WILLS. A Will is a legal document naming the people - called beneficiaries - you want to receive your property and possessions, after you die.

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1 WILLS Level 7, No. 1 Chandos Street PO Box No. 143 St Leonards NSW Australia 2065 Telephone (02) Facsimile (02) lawyer@bullson.com.au Website: DX 3304 St Leonards

2 1 WILLS What is a Will? A Will is a legal document naming the people - called beneficiaries - you want to receive your property and possessions, after you die. Your property and possessions include everything you own: your home; land; car; money in bank accounts; insurance policies; shares; jewellery; pictures; furniture and so on. Making a will is the only way to ensure your assets will be distributed in the way you want after you die. What is a valid Will? A valid Will is one accepted by a court and put into effect by a Grant of Probate. To be valid your Will must be: in writing - handwritten, typed or printed; signed - ideally your signature should be at the end of the Will and on each separate page of the Will; witnessed - two witnesses must be present when you sign your Will or acknowledge it, and they must sign in your presence. Witnesses must not be beneficiaries of your Will, (or their spouses). If your Will is not made in this manner, it may not be enforceable. The court has a discretion to grant or not grant Probate and your property could be disposed of as if you had not made a Will. In exercising its discretion, the court needs to be satisfied that the document sets out how you want your assets to be distributed. ( Probate is explained later in this document.) How can you make sure your wishes are carried out? You should appoint in your Will a person called an Executor to handle your affairs after you die. If you wish, you can name more than one person to act as Executor. You can choose anyone to be your Executor - your spouse, relative, a friend, your solicitor - but you should first ask them if they are prepared to take on the task and confirm with them that they have been appointed. It is sensible if at least one of your Executors lives in New South Wales and knows you well. You should also think about the age of your Executors - are they likely to be alive when required? The Executor has to obtain Probate of the Will and pay any taxes, debts or expenses before distributing the balance to the beneficiaries named in the Will. (Other duties of Executors are set out later in this document.) An Executor who is not a beneficiary may apply to the court for payment for their work as Executor.

3 2 What happens if you don't make a Will? The legal procedures are more complicated and time consuming and may cause expense, worry or even hardship to your family. The law provides a formula which sets out who is entitled to the property of a deceased person who does not leave a Will. The formula may not distribute your assets in the way you would have wanted. It is not true that the Government takes a deceased person's property if there is no Will. This can happen only in exceptional cases where there are no close relatives or persons in a family relationship surviving the deceased. Can you alter your Will? Yes. You are free to alter your Will at any time. If your circumstances change in any significant way, you can and should alter your Will. You cannot, however, make an alteration by crossing something out on the original Will and writing in your new wishes. If the alterations are minor, you can make a Codicil (this is a separate document in which you change a provision in your Will) but it is usually better to make an entirely new Will. What if you marry or divorce? If you made a Will before you married, it will automatically be revoked when you marry, unless it was made with a particular marriage in mind, or expressly stated that it was made in contemplation of marriage. So if you marry, it is probable you will need to make a new Will. Any gift or appointment (eg. as an Executor or Guardian) in favour of a former spouse in your Will is automatically revoked when you are divorced. It is in your best interests to make a new Will if you divorce. Can you leave your assets to anyone you please? Yes, but you should make proper provision for your spouse and children, including ex-nuptial children. If you do not, they could apply to the court for proper provision. Some broad options for your Will. Wills can take many different forms; they can be simple or complex. Wills can contain many types of clauses. Some are set out below - Specific gifts - you can give specific things to specific people. This type of gift is often used for family heirlooms or items of sentimental value. It is important to identify the item clearly. For example: My baguette diamond engagement ring to my daughter Rachael. Gifts to be divided among a number of beneficiaries - you can leave all or part of your estate to be divided between a group of possible beneficiaries. For example:

