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Making a Will should be a high priority. It is one of the most important things you can do for yourself and your family.
Do you know what happens to your assets if you pass away without a Will?
Are you in a blended family and want to safeguard your children’s inheritance?
Do you want to ensure that a disabled child is cared for when you pass away?
Do you want to ensure that your superannuation death benefits go to your intended beneficiary?
Having a Will ensures that important decisions are not left to chance.
What is a Will?
A Will is a binding legal document containing instructions as to the disposition of your property (your estate) to take effect on your passing.
It gives your spouse, children and assets legal protection and peace of mind, and ensures that your estate is handled according to your wishes after your passing.
Usually you must have the capacity to make a Will (testamentary capacity) and be at least 18 years of age.
A Will:
- gives you control over who receives your assets after your passing;
- allows you to nominate guardians for your children under 18 years of age;
- is much faster, simpler, cheaper and more certain than the process followed if there is no Will;
- allows you to make provision for contingencies.
What is an executor?
Your Will appoints your executor, who ensures that the wishes of the Will maker (the testator) are carried out in accordance with their Will and looks after your estate after your passing.
The executor may also be a beneficiary. It may be a family member, a friend, a professional, or a trustee company.
Professionals and trustee companies charge for their work. A pecuniary legacy may be left in lieu of payment to a person who is an executor but not a beneficiary.
You may appoint joint executors but it’s preferable to appoint one instituted executor and, in case they are unable or unwilling to act or renounce the appointment, a substitute executor.
Tell your executor where your Will is stored.
What are beneficiaries?
These are the people (or entities) who receive your assets. You should also choose contingent beneficiaries who benefit if the gift to a preferred beneficiary fails.
What is a trustee?
If beneficiaries are young or disabled or need protection, the trustee holds their gift in trust and manages it for them. The trustee’s role usually starts when the executor’s role ends. The same person is often the executor and the trustee.
What if I don’t have a Will?
Finalising an estate is generally much slower, more complex and expensive when there is no Will.
If you have no Will:
- an administrator fills the executor’s role; and
- you lose control over who inherits your assets after your passing. The Succession Act 2006 (NSW) determines which of your surviving family members receives what share of your estate, depending on your personal circumstances on your passing.
What can’t I give away in my Will?
You may give away things that you own on your passing. However, some assets may be controlled by you, but you don’t own them, as an entitlement to them arises only after your passing.
Assets you can not give away in a Will include:
- property owned as a joint tenant;
- assets in discretionary trusts if you are the trustee;
- life interests, pensions and annuities; and
- most superannuation and life insurance proceeds.
If your superannuation fund’s trust deed does not accept a “Binding Nomination” then the fund’s trustee has the final say on who receives your superannuation entitlements on your passing.
What are the requirements for a valid Will?
- In writing signed by or on behalf of the testator;
- Testator knows and approves its contents;
- Testator has capacity to make a Will; and
- Testator’s signature witnessed and signed by two competent persons.
The Supreme Court of NSW can nonetheless declare valid a document which fails to meet these requirements.
How do I revoke my Will?
A later Will revokes an earlier Will but it’s a good practice to retrieve the previous Will, write “revoked” on it, and store it with your new Will (or destroy it).
Unless your Will states that it was made in contemplation of getting married, a Will made may be revoked upon your marriage.
If you are married and you separate, your Will remains valid until you are divorced.
If you appointed your former spouse as your executor, that appointment and gifts to your former spouse are revoked on divorce.
How do I change my Will?
For a significant change, make a new Will. For a less significant change, make a codicil (amending part of a Will only).
Why have a Will?
A Will is an important document. Following are some reasons for having a Will.
Decide how your Estate is to be distributed
A person who makes a Will is known as a testator. A person who dies without having made a valid will dies “intestate.” If you die intestate, your estate is distributed according to a formula set out in the Succession Act 2006 (NSW). There is no guarantee that the result of applying this law will be in accord with your wishes. You can avoid this problem by drafting a Will.
Decide who will administer your Estate
Executors play an important role in the administration of your estate, ensuring that all your affairs are in order. You should appoint someone who is organized, honest, responsible, competent and trust worthy.
If your Will does not appoint an executor, a court will appoint a legal personal representative for you.
Selecting a family member as your executor may not be an ideal option if you anticipate family disputes.
Decide who will take care of your minor children
You can appoint a guardian to care for your children under 18 years of age. You can include a “memorandum of wishes” document that details how you would like them to be raised.
If your Will does not appoint a guardian or you die without a Will (dying intestate) and the other parent is unavailable or has died, a court will choose a family member or a state-appointed guardian.
Make gifts and donations
Ensure that you accurately name any charities in your Will.
Obtaining probate
Probate is the legal process the executor goes through to ensure the Will is valid. All estates must go through a probate process, regardless of whether or not there is a Will.
If you die intestate, the process is slower and the court will decide how to divide your estate. Having a Will speeds up the probate process and informs the court of how you want your estate to be divided.
Disinherit people you do not want to receive your property
If you die intestate, the court will distribute your estate according to intestacy laws. These laws create a hierarchy of inheritance among your surviving relatives (your heirs) which do not take into account the current state of affairs between you and your family members.
If you die without a Will, part or all of your estate may pass to someone you did not intend. Having a Will allows you to disinherit a person who would inherit if you died intestate and to include people (beneficiaries) who would be excluded under the intestacy laws.
Having a Will ensures that your instructions are clear and unmistakable and helps to avoid potential family disputes.
Avoid legal challenges
A well-drafted Will reduces the risk of legal challenges. Including a clause in your Will in anticipation of a challenge to the distribution by a disgruntled family member can quickly resolve the dispute
Change your Will at any time
A Will is a revocable instrument that you can change as your life circumstances change.
Tomorrow is not promised
Procrastination and the unwillingness to accept death as part of life are common reasons for not having a Will. If you lose capacity or pass away, the opportunity to make a Will is gone. This can create a lot of stress for your surviving family members at a very emotional time which can be avoided by making an appointment to get your Will drawn up.
