Property 101: No such thing as a simple will

Lawyers who prepare Wills regularly as part of their usual practice are familiar with the expression ‘only a simple Will’ and just as regularly understand there is no such creature, as a Will is only as simple as the personal circumstances and assets of the client.

In this newsletter we examine matters which should form part of a client’s instructions to a lawyer when making a will. Failure to consider and discuss these particular matters can have serious implications for your intended beneficiaries.

1. Your personal circumstances

The intentions in your will can be thwarted and the estate’s assets diminished by significant legal costs if a successful family provision claim is brought against your estate. When making a will it is therefore important a potential claim is discussed with your lawyer. This requires establishing the existence of:

• a current or former spouse,
• a current or former de facto spouse,
•  children; and
• other persons who may be eligible under legislation to bring a claim for provision 

2. Your assets

The provisions of a Will reflecting your wishes only have effect in accordance with those wishes if the assets held at the time of your death and forming part of your estate can be conveyed to the intended beneficiaries. Realty is to most clients an important asset, whose ownership must be considered and advice sought.

Joint assets pass on the death of a joint owner by survivorship and operation of law to the surviving joint owner, regardless of the provisions of the will, and do not form part of your estate. Implications which arise from this include:

2.1. Severing a joint tenancy: Any jointly held real estate must be identified before finalising your will. A Will that purports to leave an interest in a joint asset to a beneficiary will fail, and the named beneficiary will be disappointed. You need to discuss with your lawyer the rights of joint owners and the ability to sever the joint tenancy to create a tenancy in common of a half share which can be conveyed by your will.

2.2. Creating a joint tenancy: This is a correlation of the previous issue, namely, by creating a joint tenancy in relation to assets held as tenants in common with an intended beneficiary may remove the asset from the estate. (Uniquely in NSW (compared to other states) this will not however prevent a notional estate orderbeing made whereby half the property can in certain circumstances become available to satisfy an order for provision in favour of an eligible claimant. It is still useful for the other reasons stated below.)

In either case, the means of conducting a title search against realty are readily available, whereby the determination of whether assets are held solely, or as tenants in common, or joint tenants can easily be ascertained and advice given.

A recent decision of the Tasmanian Full Court drew attention to the above matters which are the subject of necessary and proper instructions when considering a will.

Superannuation is an asset that may or may not be within your control to dispose of by Will.  Advice should be sought as to the potential destination of superannuation benefits, the existence of binding nominations, and taxation advantages of leaving superannuation to dependents who will receive it tax free.

3. Other considerations when making your will

Creating a Joint Tenancy- for ease of estate administration

If your intention is to leave the home in your sole name to your spouse, you may consider creating a joint tenancy in favour of your spouse to minimise the costs of Probate which would be incurred on your death if the asset remained in your sole name and therefore part of your estate.  Whilst there may be duty implications in the creation of a joint tenancy, an exemption from duty applies in the case of the matrimonial home.

Similarly where the testator holds assets as tenants in common with the intended beneficiary named in the will, and whether spouse or not, no duty is attracted by creating a joint tenancy.

The costs of registration of a notice of death are minimal in comparison with the costs of a probate application.

Preparation of a Statement by Testator:

You may consider the preparation of a statement for use in evidence in the event of a claim against your estate, setting out factual matters which may only be within your knowledge, or which may otherwise assist the defence of a claim after your death. 

This could include reference to provision made during your lifetime to the potential claimant, annexing bank or other documents which evidence such provision having been given.  Without the statement, the executors who will be defending the claim may have been unaware of the provision given to the plaintiff during your life, or other facts raised in the statement, which would have been useful evidence in the defence of a claim. 

Statements by a testator setting out the nature of a relationship may also assist the defence of a claim by a person alleging the existence of a de facto relationship.  Whilst such statements have limited weight given the testator cannot be cross-examined, the Court may take the statement into account, when the only other evidence before the Court may be the unchallenged evidence of the claimant seeking to prove a relationship.

Any such statements should be prepared carefully with the assistance of an experienced estate planning lawyer.

For more information, check out TressCox Lawyers here.