Many people avoid undertaking estate planning (approximately 50% of adult Australian do not have a will). Estate planning is an important process we should go through in life, that’s why it is important we do it right. Most wills & estate planning mistakes can be easy to avoid and although they may seem obvious to us, they are not to most people. Avoiding these mistakes when creating your wills will not only prevent the added stress to your loved ones once you have passed on but also save your estate the extra costs.
Not knowing your assets and not understanding the impact of debts
When making your will, it is important to know what assets form part of your estate as you can only dispose of assets that you own solely or have an interest in.
With property in particular, you may only dispose of property through your will if you have a suitable interest in that property. A suitable interest in a property is one where you own property solely in your name or if you have a tenancy in common interest.
Holding a tenancy in common interest in a property means you own a specific interest in that property, whether that be 10% or 50%, and it does not automatically pass on to the other individuals on the certificate of title. The interest you own in that property will become part of your estate and you can dispose of it to whomever you wish through your will.
However, property where you are a joint tenant cannot be disposed of through your will unless you become the sole surviving joint tenant before your death. Joint tenancy interests mean that upon the death of one of the joint tenants, their share in the property automatically passes on to the remaining joint tenant/s. Often people don’t realise this and try to pass the property onto someone else through their will, so it is important to know what type of interest you have.
It is also important to know if you have any debts and the impact they have on your estate. People with debt that make large cash gifts through their will don’t realise that specific debts have to be paid first. Upon your death, your debts don’t magically disappear. Instead, if you owe money to the bank or to the ATO, the assets you have in your estate will first be used to pay off any debt and then what is leftover gets disposed of through your will. Not being aware of this may mean that your beneficiaries may get less than was intended for them.
Not appointing an executor or appointing the incorrect executor
The role of an executor is to administer your estate upon your death. They will have to collect assets, pay debts and distribute any remaining assets to the beneficiaries in your will. It is a very important role that has to be filled and considered in your estate planning process.
If you create a will but fail to appoint an executor or your chosen executor does not want to act, is unable to or has died, then the beneficiary with the largest interest in your estate can apply to the Supreme Court to be appointed as the administrator. On the other hand, if you appoint an executor who is untrustworthy or unsuitable then this can cause issues by prolonging the administration process. You want to appoint someone who you can trust and have the confidence they will act accordingly.
Another thing to avoid is appointing an executor that lives outside of Western Australia (“WA”). If your executor does not live in the state, then the Supreme Court will not allow them to apply for a Grant of Probate without a WA address. In this case, your executor will have to appoint an attorney who resides in WA to act on their behalf. Therefore it is best practice to avoid appointing an executor who resides outside of WA as it can become costly for the estate.
Not including a residue clause in your Will
Often we see wills where there have been specific gifts made out to certain individuals but have failed to include a residue clause. This is known in your will as “the residue of my estate”, which captures everything in your estate that’s left over after any debts are paid, including costs associated to managing an estate, and any specific gifts.
If you fail to include a residue clause in your will and you have not specifically gifted all of your assets, then the residue of your estate will likely be divided in accordance with the Administration Act 1903 which is legislation that deals with estates that do not have a valid will. This can not only become lengthy and costly for the estate, but it also means that your estate may not be distributed the way you had wished.
Not reviewing your Will
Another common mistake is people not reviewing their wills as their personal or financial circumstances change. There is no exact time frame for when you should review your will however as a general rule of thumb, we recommend to assess it every three to five years or if there has been important changes in your life.
Some examples of what may require you to change your will is as follows:
- New child or grandchildren;
- Death of executor or beneficiary; and
- Changes in your assets.
A marriage or divorce automatically revokes your will unless it has been noted in your will. Many of our clients that are due to get married or currently going through a separation, aren’t often aware that unless there is a clause known as “contemplation of marriage/divorce” in their will, then that will is automatically revoked once that comes into effect.
Another example is people creating their wills at the start of their relationship and not considering for any futurel children or grandchildren they may have. That is why as life changes, it is important to update your will.
Incorrectly changing or damaging your Will
If you want to make changes to your will, it is important to not mark the changes on the original but instead create a whole new will. It can be tempting to just hand write some notes on your will as it is quicker and sounds more cost effective but in the long run it is not. The reason being is that writing on your will can void it completely and it is difficult to assess the validity of handwritten notes, did you write them or someone else? Another mistake to avoid is attaching anything to your will such as paperclips or staples as this will leave a mark on the document which may suggest to the Probate Registry that there is an amendment to the will and this will create complications.
Not using professionals and making an invalid Will
The most common mistake we see are in homemade or post office wills. Not using professionals to assist you in your will making can increase the potential for future problems once you have died. Mistakes can range anywhere from incorrectly signing your will, not dating your will, using an invalid witness, or even cutting people out from your will and not realising that this can be contested. These are just some examples and although it may be cheaper to do your own will, it can cause your estate to incur extra costs which means smaller inheritance for your beneficiaries.
This article is not an exhaustive list of all mistakes that can occur with wills & estate planning. Get in touch with us today on 9375 3411 to meet with one of our estate planning lawyers to review your current will or assist you in creating a new valid will.
About the Author: Ida obtained her Bachelor of Laws at Murdoch University in 2020, after graduating with a Bachelor of Criminology. Ida was admitted as a lawyer in 2022 and has worked in the Wills and Estates area since starting her career.