How to make a Will
Distribution of your assets
Choose the people you want to receive your assets (your beneficiaries).
Anything left over after your debts are paid and specific gifts are given is the ‘residue’ of your estate. Nominate a person or entity to receive the residue.
If you fail to adequately provide for dependents, your Will may be open to legal challenges.
Choose an executor and trustee (and if applicable a guardian)
Appoint people to carry out your wishes as expressed in your Will.
- An executor ‘executes’ the instructions in your Will, ensuring that your beneficiaries receive what you have left them.
- A trustee (who may be the same person) looks after any assets held in trust for other people.
- A guardian appointed in your Will cares for your children under 18 years of age.
Talk to the people you wish to appoint to ensure that they are happy to be appointed. Choose people with appropriate skills (and if appointing joint executors/trustees – who will work well together).
Meet the formal writing requirements
Store your Will in a safe place.
Executor
An executor’s duties include:
- making funeral arrangements;
- identifying any debts including any tax payable;
- identifying the deceased’s assets and ensuring their security;
- applying for a grant of Probate from the Supreme Court of NSW (if required);
- paying all debts and tax from the assets; and
- distributing the balance of the assets in accordance with your Will.
The Executor's role.
Managing and administering an estate includes carrying out the deceased person’s wishes set out in the Will.
The Executor manages and protects estate assets, ensuring that all estate liabilities are paid, and protecting the interests of the estate and its beneficiaries.
Carrying out the Executor's role.
The deceased’s assets are frozen until probate has been granted. An executor can access the deceased’s bank account only to pay funeral expenses and legal fees relating to the grant of probate.
A grant of Probate is generally required unless the estate is small or if the deceased held all their assets jointly with another person. Jointly held assets are not transferred in accordance with the Will: they become the surviving joint owner’s asset.
If a grant of Probate is required, the Executor must identify the deceased’s assets and liabilities. An application for Probate, setting out the deceased’s assets and liabilities and their values and other evidence relating to the death and the Will, is prepared and filed with the Court. If the Court is satisfied that the application relates to the deceased’s last Will, and is supported by evidence, it will generally grant Probate.
After Probate is granted, the Executor can administer the estate, obtaining monies from financial institutions, selling or transferring property, paying debts and tax and distributing the proceeds of the estate in accordance with the Will.
Before distributing the deceased’s assets, the Executor should also:
- obtain expert accounting advice as to the estate’s tax liabilities, including Capital Gains Tax. The Executor could be personally liable for any unpaid tax.
- post a notice on the Court website that he or she is going to distribute the assets of the estate and giving anyone who believes they have a claim on the estate one month to make the claim. The law protects an Executor who posts such a notice from claims by creditors and other claimants of whom the Executor is unaware at the time of distribution. However, claims may be made against the beneficiaries (including the Executor if he or she is also a beneficiary).
Refusal to act as executor
An executor named in the Will can refuse to accept the position. If the decision to not act as Executor occurs after Probate is granted, the Executor must obtain the Court’s consent to cease acting.
Trustee duties
Executors also take on the role of Trustee of an estate. A Trustee’s duties include to:
- act personally;
- act unanimously where there are multiple trustees;
- act in good faith;
- consider how distributions should be made and to who and when;
- not be dictated to by others (e.g. beneficiaries); and
- avoid fettering any discretion they have.
Section 53 of the Trustee Act 1925 (NSW) allows Trustees to employ ‘agents’ to carry out part of the administration of the estate, who can be paid from the estate.
Executors often employ solicitors to obtain a grant of probate and carry out the administration of the estate. However, delegation of tasks does not absolve an Executor of their responsibilities.
If there are multiple Executors, decisions must be reached jointly, by majority or unanimously, as specified in the Will.
Payment
An Executor can be paid for carrying out the role following an application to the Court. A benefit received by an Executor under the Will is usually presumed to be payment.
What if Executors don't agree?
Will-makers (testators) often appoint more than one person as executor of their Will. However, if two or more executors do not agree (or if an executor is behaving badly), it can cause stress, delays, and higher costs.
Can each executor obtain independent legal advice?
If a solicitor acting for an estate receives incompatible instructions from multiple executors, and encouraging the executors to resolve the dispute doesn’t result in agreement on how to instruct the solicitor, each executor may have to be represented by an independent solicitor.
Independent solicitors acting for the estate and each executor taking part in mediation or a round table conference may resolve the dispute. However, involving two or three sets of solicitors means there will be two or three sets of legal fees, which can be expensive and give rise to more complications.
How can I resolve a disagreement before a grant of probate?
If executors consider that they may not be able to act alongside each other, one of them can step aside before a grant of probate is made. An executor can permanently renounce their role by signing and including with the probate application a renunciation form.
Alternatively, one executor can apply for a grant of probate with leave reserved to the other executor. The other executor steps aside but can apply to the court to become involved later if they wish.
How can I resolve a disagreement after a grant of probate?
If executors cannot reach agreement regarding administration of the estate with independent solicitors and a grant of probate has been made to all nominated executors, then a court application may be the only option.
The executors can apply to the court seeking directions aimed at breaking the deadlock.
To break a deadlock, an executor can also apply to be discharged from their role.
If the executors cannot agree on the estate management and none of the executors wishes to be discharged, one of the executors can apply to the Supreme Court of New South Wales for an order that the other executor be removed on the ground that they are unfit to act. The executor making the application can apply to be the sole executor or an independent administrator can be appointed.
The Court will not make a decision to remove an executor lightly, as the testator chose that executor (and any other executors) to be their personal representative. The Court regards the protection of beneficiary’s interests in the estate and their welfare as paramount in determining whether or not to remove an executor.
How can a testator prevent disagreements between executors?
Many executor disputes are avoidable: there are things a testator can do to minimise the potential for conflict.
When you make a Will, consider your executors carefully. Whilst appointing more than one executor may be a good idea, if siblings have fractured relationships and you think they may fight, you should consider appointing only one sibling or an independent person such as a friend or another family member.
If a friend or other family member is not an option, you may consider appointing an independent professional such as your accountant or solicitor or an independent trustee company (all of whom will charge for their services in managing the estate).
