A Will is a record of a person’s testamentary directions. It states what is to happen to a person’s estate following death. A Will can be formal or it can be informal. Clearly a formal properly executed Will is best, this reduces if not removes any ambiguity and scope for dispute. A Will is a very important document and great care should be taken. The consequences of a poorly drafted Will can be drastic.
A carefully crafted Will has other advantages. It identifies the person or persons to be appointed to ensure that the Testator’s directions in the Will are carried out (the executors). It will also specify who is to administer the assets of the estate particularly if the estate is not to be distributed immediately (the trustees). It will clearly identify who is to receive what and reduce if not eliminate the potential for disputes among beneficiaries.
People with young dependents or with dependents who, for one reason or another, may not be capable of managing their own affairs can structure their Will to ensure a vulnerable beneficiary does not fritter their inheritance away or is not taken advantage of.
Most Wills these days provide for the creation of what is known as a Testamentary Trust or Trusts. Rather than the inheritance passing to the individual the Will creates a Trust. The capital is the inheritance and the intended primary beneficiary is usually appointed the Trustee. The particular beneficiary as Trustee is in effective control of the Trust and the beneficiaries of that Trust are usually the primary beneficiary, their spouse or partner and dependents and grandchildren. The Trust is created by the Will and the Will is the governing trust document or trust deed.
Beneficiaries who are not earning an income, including minor beneficiaries, can be paid income from the Trust and that income is treated and taxed at the usual marginal rates. The penal provisions that normally apply to income received by minors does not apply. This can result in very significant tax advantages.
The Law regarding deceased estates varies from state to state and from country to country. A Will will help to eliminate conflicts that arise where assets are located in different states and different countries. If a person dies intestate there can easily be conflict between the law regarding intestacy.
There is also massive potential for dispute regarding superannuation. Trustees of Superannuation Funds not uncommonly ignore non-binding nominations. Such Trustees can elect to pay the Superannuation into the Estate or to pay the money to certain dependents.
Don’t leave your estate to chance, seek professional advice.