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Your will is one of the most important documents you’ll ever work on. Not that it will matter to you – after all, you’ll have departed – but it carries the power to protect and empower your loved ones.
So, what goes into the will?
Your will should set out what assets you have, who is to receive them and in what proportions, how they can take ownership of them, and sometimes, an explanation about why they are receiving a benefit from you.
Assets can include money, term deposits, property, cars or boats, home contents – even pets.
Like anything to do with your finances, you should always know what assets you hold in your name – and you should review this information on a regular basis. One idea is to do this on a specific day at the start of every year. This ensures you’ll be across all your financials, and the information will be current. Much can happen in a year and it’s vital to keep up to date with all your assets.
More than money
For some of us, a will can be straightforward. One beneficiary, or minimal assets can make the process straightforward.
At times, people leave large assets to be split among family members.
It’s critical for you to understand what the tax implications might be so you can make an informed decision without penalising your beneficiaries.
Let’s say you have two properties – a residence and an investment property. While the monetary values may be similar, the tax treatment for those who inherit is not.
Distributing shares and other assets with capital gains may also carry tax implications.
Getting advice
This is where a financial planner can work with your solicitor to best structure your will. They will explain the tax implications for your assets and be able to help structure the distribution for your family to make it as equitable as possible.
Often a testamentary trust is set up. This comes into effect after your death. The major advantage of a trust is having income, capital gains and franked dividends paid to your beneficiaries in a tax-efficient way.
These trusts can also be used if your will is complex and you want to protect your assets from former partners, in-laws, or bankrupt members of the family.
Got a business? You should probably make a contingency plan of what happens to it after your demise.
Special mentions
In addition to large assets, there may be other particular pieces you want to give to certain people. These include pieces of jewellery, artworks, cars, and other valuables.
In my experience, while certain items may be promised to people, unless it’s written down in the will, others could make it difficult for those items to be distributed in the way that was intended. Listing these items makes it clear-cut and the wishes must be carried out.
Online
Aside from your assets, you might also have a social media presence and your will should set out what you would like to happen to that. Who would be responsible for maintaining or shutting it down after your death, monitoring any messages of condolences that come through, or deleting certain content?
Super
Your estate does not necessarily include your superannuation. Typically superannuation has its own nominated beneficiary process which carries specific rules mandated under legislation.*
One option is to specify your estate as a beneficiary to allow your executor to distribute it as part of your assets, although this also carries tax implications.
Your farewell
To help your loved ones, it is good to have your funeral wishes also listed in your will. Include all the things that are important to you – burial or cremation, the kind of funeral you want, perhaps the music you would like to be played.
Help is at hand
Your solicitor draws up your will. They can also help you with a Power of Attorney (if someone needs to act financially or legally on your behalf), a Power of Guardianship (if someone has to make decisions on your health and wellbeing), and medical directives if you need someone to act on your end of life wishes.
You should also nominate an executor whose job it is to ensure your will is carried out according to your instructions.
While you might choose not to tell your beneficiaries what they are bequeathed in your will you should let your executor know you are appointing them and what your wishes are. Being an executor can be an onerous task if assets need to be sold before the distribution can take place. It is common to make an allowance for the executor unless they are already receiving a bequest from your estate.
Tidying up
Save your loved ones some heartache by putting all your important documents somewhere they can be easily found. Include details of bank accounts, share certificates, superannuation details, and other investments.
And importantly, have passwords for any accounts that your executor will need to transact on.
You should also let someone know where everything is – your will, your assets, bank accounts, passwords and other details that your estate will need to know.
*Your nominated superannuation beneficiary can be your spouse or partner, your children, and anyone financially dependent on you, or your estate or legal personal representative.
The Money & Life website is operated by the Financial Advice Association (FAAA). The views expressed in this article are those of the author and not those of the FAAA. The FAAA does not endorse or otherwise assume responsibility for any financial product advice which may be contained in the article. Nor does it endorse or assume responsibility for the information accessible via any links provided in the article. Please consider seeking advice from a qualified professional to ascertain how the information in this article and the links provided may relate to you.