Another option is to include directions in the Will as to how disputes should be resolved.
Witnessing a Will in NSW
Creating and signing a Will requires an understanding of the importance of a Will and the role witnesses play in the signing process.
What is a Will & why is it important?
A Will is a legally binding written declaration of your intentions regarding the disposal of your assets, the appointment of an executor, and (if applicable) guardianship arrangements for your minor children after your passing.
Having a Will is important because:
- it allows you to dictate how your estate is distributed, which helps prevent disputes among family members and reduces the chances of your assets ending up in the wrong hands;
- It provides clear instructions on who will assume guardianship of your minor children, ensuring their well-being.
- it allows you to minimise potential estate taxes and preserve the maximum value of your assets for your beneficiaries.
The witnessing process
When you witness a Will, you are confirming that the Will-maker (the testator) has signed the document willingly and in the presence of witnesses. A witness’s role is to observe the signing of the Will, ensuring that the testator appears to be of sound mind and is not under any form of coercion. By attesting to the signing, witnesses add credibility to the Will and safeguard against potential disputes or claims of forgery.
Responsibilities & duties of a witness
A witness to a Will must be present when the Will is signed and acknowledge the testator’s signature. Witnesses should not be beneficiaries or potential beneficiaries of the Will, as this may raise doubts about their impartiality.
A witness should not be directly involved in the execution or administration of the Will, such as an executor or a legal representative.
These requirements ensure that the Will avoids conflicts of interest and remains impartial.
Witnessing a Will correctly
Witnessing a Will correctly ensures that it complies with the legal requirements of the jurisdiction in which it was created. Failure to do so may render the Will invalid.
Witnessing a Will provides an additional layer of protection against claims of coercion or undue influence. The presence of witnesses helps to establish that the testator had the necessary mental capacity and was not forced into making any decisions against their will.
Choosing suitable witnesses
You should select witnesses who can be relied on to fulfill their responsibilities effectively, who are trustworthy, of sound mind, and readily available to provide testimony (if necessary).
The Will signing process
- Consult a lawyer to ensure that your Will is legally sound;
- Familiarise yourself with the legal requirements in NSW;
- Choose reliable trustworthy witnesses who meet the legal criteria;
- Find a quiet and comfortable place to execute the Will;
- Ensure that witnesses are physically present when you sign the Will;
- Each witness must sign the Will in the presence of the testator and the other witness;
- Include the date and full names and addresses of witnesses;
- Store the signed Will in a secure location and inform trusted people of its whereabouts.
Ensure a valid Will with trusted witnesses
In New South Wales, anyone over 18 who is not a beneficiary or the spouse of a beneficiary can serve as a witness.
What is Testamentary Capacity?
A person can only make legally binding decisions about what happens to their estate if they have the requisite testamentary capacity, that is: ability to remember pertinent facts, rational understanding, and comprehension of the legal implications of making a Will.
Testamentary Capacity
Testamentary capacity is a legal concept that quantifies a testator’s mental capacity to execute or change a will. In NSW, a testator is assumed to have testamentary capacity unless proven otherwise. It is up to the person challenging a will to present sufficient evidence to establish that the testator is unable to make a will.
Even if someone has reason to doubt the testamentary capacity of a testator, they must be an “eligible person” to be legally entitled to challenge the will.
The Supreme Court of NSW will apply a testamentary capacity test based on the English case of Banks v Goodfellow (1870). This case established that a Will can still be valid even if the testator suffers from a mental disorder or disease, provided they pass a four-fold test:
- Can the testator appreciate the effect of making a Will?
- Can the testator recall the assets that make up their estate?
- Can the testator comprehend that there are people who are entitled to provisions from the deceased estate?
- Does the testator suffer from any kind of disorder that stops them from making rational decisions about the distribution of their estate?
Disorders And Diseases
A family member may challenge a will because they notice the testator exhibiting symptoms of a disorder or disease. Disorientation, forgetfulness or disordered behaviour may seem like sufficient evidence of testamentary incapacity, but the legal threshold is fairly high. Mental illness, dementia, psychosis, neurological and psychiatric disorders may affect a testator’s mental faculties, but may not be extensive enough to demonstrate that the testator no longer has testamentary capacity. The court will make an assessment based on the severity of the testator’s illness and the impact it has on their reason and decision-making ability.
How does an eligible person challenge a Will?
A person intending to challenge a Will on the basis of testamentary incapacity should first file a probate caveat with the court. This is only possible if the court has not already issued a grant of Probate for the will. The court will then consider the merits of both arguments and either revoke the Will and Probate a previous Will, or dismiss the challenge and Probate the Will. If there is no previous Will, intestacy law will determine the way in which the estate is administered.
Types of land ownership
Whether or not real estate passes to the beneficiaries named in your Will depends on the type of ownership.
There are different ways to be the legal owner of real estate, with each form of ownership having different implications for deceased estates.
Sole ownership
Sole ownership means the property is exclusively owned by a single person and no other person has any interest in it. If the deceased person was the sole owner of the property, the asset usually forms part of the estate for distribution in accordance with the Will (if there is one).
Joint Tenants or Tenants in Common?
There are two ways of holding joint property. Where two or more people own property, they can hold it jointly as joint tenants or as tenants-in-common. The mode of ownership dictates what happens to the property on the death of one of the joint owners.
Joint Tenancy
When one joint owner dies, their interest in the property passes to the surviving joint owner, irrespective of what is in the deceased person’s Will. The deceased person’s share is not included in their estate.
Registration of a Notice of Death is generally all that is required to effect a transfer to the surviving joint tenant. A copy of the death certificate is generally sufficient proof of the person’s passing.
Tenancy in Common
If the deceased owned a property with someone as ‘tenants in common’, each ‘tenant’ owns a portion of the property which can be in equal or unequal shares. If one of the owners dies, their share of the property becomes an asset of their deceased estate for distribution in accordance with their Will (or if there is no Will, as per the intestacy rules in the Succession Act 2006 (NSW)).