4 3 I leave all of my estate to be divided equally between those of my children who survive me and attain 21 years of age. Residue - most Wills should include a residue clause. For example: I give the rest and residue of my estate to the Royal Society for the Prevention of Cruelty to Animals ; or I give the rest and residue of my estate to be divided equally between those of my brothers and sisters who survive me and attain 21 years of age. Residue clauses are particularly important in Wills where specific gifts have been made. If you make a specific gift to a person who does not survive you, that specific gift will lapse. A residue clause is a catch all clause which covers any asset which has been left out by the terms of your Will or which has lapsed. Gifts of Money - you can put clauses in your Will such as: I give $10, to Frank Smith. This is a type of specific gift. This type of gift requires careful thought, as the value of the gift may vary depending on when you die and what other assets you own. For example, $10, from someone who made a Will in 1950 and died in 1951 is worth a lot more than $10, from someone who made a Will in 1950 and died in Often, giving a percentage of your estate to the beneficiary will achieve a better result, as it remains in proportion to your assets. For example, if you have $100, worth of assets and give Frank Smith ten percent of your estate, then he will receive around $10, If your total assets dramatically change after you have made your Will but before you die (eg if you lose money or if you inherit money from another person) then the amount of your gift to Frank Smith will change accordingly. Husband and Wife Wills - this expression describes a common form of Will which is often used by married or de facto couples. An example of a husband s Will could be simplified and paraphrased as follows - If my wife, Robyn, survives me she is the sole Executor and sole beneficiary. If my wife does not survive me, then Mr X and Mrs Y are my Executors and I give my whole estate to be divided equally between those of my children who survive me and attain 21 years of age. Many variations on this basic theme exist. Life estates - a life estate can be created whereby rights can be given to a person to receive benefits or income for a period of time. For example, a right to Mr Jones to live in the property at 1 Smith Street, Smithville for as long as he wishes. Detailed provisions need to be included to cover a range of possibilities which may arise, including payment of insurance, maintenance and repairs etc. Life estates need careful thought and should not be used without considering the alternatives. Testamentary Trusts - a Will can be used to set up a trust. The terms of the trust are contained in the Will and the trust is established when the Will comes into force (on death).

5 4 A testamentary trust is potentially useful in various situations, including - Where there is an intellectually handicapped beneficiary who is incapable of managing their own affairs. Where a beneficiary is bankrupt or the gift to the beneficiary is to be protected from the beneficiary s creditors. Where tax benefits are sought. A testamentary trust can provide significant income tax benefits and capital gains tax benefits in certain circumstances. For example, a testamentary trust can be used to provide grandchildren under 18 years of age with a tax free, tax effective income. Minors are generally subject to heavy penalty taxes on all unearned income. However, children who are beneficiaries of a trust established in a Will are taxed as adults and therefore can (currently) claim the benefit of the tax free threshold. Trusts, however, can be complex and somewhat expensive to administer. It is difficult to make generalisations about when a testamentary trust will prove beneficial. A testamentary trust must be carefully designed for your financial circumstances. For some people, a testamentary trust will provide significant tax savings or asset protection for beneficiaries; for others, a testamentary trust will only cause unnecessary expense or uncertainty. What type of Will is suitable for you? It is not possible to answer that question in this document. This decision requires careful thought and discussion. Your choice of Will will depend on - your assets and liabilities; the circumstances of the beneficiaries you wish to nominate; and what you want to achieve. Some do s, don ts and tips These are some general comments on common traps to avoid and sensible steps to take when thinking about preparing your Will. They are generalisations, so of course there can be exceptions. Don t specify gifts without considerable thought. There are significant risks in a Will which contains clauses like I give my house at 1 Smith Street, Smithfield to my son Matthew Smith. I give my BHP shares to my son Michael Smith. If you do not own the specified asset at the date of death (for example if you ve sold the BHP shares or if you have sold the house at 1 Smith Street) then the gift will fail and the beneficiary may get nothing. Two Executors? In many Wills, it is sensible to appoint joint Executors. This avoids many of the risks associated with having a single Executor. You should give careful thought to the appointment of Executors.

6 5 What about using the services of trustee companies? Trustee companies can assist you to make your Will and may not charge a fee for the service - but will expect to be appointed as Executor and will charge a fixed percentage commission of your estate. In most cases, the commission chargeable by a trustee company on capital and income of your estate amounts to many thousands of dollars. Tell us if you intend to leave a relevant beneficiary out of your Will. In New South Wales, legislation called the Succession Act gives certain categories of beneficiaries the right to claim against the Estate if proper provision has not been made for them in your Will. For example - a Will which unfairly fails to leave a gift to one of your children, will be open to challenge. A court can decide to alter the Will to make provision for that beneficiary who was wholly or substantially left out. Talk to your beneficiaries (if this can realistically be done) to find out about their circumstances and their wishes. For example, you may have two middle aged children, one of whom has a family discretionary trust in place. A gift in the Will to the Trustee of the John Smith Family Trust may result in significant tax savings compared to a gift to John Smith direct. Alternatively, one child may have a mortgage, in which case a direct payment may bring about considerable savings in interest costs. Consider capital gains tax and how it could affect any inheritance. Capital gains tax is the tax with the major effect on deceased estates. It is often referred to as a de facto death duty. Capital gains tax may affect the value of gifts given to beneficiaries. Remember to keep records of assets which may be subject to capital gains tax. These records include the date and cost of acquisition of the asset. These records could save beneficiaries large amounts of capital gains tax or assist in proving that no tax is payable. Pension entitlements a gift under your Will to someone who is in receipt of a pension (or who may become entitled to a pension) may have the effect of increasing their income or their assets, and so reducing their entitlements, or disentitling them altogether. Think about what you own and what will pass under your Will. It sounds simple, but there are a few traps. - For example, property owned as joint tenants does not pass under your Will. On your death, your interest in this property will be transferred direct to the surviving joint tenant and not in accordance with your Will. - Property held as tenants in common is however subject to the terms of your Will. Your interest as tenant in common will pass in accordance with the terms of your Will. - Joint bank accounts will also pass direct to the surviving joint owner and not in accordance with your Will. - Distinguish assets you own from assets which may be owned by a family discretionary trust which you control. Assets owned by the trust do not pass under your Will. - Other items that may not pass under your will include superannuation, the proceeds of life insurance policies and some capital guarantee deposits.

