Where there's a Will, there's a Way: Exploring the Importance of Estate Planning

Last revision: Last revision:21st July 2021

A Last Will and Testament is a legal document that details how a person's assets and property will be distributed after their death.

The person whose assets are distributed in the Will, is called the "Testator". Their overall collection of assets (which may include things such as their house, car, investments, money in the bank, and other personal items) is called their "estate". The person or people who are named in the Will to receive a share of the estate are called the "Beneficiary" or "Beneficiaries". Often, the Testator names their spouse and/or children as Beneficiaries. The person or people who will be responsible for handling the estate are called the "Executor" or "Executors". The Executors are responsible for taking stock of the Testator's assets, paying their debts, and then distributing the estate to the Beneficiaries in the way that the Will dictates.

Creating a Will as a part of an estate plan helps the Testator, to express their wishes regarding their estate. People often create a new Will or update their existing Will for the following reasons:

  • Marriage or divorce (a change in marital status may void an old Will);
  • Significant change in amount of money or property owned;
  • Moving to another jurisdiction;
  • Death of an Executor, Trustee, Guardian, or significant named Beneficiary;
  • Birth or adoption of a new child in the family;
  • Significant change in tax laws; or
  • Desire to add or remove Beneficiaries named in a prior Will.

A Will is an important tool that allows a Testator to make important decisions about how their estate will be handled. In order to make a Will, the Testator generally must be at least 18 years old and must have legal capacity (effectively, they must be able to understand what they are doing, and the consequences of it).

It is important to remember that Wills can also be challenged in court in Australia, especially if they have been prepared in a way that does not adequately address the Testator's circumstances. This can cost a lot of money out of the estate (meaning there is less money left for the Beneficiaries). Unfortunately, problems with most Wills are not discovered until after the Testator has died, so it is too late to rectify the problems. Therefore, it is very important that all Wills are prepared carefully, while considering applicable laws, and if the Testator is unsure about anything they should seek legal advice.

Important considerations in estate planning

Estate planning and writing a Will is complicated. If a Will is not prepared carefully, it is possible that the assets may be distributed in a way that does not match the intentions of the Testator.

Many problems with Wills might only be discovered after the Testator has died, meaning it is too late to rectify the problems. There are a lot of important considerations, some (but not all) of which are set out below.

If the Testator has any concerns about any of these issues, or wants to ensure they have considered all of the relevant matters, then they should strongly consider seeking legal advice.

1. Failure to properly provide for dependants

If the Testator fails to adequately provide for a person for whom the Testator had a moral duty (for example, if the Testator failed to provide for an estranged child), then that person might be able to challenge the Will and claim a portion of the estate. This would result in the intended Beneficiaries (the people the Testator actually wanted to leave their assets to) receiving less than intended.

Therefore, to ensure that the assets end up where the Testator wants them to go, it may be necessary to seek comprehensive estate planning advice from a lawyer.

2. Complicated family situations - such as second marriages and step children

In complicated family situations (for example, involving second marriages, step children, adopted children or estranged children etc) if the Testator is not careful about their estate planning, then there can be unintended consequences for the assets.

For example, what happens if a Testator has children from a first marriage, but then remarries? Will they leave their assets to their second wife, or to their children?

And what happens if their second wife has her own children from a previous relationship. If she receives the assets from the Testator, will she leave them to her own children (as most people do) or is the Testator counting on her leaving something for his own children?

And what if the second wife remarries again after the Testator's death? Will she leave her assets to her new husband? Will she still remember the Testator's children at this point?

In these sorts of circumstances, if the Testator does not think carefully about their estate planning, and put some appropriate structures in place, then it could be very unlikely that any assets actually make their way to the Testator's own children. In fact, in situations like this, simply preparing a Will might not be enough to make sure that the Testator's assets go where the Testator wants them to go. Instead, the Testator may need to develop an overall estate plan, together with some new legal structures, in consultation with their lawyer.

3. Testamentary capacity

It is important that the Testator understands what they are doing, and the consequences of it.

This is a legal requirement, but it is also very important from a practical perspective. Ultimately, a Will is all about giving effect to the Testator's wishes. But in order to make informed choices about what they want to do with their assets, the Testator needs to understand what they are doing.

It is relatively common for a person's mental capacity to deteriorate as they age, so many Testators do reach a point in their lives when they no longer have the mental capacity to really understand what they are doing when they write a Will. At this point, there is a risk that they will write a Will which is inconsistent with what they would actually want to happen (for example, because it leaves out important people, or leaves all of the assets to an animal shelter instead of to their children).

Therefore, if there are any doubts as to the Testator's mental capacity, it is very important that the Testator has legal and/or medical advice, to ensure that the consequences are clearly explained to them, and they demonstrate an ability to understand what is happening.