Can joint tenancy be changed to tenancy in common?
A joint tenant may apply to NSW Land Registry Services to have ownership changed from joint tenants to tenants-in-common without the consent of the other joint tenant.
Should I use a Will kit?
A Will kit is a hardcopy or online do-it-yourself option for doing a Last Will and Testament. They are advertised as an inexpensive, no-hassle solution for setting out your desires for your estate on your passing. However, there are some important things you should know before deciding to buy one.
Why are will kits so prevalent?
Do-it-yourself Will kits are promoted as an attractive, low-cost option, but erroneous documents may cause substantial long-term costs, unintended legal complications and problems for you or your loved ones.
Product disclaimers for online Will kits generally ensure that the marketer avoids any responsibility if the Will kit is not effective.
If your wishes are unclear or your Will is unenforceable, your heirs could end up spending a lot of money on legal costs fighting for the inheritance you left them. Or you could end up having to retain a lawyer to get the job done, having already paid for a kit that is not helpful.
What are some of the risks in using Will kits?
A Will kit does not give you any legal advice or guidance. Most people are unfamiliar with the potential pitfalls of drafting a Will, and the basic kit they receive will not help them with all the technical requirements of estate laws. You could create a Will that leaves out key information or is incorrectly executed.
A Will kit only provides you with the basic framework for creating a Will. It does not take into account complexities associated with your estate.
Unfortunately, leaving someone out of your Will is not necessarily the end of the story. A challenge to your Will may have a greater chance of success if you used a Will kit. The Succession Act 2006 (NSW) allows certain classes of people to challenge your Will. If they prevail, someone you would not have chosen could inherit and your intended beneficiaries may not receive your intended gifts.
If a gift fails (e.g. because a beneficiary dies before you) and you have not included a substitute beneficiary, someone you never intended could inherit that gift.
Your heirs could end up paying more in taxes. Capital gains tax (CGT) can apply when a change in ownership occurs due to the death of the owner, or if an asset passes to a foreign resident or a tax-advantaged entity.
Why should a lawyer prepare my Will?
Your Will may be the most important document of your life. A lawyer is a skilled professional who will ensure that your wishes are carried out in the way you intended. Your family will not be left with legal issues and expensive fees.
Handwritten and other informal changes to a Will in NSW
Once you have made your Will, it remains in full force and effect until you either revoke (cancel) or change it.
Update your Will as soon as your personal and/or financial circumstances change.
How do I revoke my Will?
Section 11 of the Succession Act 2006 provides that a Will may be revoked by:
- a court order;
- marriage;
- divorce (in part);
- a later Will;
- written declaration (executed in the same way as a Will) of your intention to revoke it;
- you or someone in your presence destroying the Will intending to revoke it; or
- you or someone in your presence dealing with the Will in a way that satisfies the Court from its state that you intended to revoke it.
Does Marriage revoke my Will?
A Will is automatically revoked when you marry unless your existing Will states that it was made “in contemplation of marriage”, in which case, your Will remains valid despite your marriage.
Your Will is not fully revoked if you marry the person to whom you left assets in your Will or whom you appointed to be your executor. In this case, your appointment of the person you married as the executor and the gift to them remains valid, but the balance of your Will is revoked.
Does divorce revoke my Will?
A divorce does not revoke your entire Will, but it does revoke:-
- the appointment of your ex-spouse as your executor, guardian or trustee; and
- any gifts to your ex-spouse.
You may nevertheless include a clause in the Will to ensure that, despite the divorce, the appointment or gift remains valid.
How can I make changes to my Will?
Although you can make written changes to an existing Will, for those changes to be valid, you must:-
- have two independent witnesses with you when you make the changes; and
- sign to confirm those changes; and
- the two witnesses must sign the Will and say they have witnessed you make those changes and witnessed you sign it.
As you can imagine, this can make the Will confusing and messy. It is preferable to set out any changes in a codicil or a new Will.
What is a codicil?
A codicil is a supplementary document to the Will which sets out a revocation, addition or minor change to your Will. You can make more than one codicil.
If you make a codicil, you must sign it and have it witnessed in the same way as a Will and keep it with your Will.
A New Will
If the changes or additions you want to make to your Will are numerous or complex, it is preferable to make a new Will. It automatically revokes the old Will and you can easily and clearly set out your new wishes.
How often should you change your Will?
You can change your Will as many times as you like provided you are mentally capable of doing so.
You should review your Will at least every 2-3 years to make sure it still correctly sets out your wishes on your death.
Revoking a Will without a new Will
If you revoke your Will and do not draw up a new Will, your assets will be dealt with by the rules of intestacy in the Succession Act (NSW).
Informal Wills
The Succession Act 2006 (NSW) specifies what constitutes a valid Will in NSW. However, a document which does not satisfy these formal requirements may in some circumstances be considered a valid Will.
Can an informal Will be valid?
Following are the formal requirements which must be met to make a Will valid:
- it must be in writing;
- it must state that the document is intended to be your Will;
- each page must be signed by the testator (or by someone else in the presence of and directed by the testator) in the presence of at least two witnesses (execution)
- it must be dated when it is executed;
- at least two of those witnesses must attest and sign the Will in the testator’s presence (but not necessarily in the presence of each other); and
- The testator’s signature must be made with the intention of executing the Will.
A Will that satisfies these requirements (the valid Will test) is a Formal Will.
What is an Informal Will?
A Will that doesn’t satisfy the valid will test is an Informal Will.
Traditionally, an Informal Will had to be written as a “document”. However, technological advances have extended the definition of a “document” to non-written forms.
When does a Court accept an Informal Will as valid?
The Succession Act 2006 allows the Court to dispense with the requirements of the valid Will test if:
- a document or part of a document appears to contain the deceased’s wishes as to the distribution of their assets but has not been signed in accordance with the Succession Act 2006; and
- the deceased intended the document to form their Will.
In making a decision as to the validity of an Informal Will, there is no limit on the matters to which the Court may have regard.