7 6 Storage of your Will We will arrange to store your original Will in our office for safekeeping. There is no charge for this. We provide a copy of your Will in a Will envelope, showing the location of the original Will and setting out what you should do if you want to change your Will. You should keep the Will envelope with your other personal papers so that it can be easily located in the event of your death. Other things to think about This document sets out a very superficial overview of matters that you should think about when preparing your Will. There are a number of other issues, including - What powers your Executors should have, including powers to distribute funds to children for their education, investment powers etc. Should children obtain their gift when they turn 18, 21, 25 or some other age? Should you appoint a guardian to look after your children? Your Will may set out your wishes regarding burial or cremation.

8 7 Terminology Below is a list of commonly used terms you may need to understand. Administrator - see Intestate/Intestacy. Beneficiary - a person or persons you choose to benefit from the distribution of your Estate on your death. Bequest - a gift left to an individual, family or charity of your choice in your Will. Capital Gains Tax - a tax liability arising in some cases from the sale of your assets by your Executor or named Beneficiary. Codicil - a document (similar to a Will) providing for an addition or alteration to your existing Will. Estate - the total net worth of your assets at your death, including real estate, personal possessions and money. Executor - a person or persons chosen by you to ensure the instructions made by you in your Will are properly carried out after your death. Inheritance - when your assets are transferred after your death to the Beneficiaries named in your Will. Intestate/Intestacy - arises when someone dies without making a Will. In such cases an Administrator is appointed to distribute your assets. Legacy - a gift of money or assets left in a Will. Personal Possessions - such items as furniture, china, household goods and jewellery. Probate - the legal procedure whereby the Executor named in your Will is appointed by the Supreme Court as your legal representative on your death. If no Will can be located, an Administrator is appointed by the Court. Residue - your assets remaining after all expenses and legacy instructions in your Will have been carried out. Revoke - to withdraw/annul any previous Will(s). This must be made in writing, and all relevant people, (eg Solicitor, Executor, Trustee and Beneficiaries) should be informed of changes to your Will as they occur. Testator - the person who has made the Will. Trust - a legal arrangement entered into prior to your death whereby assets can be administered after your death, as directed by you. Trustee Company - if you choose, you can appoint a Trustee Company as the Executor of your Will. The Company will attend to the distribution of your assets.

9 8 Will - the process whereby you set out instructions as to how your Estate is to be divided after death. Witness - a person who is not named as a Beneficiary in the Will (nor related to any Beneficiaries) who must witness you signing your Will. Two witnesses are required, both over 18 years of age. Witnesses should print their names, addresses and occupation using the same black pen as yourself in the space provided. You do not have to reveal the contents of your Will to witnesses, but you must observe each other signing. DISCLAIMER This publication is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this publication without first obtaining advice from a qualified professional person. Please ring us if you would like expert help or advice. Liability limited by a scheme approved under Professional Standards Legislation. Copyright in this document and the concepts it represents is strictly reserved by Bull Son & Schmidt October Document last modified, October 2012.

10 9 OUR HISTORY Our firm was established in 1878 by Sidney John Bull and has been providing over 125 years of quality service. Our current team is dedicated to continuing and further improving that high level of service utilising state of the art technology. We pride ourselves on being "lawyers you can understand". OUR LAWYERS We have solicitors with various fields of expertise, including general business advice, commercial property, contract work, debt recovery, litigation, conveyancing, wills, estates and IT law. Amongst our team of solicitors we have a specialist accredited in business law and a Public Notary. OUR CLIENTS Our team of solicitors have experience acting for a broad range of businesses and organisations, including private and public companies, councils, hospitals, insurers, accountants, liquidators, co-operatives, IT companies, industry associations, financial institutions, building and construction companies, engineers and property developers. Our individual clients have diverse backgrounds, including builders, barristers, bishops, bus drivers, bank managers, shop owners, judges, adventurers, politicians, photographers, doctors, dentists, directors, mechanics, media personalities and "mums and dads". OUR SERVICES Our services include: Business Law Buying Property Selling Property Buying, Selling and Leasing commercial property Employment Law IT Law Litigation Public Notary Wills and Estates No matter what type of legal problem you have, we will be able to help.

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