4. Proving the Testator had testamentary capacity

While it is important that the Testator actually understands what they are doing, it is also important that this can be demonstrated with supporting by evidence, in case anyone later tries to argue that they did not.

For example, if somebody (such as an ex-spouse or estranged child) believes they have not received their fair share of the estate, then they might try to argue that the Testator did not understand what they were doing, at the time that the Will was written. In fact, it is quite common for people to challenge the Will in this way, arguing that the Testator lacked testamentary capacity.

If the Testator suffers from dementia or a similar condition (which can be relatively common among older people) then it is quite possible that questions could be raised about whether or not they actually had the capacity to understand what they were doing. Even if the Testator only suffered a relatively minor case of dementia, this could be enough for questions to be raised about their testamentary capacity.

It can be possible to respond to these sorts of challenges if the Testator had legal and/or medical professionals confirm, at the time that they wrote the Will, that they had the capacity to understand what they were doing.

However, if the Testator has not had these sorts of expert opinions, then it might be easier for someone to challenge the Will. Therefore, if there is any risk that the Testator's mental capacity may be challenged, then it may be wise to obtain legal and/or medical advice.

5. Vulnerable Beneficiaries

In some cases, it might be wise for the Testator to consider how to protect their Beneficiaries from themselves. For example, if a Beneficiary has a drug addiction or gambling addiction, if the Beneficiary has mental health issues, is too young or immature to manage their own money, or if they have other similar spending problems, then the Testator might want to consider putting a structure in place to ensure that the Beneficiary does not blow their inheritance.

There may be ways for the Testator to set up some kind of structure so that the Beneficiary is able to receive the benefit of the assets, but is not able to spend them or sell them. For example, the Testator could create a structure that allows the Beneficiary to receive a monthly allowance from the income of an investment account, but is not able to sell the underlying assets. Or the Testator might be able to provide funds that can only be used for a specific purpose (for example, for education, but not for anything else). However, these structures can be complicated, and if the Testator does not do it right, then there is a risk that it will not provide the protection they require. Therefore, if the Testator has concerns about these sorts of issues, then they should strongly consider seeking legal advice.

6. Questions about duress or undue influence

Wills can also be declared void if the Testator made the Will under duress or as a result of undue influence. For example, if there is evidence that one of the Testator's children has pressured the Testator to rewrite their Will, in order to leave everything to this one child, and not to any of the Testator's other children, then the other children may be able to challenge the Will and have it declared void.

Lawyers generally know how to look for signs of duress or undue influence when they prepare Wills. However, if the Testator is preparing this Will themselves, or if one of the Beneficiaries is helping them to prepare it (for example, if one of their children is helping them to prepare it), then it is possible that questions could later be raised about whether there was any duress or undue influence. The Testator should avoid preparing the Will if they are uncomfortable with the pressure that someone is exerting on them. And even if the Testator is comfortable preparing this Will then they may need to be careful to avoid doing anything that raises concerns about duress and undue influence. If in doubt, they should seek legal advice.

7. Who to appoint as Executor

An Executor is the person responsible for collecting the assets of the estate, paying any debts of the estate, paying state and federal taxes, and then distributing the assets of the estate in accordance with the directions of the Will. Administering the estate can be complex, time-consuming and stressful, so it is important that the Testator chooses their Executor(s) carefully.

Many people choose several Executors who will act "jointly and severally". This means that they work together on handling the estate, and either one of them can exercise the powers of the Executor alone. For example, if the Executor needs to go to the bank to sign some documents, any one of the Executors who have the power to act "jointly and severally" can do this on their own, without any of the other Executors. This provides a bit of flexibility and can be convenient when Executors all trust each other and work well together. However this also means that it is possible for one Executor to do things that the other Executors don't know about or don't agree with, so it can cause problems if Executors do not trust each other or do not work well together. (Of course, if the Testator has concerns about somebody's trustworthiness or ability to cooperate, then the Testator should think carefully about whether this person is appropriate to take on the role of Executor at all.)

On the other hand, if several people are acting "jointly" as Executors, then the powers of the Executor can only be used when all of them agree. For example, in the case of going to the bank to sign some documents, all of the Executors would need to go to the bank and sign the relevant documents (rather than just one of them doing it). This can be complicated in some cases, for example if the Executors live in different states. However, it can also prevent one Executor from doing things that the other Executor(s) do not know about or do not agree with.

If one person is acting solely as the Executor, with another person as a backup, then if the first person is willing and able to act as Executor, then they will become the only Executor and will have all of the powers of the Executor. The backup Executor will not have any of the powers of the Executor. This means the first Executor could go to the bank and sign the relevant documents on their own. The backup Executor would have no say in what happens because they have not actually become an Executor. However, if the first Executor was unwilling or unable to act as Executor, (for example, if they died before the Testator, or were in prison at the time of the Testator's death), then they would not become the Executor at all, and the backup Executor would become the only Executor of the estate. That person named as the backup would then have all of the powers of the Executor (including signing the relevant documents at the bank) and the first named person would not have any of these powers.