If the Court accepts an Informal Will as a valid Will, it overrides any prior wills the deceased made. The Court will grant Probate to the person named as the Executor in the Will. If the valid will does not appoint an executor, the Court will grant Letters of Administration and appoint the applicant as the Administrator.
Who can obtain a copy of a Will in NSW?
How to obtain a copy of a Will during the testator’s lifetime
Family members are often interested in finding out the disposition of their parent or grandparent’s Will before their death. There is no legal obligation for a testator to inform their family or beneficiaries of the contents of their Will. No one can obtain a copy of the Will without the testator’s consent.
Solicitors’ conduct rules also prohibit a solicitor from revealing the details of a Will without a binding court order or the consent of the testator.
Who can obtain a copy of a Will before Probate?
Section 54 of the Succession Act 2006 permits certain people to inspect or obtain a copy of a Will before it is probated.
The executor or administrator must make available a copy of the Will at the requestor’s expense to:
- anyone who is named or referenced in the current Will;
- anyone named as a beneficiary in a previous Will;
- a guardian or parent of the deceased;
- a person who is eligible to inherit if the estate is intestate;
- a spouse or de facto partner or child of the deceased;
- anyone who has a claim against the deceased estate;
- anyone who had management of the testator’s estate, under the NSW Trustee and Guardian Act 2009, immediately before their death;
- a guardian or parent of a minor referenced in the Will, or who would be eligible under intestate succession law;
- an attorney with enduring power of attorney for the deceased; and
- anyone specified by NSW succession regulations.
How to obtain a copy of a Will before Probate
If you are a person eligible to view the Will, the problem may be tracking down a copy. Approach the executor or administrator first, as they are most likely to have the Will and are obligated to pass over a copy to eligible persons. If you do not know who the executor is, you may be able to find out their contact details by monitoring local newspapers for a death notice or online probate notices. If that approach is unsuccessful, you should contact the testator’s solicitor or the Probate Registry of the Supreme Court of NSW.
Conditional Gifts
A testator can draft their Will to benefit whomever they like and phrase these bequests using whatever clauses they see fit. If a testator attaches conditions to a bequest before a beneficiary can inherit, they will not receive or retain their bequest unless they meet the requirements of the Will. This allows the deceased to keep tighter control over their beneficiaries and their assets after their death but it has inherent problems.
What is a conditional bequest?
A conditional bequest is a provision in a Will that distributes an asset to a beneficiary only under particular circumstances. Conditional gifts may be conditions precedent or conditions subsequent.
Condition precedent
A beneficiary must satisfy certain conditions to receive the gift.
Condition subsequent
A beneficiary receives their inheritance, but the asset is revoked if a specific event happens.
Is making a conditional bequest a good idea?
You should consider carefully before making an unusual conditional bequest in your Will. Conditional bequests give you greater control over the administration of your estate, and testamentary freedom allows you to make your Will according to your wishes. However, courts will not uphold conditions that breach public policy.
A testator cannot predict the future needs and circumstances of their beneficiaries. If a conditional bequest can be received only in limited circumstances, it may be very difficult if not impossible for the beneficiary to inherit.
An alternative is to establish a discretionary trust in your Will. This allows a trustee to determine when to disburse the trust assets and to do so in the spirit of the testator’s wishes.
Is a conditional bequest legally binding?
Courts are reluctant to deny a testator’s last wishes and will generally uphold a conditional bequest unless it:
- violates the rule of law;
- is uncertain or impossible to fulfil; or
- is contrary to public policy.
The court may overturn a conditional bequest if it is impossible to fulfil the requirement in the specified timeframe. However, the court will not interfere if the request is merely improbable or difficult to fulfil.
What if a gift in my Will fails?
When a specific gift mentioned in a will is no longer in the deceased estate, there is an ademption, and the named beneficiary misses out. However, statute and common law offers some relief from the rules of ademption.
What Is Ademption?
When a specific gift left in a testator’s Will has been sold, destroyed or lost between the time that the testator made the Will and when they passed away, that asset is adeemed and the beneficiary cannot inherit. The legal assumption is that the testator intended the beneficiary to receive nothing in replacement.
An ademption can lead to unexpected outcomes.
Litigating ademption
The Supreme Court of NSW has developed solutions to the problem of ademption. The court may presume that the testator intended a gift to be general rather than specific. In that event, the beneficiary receives an asset of equal value to the unavailable gift. If the gift is substantially the same as identified in the Will, having only changed in name and form, the court is likely to save the gift.
No ademption due to lack of authority or wrongdoing
If the testator was unaware that a specific asset was no longer in his or her possession because of someone else’s wrongdoing, then the court will rectify the adeemed gift.
Avoiding Ademption
A testator can avoid ademption by properly drafting and regularly updating their Will.
Parents in a blended family making a Will
Wills for blended families can be complex, but legal mechanisms exist to ensure that the testator’s assets are divided according to their wishes.
Why is creating a will as a blended family more complex?
Even if not immediately apparent, the potential for future conflict between a surviving spouse and their biological and step-children may emerge. Fortunately, there are several ways to ensure that the deceased’s wishes are honoured, even if other family members want to use the estate’s assets in other ways.
A ‘traditional’ Will (where the entire estate is left to the surviving spouse) may be unsuitable for blended families, especially if there are additional beneficiaries such as step-children from prior or future relationships.
How can I ensure my assets are divided how I wish?
To reduce the likelihood of issues arising and ensure that the assets of a spouse in a blended family are divided in the way they wish, they should consider structures such as trusts, mutual wills and binding family agreements.
Discretionary testamentary trusts
You can use discretionary testamentary trusts to ensure that the estate assets are divided in the way you intended. For example, you could give a life interest in the estate to the surviving spouse. On their death, the estate passes to the children.
You can create more than one testamentary trust if you want to govern the use and benefit of specific investments or assets separately from each other.
Mutual wills
A mutual Will requires both parties to make any changes in writing. The surviving spouse cannot change the estate beneficiaries or the proportion of the estate they will inherit. The obligations under the agreement remain valid even if the surviving spouse remarries or the Will is terminated.
