come as a surprise to discover that a Will does not automatically deal with all of your assets.
Superannuation is the most significant asset for many Australians, and yet superannuation may or may not be dealt with by the terms of your Will, depending on the type of fund and whether a binding death benefit nomination has been made.
Other assets that may not automatically be distributed by your Will include jointly owned property, insurance policies and assets held within companies or trusts.
A considered estate plan should deal with all assets to ensure they are flowing where intended, otherwise valuable assets may be distributed after your death in unexpected or unfair ways.
- Consider family provision risks
If a person has been left out of a Will, or believes they have received an insufficient share of the estate, they can ask the Court to increase their inheritance by way of a family provision claim.
Family provision claims are the most common type of challenge made against an estate – and one of the most misunderstood.
If you’re concerned about the threat of someone making a family provision claim against your estate, it’s essential to obtain specialist advice about that risk. By understanding your family circumstances and objectives, we can advise you about who is an eligible person to make a claim against your estate and the strengths or weaknesses of any potential claims.
In some cases, there is merit in leaving a statement with your Will which sets out important facts about the history of your relationship or financial support of the potential claimant and your reasons for making your Will in a particular way.
For our ACT clients, in some circumstances, there is scope to structure your assets in such a way to reduce the size of the estate that can be claimed against.
As each family provision case turns on its own facts, it’s critical to get individual advice about how a family provision claim may impact your estate and what strategies are available to you to manage that risk.
- Be clear about gifts, loans and other financial support to family
In recent years, we have seen an increasing number of our clients provide financial assistance to their children or other family members. Sometimes this comes in the form of a lump sum, such as providing a deposit to purchase a home, regular support such as helping to pay school fees for grandchildren, or financial assistance in the time of need such as during a relationship breakdown.
From talking to our clients, we know that the attitudes and expectations about financial assistance can vary between – and within – families. Some of our clients choose to offer financial assistance by way of a loan with structured repayment terms, while others view the financial assistance as a gift. Furthermore, some of our clients wish to ensure equality between their children whereas others prefer to give support when it’s needed without adjustment between children.
Regardless of your mindset, the key thing is to be clear about your intentions when you provide financial support to your children or other family members. To avoid disharmony down the track, you should carefully consider and communicate whether your financial assistance is a gift or a loan. If it’s a loan, it is important to have this properly documented and to keep records of any repayments.
If you’ve provided financial assistance to a family member, then we can help you identify whether any adjustments should be made in your estate planning and prepare any necessary loan agreements.
- Be wise about your choice of executor
The executor of your Will owes significant responsibilities to your beneficiaries to distribute your estate according to the terms of your Will and the law. However, within the confines of their legal duties, your executor also has a range of decision-making powers about how they manage the administration of the estate. Some of the common areas of tensions between executors and beneficiaries include the timeliness of collecting assets and making distributions, whether specific assets are to be transferred to beneficiaries or sold, the process for selling assets and the payment of estate expenses.
Appointing multiple executors has the advantages of increased accountability and enabling executors to share the load. However, if you appoint more than one executor, it’s essential that they are able to work well together – otherwise the administration of the estate can grind to a halt if they’re unable to reach consensus.
The wise choice for your executor will depend on your family circumstances and your objectives. We believe that it’s wise to choose executors with the right skill set and who you expect will be able to get along with your beneficiaries. In some cases, it can be worthwhile to appoint an independent executor if you’re concerned about disagreements within your family.
The other key roles that may be relevant to your estate planning include trustees of testamentary trusts, guardians for minor children and attorneys under Enduring Powers of Attorney.
We can help you work through your options for executors and other key decisionmakers as well as provide support to your executors throughout the estate administration process.
If you would like to discuss any aspect of your estate planning, we invite you to contact us on (02) 6140 3263 or [email protected]