Your Last Will And Testament
Who needs to make a Will?
Anyone who is over the age of 18 years or married (if under the age of 18 years).
Why do I need to make a Will?
When we die in NSW, the government has passed a law known as the Sucession Act. This Act of Parliament, sets out what should happen to our assets if we die without a Will.
Basically your spouse is entitled to some and so are your children. If you don’t have a spouse or children then the Act directs our Estate to our parents and siblings.
So why make a Will? The reason is that if you make a Will, you can choose your beneficiaries and direct what part of your estate they receive. You can set out specifically what you would like each beneficiary to receive and when they are to receive it.
We have a lot of clients who have treasured possessions and collections and they always want to make sure the right beneficiary will receive them. Some things that our clients have collected over the years are:
- Dinner sets
Making a specific gift to a beneficiary who you know will love and care for your collection the way you have will bring both you and the beneficiary a lot of peace.
We have had other clients who want to make sure that their spouse or child have a home to live in for the rest of their lives. Using a Will you can make this happen. You can rest easy knowing that your loved one will have a roof over their head for the rest of their days.
There are lots of other examples, but i’m sure by now you get the idea. A Will gives you the choice.
Without a Will, your family will need to make an application to the Court for Letters of Administration. It can be a time consuming and costly process to do this, much more expensive than making a Will.
Are there different types of Wills?
Yes. There are two types. A Simple Will and a Will that creates a Discretionary Testamentary Trust.
What Type Of Will Do I Need?
Each person is different and so are their family circumstances. Let’s have a brief look at the two types and you can think about what would achieve the desired outcome for your beneficiaries that reflects your wishes.
A Simple Will is just that. A Simple Will that leaves your estate in a set way to your beneficiaries. A Simple Will suits someone who is happy to leave their estate to their beneficiaries regardless of the beneficiary’s circumstances at the time of their death.
You set out clear instructions for your Executor about who receives a share of your Estate and who receives certain items.
Not only can you bequeath gifts in your Will, but you can direct your Executor to have your body buried, cremated and to pay or forgive debts owed to you.
This is the most common type of Will that is prepared by Solicitors. However, there are real implications for your beneficiaries with this type of Will.
The beneficiary must take the bequest that you have left them in their own name regardless of their income, marital status or tax bracket.
If your beneficiary has married or is in a de-facto relationship, the bequest that you leave them may become part of their joint property pool. This means that if they separate or divorce after they receive any bequest from you, your beneficiary may be at risk of loosing all or part of it in any family law proceedings.
Discretionary Testamentary Trust
In this type of Will a Discretionary Testamentary Trust (“DTT”) is created. It is a bit fancy. A DTT can only be created via a Will. The purpose of creating a DTT is:
- If your beneficiary has reached the age (that you nominate) that enables them to receive your bequest then the beneficiary has a choice. They can take the whole of the bequest (as a simple gift the same as they would under a simple will) or they can receive the bequest in part or whole in a DTT structure; and
- If your beneficiary has not reached the age (that you nominate) that enables them to receive your bequest then their share of your estate will be automatically held in a DTT and managed by the Trustee until they reach the age nominated by you.
Who controls the DTT?
When you make your Will and include a DTT, then you nominate not only someone to act as your Executor of your Will but someone to act as the Trustee of the DTT that you have created as well. It can be the same person, or it can be two different people.
So how does a DTT work when my beneficiary is old enough to receive their bequest from me?
Each beneficiary will have a choice to either leave their inheritance inside the DTT structure or to take their inheritance and leave the DTT structure.
If they choose to take their inheritance, then that is the end of their involvement I the DTT structure. However, if a beneficiary decides to leave their inheritance inside the DTT structure then they will have the following benefits available to them:
- To decide whether they will split and stream income and any capital gains that are generated from their inheritance between parties who fall into a category of people known as “Potential Beneficiary” – in most DTT structures this means their children and spouses.
- They will have greater level of protection over their inheritance which can assist them in any business dealings and any future family law proceedings where assets in the beneficiary’s personal name may be at risk.