Binding financial agreements
In the event of a breakdown in a relationship, you can make a financial agreement before, during or after a relationship breakdown mirroring the Will of each spouse to ensure a specific division of assets.
Binding or non-binding nomination forms
Binding or non-binding nomination forms for superannuation, life insurance policies and insurance bonds ensure that a specific beneficiary or group of beneficiaries receive money from the estate.
Additional considerations
Other considerations when making a Will as a blended family include distribution of family heirlooms, what happens when assets are held separately, and child support obligations.
Distribution of family heirlooms
Family heirlooms should be individually mentioned in the Will to avoid conflicts between potential beneficiaries.
Assets held separately
Parents of blended families may prefer to hold assets such as bank accounts and houses in separate (as opposed to joint) names.
If a property is held between spouses as joint tenants rather than as tenants in common (held separately in a fixed proportion), a right of survivorship operates. On the death of a spouse, despite any provisions made in the deceased’s Will, the property automatically passes to the surviving joint tenant.
Child support obligations
Parents in blended families should also keep in mind other financial obligations they may owe children and partners of previous relationships under child support or spousal maintenance orders.
Mirror Wills & mutual Wills
A mirror Will is a simple Will that is largely identical to that of their partner or spouse.
A mutual Will is where each Will-maker (testator) makes a Will which forms a binding contract between them.
What’s a mirror Will?
Mirror Wills:-
- are usually used by couples
- are mainly identical to and reflect each other; and
- may be changed or revoked at any time by either testator.
A mirror Will can be changed at any time: you need not give the other testator notice before changing or revoking it.
What’s a mutual Will?
Mutual Wills (also known as mutual Will contracts or binding Wills) form a legally binding contract between two people. The terms of both Wills are agreed by both testators and prevent either from revoking or amending their Will without the other’s agreement. After the death of the first testator, both Wills become irrevocable and cannot be amended.
Mutual Wills work as a contract to protect the estate interests of both executors’ beneficiaries.
Where both testators have agreed to the terms in their Wills, the surviving party is bound by this agreement. If either testator changes their Will contrary to the agreement, the courts may enforce the original agreement.
If the surviving party unreasonably exhausts the deceased’s assets, beneficiaries may sue for breach of contract.
Mutual Wills do not prevent challenges to the estate.
Changing circumstances after the making of the mutual Will agreement could disadvantage the survivor. They may attempt to frustrate the operation of the agreement by depleting or changing their ownership of the estate assets .
Right to Reside vs Life Interest
If you wish to give a beneficiary the ability to live in a property, yet ensure that it ultimately ends up with someone else, you can allow the beneficiary to reside in a property by giving them a Right to Reside or a Life Interest.
Right to Reside
A right to reside is where you give the beneficiary the right to live in your property for the period specified in your Will. The period can be for the life of the beneficiary or for a specified time, or until an event happens and the entitlement may be subject to conditions.
The beneficiary has a right to live in the property but not to any income it generates.
The beneficiary’s right in the property is relinquished when they cease residing in it. When their right to reside ends, the property can either be:
- sold and the proceeds paid to the “remainder” beneficiaries named in the Will; or
- transferred to the remainder beneficiaries.
What is a life Interest in a Will?
When are life interests used?
Life interests are often used in blended families as a wealth protection measure (e.g. where a spouse has children from a former relationship and wants their assets to be inherited by their children). A life interest gives the beneficiary the right to use the property after your passing but not actual ownership. The life tenant can live in the property or lease it and live off the proceeds. They can also sell the property and use the sale proceeds to buy and live in a replacement property or invest the sale proceeds and live off the income. They cannot be forced to move out of the home or sell it against their wishes.How do I set up a life interest?
What are the advantages of a life interest?
What are the disadvantages of a life interest?
A spouse with a life interest in the family home may feel that the rights are restrictive, that they have lost control of their use and enjoyment of the home, and that they are answerable to the executor. Although the life interest might allow for the family home to be sold and a substitute property purchased to which the same life interest arrangements would apply, there are some negative tax impacts. Whilst capital gains tax or land tax exemptions for the principal place of residence will apply to the original family home, they may not apply to a substitute property.What happens to my debts if I die?
Death does not extinguish a deceased person’s debts. Creditors to whom the deceased owed money can still pursue repayment from the deceased’s estate. There are however rules that apply to the order in which the deceased’s assets can be used to pay debts. Some asset types are also excluded from being used to repay debt.
Executor’s responsibility to pay Estate’s debts
An Executor is responsible for ensuring that, if there are sufficient assets, the deceased’s debts are paid from the estate assets before distributing them to the beneficiaries named in the Will. The Probate and Administration Act 1898 (NSW) authorises an Executor to collect the deceased’s assets and use them to satisfy the deceased’s debts. Failure to do so can expose the Executor to a personal liability to any unpaid creditors.
Insolvent Estates
An estate with insufficient assets to meet all the deceased’s debts is “insolvent”. The Executor of an insolvent estate may have to contact creditors to let them know that the debts cannot be repaid, and request that the creditor write off the debt.
Creditors are not however compelled to write off debts. If the debts to a creditor amount to $5,000 or more or if they believe there are insufficient assets in the estate to pay all of the deceased’s debts, they may apply to court to have a bankruptcy trustee appointed to the estate.
If the estate is insolvent, the priority of payment of debts is (subject to the provisions of the Bankruptcy Act 1966 [Cth]):
- Funeral, testamentary, and administration expenses;
- Secured creditors;
- Unsecured creditors; and
- Valuation of annuities and future and contingent liabilities.
Are secured and unsecured debts treated differently?
A secured debt is fixed to one or more of the deceased’s assets. An unsecured debt is not attached to an asset.
An Executor will generally pay secured debts before unsecured debts. If a home loan is not paid, the mortgagee can exercise their right to sell the property to recover the debt owed to them.
If a beneficiary is bequeathed an asset used as security for a debt, they are actually only being given the equity the deceased held in that asset. If the beneficiary wants to retain the asset then, unless the Will specifies that the debt is to be paid from the deceased’s other assets, they must take on the debt attached to the asset and repay or refinance the secured debt before the asset is transferred to them.