Either way, Executors should be people that the Testator trusts, who will be able to handle financial matters prudently. Executors do not need to have any legal expertise, although it can be helpful if they do.

Many people select their spouse or adult children to be their Executor(s). Many people, if they have a trusted lawyer, also consider appointing the lawyer as an Executor (often acting "jointly" with the other Executors), so that they can help guide the other Executor(s) (the lawyer would usually be paid for this, out of the assets of the estate).

Also, people often choose an individual who will be receiving a substantial amount of property to be their Executor. In this way, the Executor will want to ensure that the property is distributed properly.

It is possible for tensions to arise if people disagree with the way that the Executor(s) handle an estate. Therefore, the Testator really needs to think carefully about the people they are naming as Executor(s), and how they are likely to handle the task. This is an important and very personal decision, as every Testator's circumstances are different. Therefore, what suits one Testator may not suit another.

If in doubt, seek legal advice about appropriate Executors.

Things to Include in a Will

Use a Will to explain how the Testator's estate should be distributed among the people they name. There are several major decisions that the Testator must make to accomplish this task.

1. Describe the Testator's Family

The Testator should note whether they are married and, if so, the name of their spouse, as well as whether they have any children. For the purposes of a Will, children include both those that were born to the Testator as well as those that have been legally adopted by the Testator. This Will also includes a provision so that the Testator's future children, if any, may be covered by the terms of this Will. All children can be included in the family description, even if the Testator does not plan to leave them anything in the Will.

2. Appoint an Executor

The Testator must appoint one or more Executors in their Will. The Executor fills the important role of carrying out the Testator's wishes concerning the legal and financial matters of the estate. The Executor is in charge of making sure that the people the Testator has named as Beneficiaries get the portion of the estate described by the Testator. The person who is the Executor may be named as a Beneficiary in the Will. People often choose someone that they are close to and that they trust, such as a spouse or their adult children, to fill this role.

As discussed in the "Who to appoint as Executor" section above, it is possible to appoint several Executors. Multiple Executors may be appointed to act "jointly and severally", "jointly" or one could be appointed as the sole Executor, with one or more others as a backup.

3. Name Beneficiaries

The Beneficiaries are the people who will inherit the contents of the Testator's estate, all of their belongings and property, after the Testator's death. The Testator may make specific gifts in their Will, naming specific people to inherit specific possessions, property, or cash assets. For example, a mother might make a specific gift leaving her engagement ring to her eldest daughter or a father might make a specific gift leaving his motorcycle to one child, and his watch to his other child.

Things can become complicated if the Testator gets too carried away with specific gifts. For example, what happens if the Testator leaves his motorcycle to one child and his watch to the other child, but then loses the watch before his death? Therefore, in many cases Testators choose to just leave their estate to their children in equal shares, trusting that their children will be able to work it out between themselves. This can allow for more flexibility and adaptation as circumstances change.

In addition to specific gifts (if any), the Testator will also name who will inherit the residue, or remainder, of their estate. The residue includes anything that they have not given away in a specific gift. The Testator will name Beneficiaries as well as alternate Beneficiaries in case the people they have initially named die before them and are therefore unable to inherit. The Testator can name multiple people to inherit the residue of their estate and may specify what percentage or fraction of the estate each Beneficiary will get.

4. Other Provisions

In addition to these three main functions of a Will, the Testator also has the option of naming a Guardian for their children who are under 18 years old in case the children's other parent is unable to care for them, setting up a trust account for their children so that their inheritance is managed by an adult known as a Trustee until the children reach a certain age, designating people who will care for their pets, forgiving any debts that may be owed to them, and describing their funeral wishes.

Once the Testator has completed their Will, they should take some time to carefully review it to make sure that it accurately reflects their wishes. A Will is a very personal document and it is up to the Testator to decide what they want to do with their estate. It is not possible for our document to cover all possibilities, so the Testator may have other options that we have not addressed in our document.

If the Testator thinks the Will does not accurately reflect their wishes, or if they are confused about what it says, then they should seek legal advice before signing it.

Relevant law

Each state and territory of Australia has legislation setting out the rules for creating Wills. In addition, there is a large body of common law regarding interpretation of Wills and challenges to Wills.

In Conclusion

Preparing a Will is a very personal matter and it involves some complicated legal issues. Testators' circumstances can vary a lot, and it is not possible for our document to cover all possibilities. Testators also need to keep in mind that if there are problems with a Will, in most cases, the problems will not be discovered until after the Testator has died, meaning it is too late to do anything to fix the problems. Therefore, if the Testator has any concerns, and especially if they think that their circumstances might be a bit complicated, then they should seek legal advice.

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