Why should people consider getting their Estate Planning documents (like Wills and Powers) in order?
People work very hard to pay off their home and accumulate assets during their lifetime and want to see their hard work benefit their loved ones. Making sure that your estate planning is in order is critical to ensure that your assets pass to your intended beneficiaries with as little cost and as few complications and delays as possible.
Certain organisations can do Wills for ‘free’. Why would I consider paying a lawyer?
As the saying goes: ‘there is no such thing as a free lunch’. Similarly, there is no such thing as a free Will.
Commonly, there is no up-front cost for preparing a Will with these types of ‘trustee’ organisations if they are appointed as your executor. On your death, the organisation will normally charge a commission based on the value of your estate.
On the current fee structure of some organisations, the cost of a ‘free’ Will and administering a small estate worth $400,000 (e.g. a modest house and other minor assets) would be $15,400 (not taking into account additional management and income fees that are charged on top of that). The cost for a lawyer to prepare a Will and administer such an estate is more likely to be less than $3,000.
What happens to my assets if I die without a Will?
If you do not leave a Will, you are said to have died ‘intestate’. In that situation, the law decides what happens to your estate. Different rules apply in different states.
For example, in South Australia, if the deceased had a spouse and children, then the spouse will generally receive the first $100,000 of the estate and 50% of the rest. The children will receive the other 50%. If the children are under 18, then their share must be held by the Public Trustee (with the associated costs and lack of control associated with that).
While this may not seem to be too bad a result to some, the lack of control of the children’s funds can cause serious practical and financial difficulties for the family, with the spouse potentially having to go ‘cap in hand’ to the Public Trustee if they need funds for the children’s care, education or maintenance, with no guarantee that they will be provided.
What are the risks of having a DIY Will? What is the worst outcome you have seen from a DIY Will?
It always surprises me that people will pay a real estate agent thousands of dollars to help sell their house to a complete stranger, but are reluctant to pay a lawyer a fraction of that amount to help transfer all of their assets to their loved ones.
Despite what some people may believe, estate planning is a highly complex area of law. In my view, the person preparing a Will must have a detailed knowledge of estate and succession law, superannuation, trusts and taxation to ensure that all of the assets that a person owns, or controls, are dealt with appropriately and in the most cost and tax effective manner.
Also, many people (including some lawyers) do not realise that a Will cannot deal directly with superannuation or assets held in trusts. Other documents and steps are required there. As a result, proper specialist advice is required to ensure that those assets also pass to your intended beneficiaries.
Even a small error in a DIY Will can cost tens or hundreds of thousands of dollars, and many months, to correct. The most dramatic example I have seen is where a person with a relatively simple estate (a house, some savings and some shares worth about $800,000) prepared his own Will. Unfortunately, it was not entirely clear which assets he left to which beneficiaries. The total costs (including stamp duty and capital gains tax) to correct the error were almost $350,000. A Will prepared by a lawyer would have cost him around $500.
What documents do you recommend in case a person becomes unable to manage his or her own affairs?
As part of the estate planning process, I always recommend that clients prepare an Enduring Power of Attorney and an Advance Care Directive.
An Enduring Power of Attorney appoints people to make decisions about your legal and financial affairs (including signing documents and dealing with assets) on your behalf.
An Advance Care Directive appoints people to make decisions about your personal and medical affairs (e.g. consenting or refusing consent to medical treatment, deciding where you are to live, who cared for you etc.) if you are incapable of making those decisions for yourself.
By AMALIA SUBOTKIEWICZ, MT LAWYERS | ADELAIDE
Amalia is an Associate at MT Lawyers and specialises primarily in estate planning and estate administration. She is knowledgeable, friendly and has an excellent way of making clients feel comfortable in what can sometimes be a difficult and emotional area of law. Amalia can be contacted on (08) 8232 5604 or by email email@example.com