Common mistakes to avoid in estate planning and will making

When people take the step to make their will and/or estate plan, they don’t always get it right. In this article, I explore some of the more common errors that can lead to unintended or even catastrophic outcomes, such as wealth ending up in the wrong hands, costly estate disputes, or irreparable damage to relationships.

In this article I highlight some of the more common mistakes we see. With careful planning and good advice, these mistakes can be avoided.

1. Not Planning at All

The most obvious mistake is failing to properly document your wishes. There remains a significant number of Australians who don’t even have a Will. This may be because they believe that they are too young to require estate planning, or that they do not have enough assets, or that they do not have dependents.

The reality is that nearly everyone has either estate or non-estate assets. These may include real estate, cars, bank accounts, shares, personal belongings, superannuation, life insurance, social media account or digital assets; and everyone should consider who would make important decisions about their finances, personal care, and medical care if they were injured or became unwell.

2. DIY Wills

Some of the most avoidable mistakes can be found where ‘do-it-yourself’ wills are concerned. These can be a bit of a trap because even a straightforward estate can be misrepresented in DIY wills, resulting in errors, inequities or uncertainties for loved ones.

Too often we see DIY wills which are unclear or contradictory. This can often result in costly legal fees to administer the estate and sometimes result in having to go to Court to rectify the will or to ask the Court to interpret the Will. The Court’s interpretation may be different to that which the willmaker intended.

What makes a will more likely to be able to be effective is the legal advice that goes with it. Seeking appropriate legal advice will minimise any chances of the intended beneficiaries missing out on their inheritance and avoid lengthy and costly legal proceedings.

3. Non Estate Assets

Estate assets are assets that a person is legally entitled to deal with in their Will. This will include most assets owned in the person’s sole name at the date of their death.

Non-estate assets are unable to be dealt with by a person’s Will alone. These assets include jointly owned property (such as a home owned in joint tenancy) superannuation funds, life insurance or trusts.

Jointly owned property is a non-estate asset and cannot be given away in your Will. When you own property jointly with one or more other persons, the other joint owners will automatically inherit the property.

Superannuation funds, life insurance policies and trust assets also require further consideration. Additional estate planning documents (such as a binding death benefit nomination) may be required to ensure the gift is received by the intended beneficiaries.

Why you need to check your superannuation death benefit nominations

4. Appointing the Wrong Executor/s

The role of an executor generally is to administer the estate by finalising your affairs, calling in your assets and paying your liabilities whilst acting at all times in the best interests of beneficiaries. If you have two or more executors who are unable to reach agreement, then the administration of the estate can be delayed and costs may be incurred.

Often people will select one or more executors in an attempt to be ‘fair’. For example, it is common for a willmaker to appoint two or more children without considering their capacity to get along. Also common is the appointment of a second spouse without considering their relationship with children from the deceased’s prior marriage.

If the executors cannot make decisions together or simply do not agree this may hinder the administration of the estate and place even more strain on relationships.

Consider the suitability of the executor for the role, and the nature of the relationship between multiple proposed executors. If there is a high risk of a dispute or if family relationships are fragile, then you may wish to consider appointing a lawyer, a licensed trustee company or an independent third party to be the executor.

5. Failure to Provide

Sometimes a willmaker wishes to leave someone out of their Will, such as a child, spouse, or other family member. It is essential that the willmaker has the benefit of expert advice in making this decision and in preparing the Will and estate plan to go along with it, as this sort of decision can leave the estate exposed to risk of litigation pursuant to Family Provision legislation.

This legislation is different in each State and Territory, but the key component is whether the willmaker has made ‘adequate provision’ for specific people to whom they had a moral obligation to provide. We have explored this more deeply in our article, Who can make a family provision claim? – ACT & NSW. Failure to provide adequately is fertile ground for estate disputes, so appropriate legal advice is necessary to ensure that people’s wishes are upheld and the intended beneficiaries receive their inheritance without undue risk of a costly estate litigation.

6. Failure of Gifts

There are various reasons a gift in a Will may fail. These include gifts where:

the intended recipient dies before you.
the description of the item to be gifted is unclear.
the intended recipient of the gift is unclear.
the gift is no longer owned by you at the time of death.

For example if you wish to leave $10,000 to ‘your son’ but you have more than one son, this is unclear and so this may prevent the intended son from being the beneficiary of these funds.

Problems can arise where a specific asset is gifted such as ‘my property at 1 Smith Street, Smithtown’, but then the willmaker moves to a new home without updating their Will.

A specialist estate planning lawyer will help you create a Will and any other necessary estate planning documents that are flexible enough to overcome life’s everyday events whilst delivering your overall strategy.

7. Making Assumptions about Who will Die First

When there is a significant age gap, people often assume that the older person in a relationship will die first and plan their estate with that assumption in mind. Parents also often assume that they will die before their children and their children before their grandchild. Sadly, this is not always the case.

It is important to consider and provide for different scenarios as the last thing people want to think about when a loved one has died is updating their will.

8. Forgetting Liabilities

When assets are allocated to specific beneficiaries, there can be debts associated with those assets. When there are no instructions on how the liability will be paid , the recipient of the asset will also inherit the liability attached to that asset which can sometimes result in an unfair division of assets. Your intentions as to any liabilities attached to an asset should be carefully considered and documented if necessary.

9. Failing to Consider Testamentary Trusts as a Strategy

A testamentary trust is a great tool that many will makers overlook. The perception is that it must be complicated, or that it is only for the wealthy, or that they are only appropriate where the beneficiary can’t look after their own money. This is not necessarily true.

A testamentary trust can be a very effective tool to protect a beneficiary’s inheritance from a range of potential risks such as being divided between separated spouses by the Family Court, and bankruptcy. A testamentary trust can also provide beneficiaries with helpful tax planning opportunities such as tax benefits and flexibility in income distribution.

Get it Right

Despite people’s best intentions, wills are frequently unable to be upheld or subject to disputes for many reasons. Mistakes such as these can be very costly, can create unintended outcomes or negative impacts for beneficiaries and can have long-lasting impacts on family relationships. With advice from an expert estate planning lawyer, the risk of conflict and potential disputes can be minimised and the matter kept out of court.

The DDCS wills and estate planning team are highly experienced and specialise in helping people minimise risk relating to wills and estates. To discuss your circumstances, phone our team on (02) 62127600 or fill in the contact us form and our team will be in touch.