The Probate and Administration Act 1898 (NSW) provides that all unsecured debts have equal standing so no unsecured debt can be paid in priority to another unsecured debt.
Can any debts be passed on to beneficiaries?
Beneficiaries are only held responsible for paying off the deceased’s debts if:
- the debt was jointly incurred by the deceased and the beneficiary (i.e. the beneficiary was a co-borrower, so the deceased and the co-borrower were both liable for the whole of the debt); or
- the debt was secured against an asset the beneficiary owned; or
- the beneficiary personally guaranteed an unsecured debt of the deceased.
If the deceased’s assets are insufficient to pay out their debts, beneficiaries will not be held liable for satisfying the deceased’s debts if one of the above scenarios applies.
In what order are assets used to pay off debts?
The deceased’s debts are paid in the following priority:
- Secured debts from the assets securing them;
- Funeral expenses;
- Testamentary and administration expenses ; then
- Unsecured debts.
The Probate and Administration Act 1898 (NSW) sets out the order in which assets should be applied to pay debts where the estate is solvent. If the will contains specific gifts of monetary sums, the Executor must first set aside that money in a fund from the other estate assets not left to a beneficiary. Then, after the payment of debts, the order of application of assets is:
- Assets undisposed of by the will;
- Assets not specifically disposed of by the will but included in a residuary gift;
- Assets specifically appropriated or disposed of by the will for the payment of debts;
- Assets charged with, or disposed of by the will subject to a charge for the payment of debts; then
- Any fund retained to meet monetary gifts; and
- Assets specifically disposed of by the will, according to their value.
Any assets which can not be used to pay off debts?
Assets owned by the deceased as joint tenant with another person do not form part of their estate and will pass “by way of survivorship” to the surviving joint tenant/s. The deceased’s interest in these assets do not form part of the estate and they are not available to pay the deceased’s debts.
If a beneficiary is nominated in a life insurance or superannuation fund to receive these assets on their death, they will normally be paid to the nominated beneficiary. They do not form part of the deceased’s estate and are not available to pay the deceased’s debts.
If no-one has been nominated as the beneficiary of the deceased’s life insurance or superannuation benefits, the life insurer or superannuation fund may pay the deceased’s benefits to their estate. In that event, the Executor can use the benefits to pay for the funeral and for testamentary and administration expenses but not to pay other estate debts unless the will specifically allows them to.
What happens to my business if I die or lose capacity?
Your company is a separate legal entity which can hold property in its own right. When you pass away, property owned by your company does not automatically pass to the beneficiaries named in your Will.
The executor or administrator may appoint a new company director with all the powers, rights and duties of the deceased director who can keep the company running until shares are transferred to beneficiaries. The beneficiaries may then appoint new directors.
If there is no Will, a relative would to apply to the Supreme Court of NSW for letters of administration.
If there are no immediate relatives or other obvious people to be appointed as the administrator of the estate, the NSW Trustee and Guardian may administer the estate.
During the months that these procedures generally take, it may be that no-one is authorised to make management decisions or act for the company.
A potential buyer may be unable to buy the company until an administrator has been appointed and settled the estate.
If the administrator decides to wind up the company and pay out the beneficiaries, the delay may have damaged the company’s reputation and reduced it’s value.
If you are a sole shareholder/director of a company, you should have a Will naming the beneficiaries of your shares.
You should also have your company constitution reviewed to ensure that it meets your succession planning needs.
Why have a Power of Attorney?
If you are a business owner, director or partner and you become incapacitated with no Power of Attorney, there may be no-one authorised to sign documents or make business decisions or discuss your financial affairs with your bank or creditors on your behalf.
If you have not appointed an attorney to act for you, the business may be unable to trade for the duration of your incapacity.
Including cryptocurrency in your Will
Including cryptocurrency in your Will is slightly different to including other assets. Unlike traditional assets, cryptocurrency does not leave an obvious paper trail. If it’s not specifically listed, your loved ones may find it difficult to identify and distribute. It’s therefore important to ensure that your cryptocurrency (and instructions for how to access and distribute it) is clearly identified in your Will. Including cryptocurrency in your Will requires more planning and thought than other traditional assets.
What is cryptocurrency?
Cryptocurrency is a virtual currency that can be used as a method of exchange online. However, although it can be used for payment, it’s recognised as an asset rather than as a currency. Therefore cryptocurrency left in your Will is treated like any other asset of your estate.
Things you need to know when including cryptocurrency in your Will
It is important that you specifically list your cryptocurrency in your Will. If you don’t, it will fall into the ‘residue’ of your estate. Residue is a catchall term for assets that are not specifically listed in your Will.
If cryptocurrency falls into the residue, then it can be difficult to identify, particularly if you don’t know where to look. But, there’s more to including your cryptocurrency in a Will than simply listing it as an asset. Cryptocurrencies are stored virtually on a “blockchain”. To access this you need a unique, private key.
It’s crucial that the executor of your Will knows where to find this private key. Having this information will allow them to easily access your cryptocurrency and distribute it in accordance with the terms of your Will.
Know the details of your cryptocurrency wallet
A cryptocurrency wallet, or ‘crypto’ wallet, is used to store and protect your private key. There are various wallets available, however the most common are:
- A paper wallet is a physical piece of paper that has a unique private key printed or written on it. It might also include the blockchain address. Paper wallets are less likely to be compromised because they can’t be accessed easily or remotely.
- A hardware wallet is external hardware, such as a USB stick. Most hardware devices allow you to add extra security (a PIN or password).
- Software wallets, most commonly web and desktop. Web wallets are cloud-based programs that can be accessed from any device that connects to the internet. Desktop wallets are software that can be installed onto your personal computer. They can only be accessed on the computer they’re installed on.
We don’t recommend that you write your private keys into your Will because it becomes a public document accessible by anyone in the community when probate is granted. If anyone other than your executor were to access this information, they could steal your cryptocurrency.
Tax implications of leaving cryptocurrency in a Will
Someone can challenge a Will for a share in cryptocurrency. However, if the executor chooses to liquidate the cryptocurrency and convert it into Australian Dollars before beginning negotiations, there may be tax implications.
Disposing of cryptocurrency may attract capital gains tax, so executors should get tax advice from a specialised cryptocurrency accredited accountant.
Including cryptocurrency in your estate planning
Leaving cryptocurrency in your Will requires thorough planning and thought. Taking the right steps now will ensure that your estate beneficiaries can inherit your cryptocurrency assets swiftly and easily.
What is a Statutory Will?
In New South Wales, the eligibility requirements for anyone wishing to make a Will are that the testator must:
- be over eighteen years of age; and
- have the necessary testamentary capacity.
What Is Testamentary Capacity?
Testamentary capacity is a legal term defining the mental acuity of a person, specifically whether they have good memory, sound mind, and competent understanding at the time they make a Will. Those lacking testamentary capacity have either:
- nil capacity, where they have never had the competency to form testamentary intent; or
- lost capacity, where they have in the past been capable, but subsequently lost that capacity through impairment.
A person is assumed to have testamentary capacity unless proven otherwise. A person is judged to be testamentary incapable if they do not:
- understand the purpose and effect of making a Will;
- know or remember what assets they have to be disposed of in a Will; or
- comprehend that certain people have a moral right to inherit from their deceased estate.
What is a Statutory Will?
When someone lacks testamentary capacity to make a Will, the Succession Act 2006 offers an alternative to the person dying intestate. The Supreme Court of NSW can authorise the creation of a statutory Will to express the testamentary intentions of someone who lacks mandatory testamentary capacity.
The Court will only make this provision when there is evidence that:
- the person lacks testamentary capacity to create or amend a Will; and
- the proposed testamentary instrument is reasonable and the likely intent of the person if they had testamentary capacity.
The Court will invite evidence of the person’s likely testamentary intentions and decide the terms of the Will.
Anyone who intends to apply for a statutory Will must first notify specific parties such as the next of kin. This is to ensure that anyone with a significant and legitimate interest in the deceased estate is aware of the application and has the opportunity to be heard in Court.
When are statutory Wills necessary?
An application for a statutory Will should be made if a family member or significant other:
- lacks the testamentary capacity to make a will;
- has a sizeable estate and high-value assets; and
- has no pre-existing will, or their current will is out of date or does not provide for loved ones or significant others.
Who can apply for a Statutory Will?
Only certain people may apply for a statutory Will. A family member or someone who already has charge of the vulnerable person’s physical or legal welfare may be an eligible applicant. The court must be satisfied that the applicant is an appropriate person.
Overseas Assets
- Can I include overseas assets in my Will?
If you hold assets overseas as well as in Australia:
- does your Australian Will cover your overseas assets; or
- do you need a Will in each country in which you have assets?
If you make a Will in New South Wales, it will cover your assets throughout Australia. But you can’t assume that any overseas assets will be included in your Australian Will. Countries have different laws regarding deceased estates’ assets.
Options if you have assets in different countries are:
- an International Will
An international will is made in accordance with the Convention Providing a Uniform Law on the Form of an International Will 1973 (the Convention). A country that is a party to the Convention will recognise a Will made in accordance with the Convention.
The Convention provides uniformity on the formal requirements for a Will but it doesn’t address several matters, which are governed by:
- where your assets are situated;
- the jurisdiction in which the Will is made;
- where probate is granted; and
- where you die or are domiciled.
2. a separate Will in each country
Making a Will in each country in which you hold assets is usually preferable to making an international Will.
It’s important to advise your lawyer in each country that you either intend to make, or have made, a Will in another country.
An international Will may still be appropriate if most of your assets are in Australia with a modest asset (such as a bank account) in a signatory country where a grant of probate may be necessary.
What is a Testamentary Trust Will?
A Testamentary Trust is created in your Will to benefit your beneficiaries which comes into existence on your passing.
The Trustee appointed in your Will controls the Trust assets.
You choose the degree of the Trustee’s discretion.
What happens in practice?
- the executor applies to the court for a grant of probate;
- once probate is granted your executor pays funeral expenses and debts and transfers assets left to beneficiaries direct;
- assets left on trust are transferred to the testamentary trust trustee to be administered according to the Will.
Income tax and CGT minimisation
Testamentary trusts can split income between family members. The Income Tax Assessment Act 1936 (Cth) allows the income of a trust beneficiary to be treated like a normal taxpayer. A child beneficiary of a testamentary trust has the same tax free threshold as an adult.
Superannuation
Superannuation can not be dealt with in your Will.
If your superannuation fund trustee allows you to make a binding death benefit nomination (BDBN), you can nominate who is to receive your superannuation. This gives you some control over who receives your superannuation benefits on your passing, but the law limits who can be nominated.
BDBNs are binding on your superannuation fund trustee. Some BDBNs lapse and must be renewed every three years.
If your superannuation fund trustee does not accept BDBNs, they determine who receives your superannuation benefits.
If you have a self managed superannuation fund (SMSF), a BDBN need not be renewed and is binding on your SMSF’s trustee.
Tax minimisation on super entitlements
If at the time of your passing you have superannuation assets and dependents then your estate may have to pay superannuation death benefits taxes.
If your superannuation is paid to a ‘death benefits dependent’, the benefits are tax-free.
Can I protect my beneficiaries’ inheritance if their marriage or relationship fails?
People are often concerned that their children’s inheritance will go to their son-in-law or daughter-in-law if their child’s marriage or de facto relationship fails.
If your children receive an inheritance from you then that will form part of their assets. If they separate it will be available for distribution by the Federal Circuit and Family Court of Australia (FCFCOA).
If your children receive their inheritance in a testamentary trust, that may not form part of the assets available for distribution by the FCFCOA if they separate.
Who controls my SMSF, family company or family trust on my passing?
Family companies, family trusts and SMSFs with a corporate trustee provide asset protection and tax savings because they continue after your passing. A testamentary trust Will can ensure that your chosen beneficiaries control the assets these entities hold.
