Parents – THIS is why you need a Will…
I think it’s safe to say that the majority of us know what a Will is and that we should all have one and yet 58% of Australian’s don’t. It’s not surprising, though. Death isn’t something anyone likes to talk about and, there’s a lot to think about too, – who should benefit, who should look after the kids, who you should appoint as executor, and so on.
As a parent, I understand the need and the desire to protect my children daily. I am sure that most parents do, but in my experience, there is such a reluctance on the part of parents to get their affairs in order. I was only talking to friends of mine the other day, and we touched on this very subject. Even though they have three children over the age of 8 years, with no immediate family in Australia, they still haven’t got around to making their Wills, and I know that they’re not alone! Clearly – not a priority, but it certainly should be.
So, what is a Will, why should you have one, and how do you choose a Guardian for your children.
What is a Will?
A Will is a document which expresses your wishes of what will happen to your estate, i.e. your property, money, possessions etc. when you die. Amongst other things, you can choose who you want to inherit your estate. You can appoint someone you trust to manage and distribute your estate. You can pass on items of sentimental value to those who will appreciate them the most, and you can choose who you want to look after your kids when you’re gone.
However, not all assets pass through your Will. For example, if you own your home as joint tenants, regardless of what your Will says, your share will automatically pass to the survivor. Neither do assets held in trust, for example, superannuation or life policies. So seek advice with regards to those assets, as part of your estate plan.
What happens if you don’t have a Will?
If you don’t have a Will, your estate will be distributed according to the intestacy rules. The rules are rigid and won’t necessarily distribute your estate in the way that you intend. A prescribed formula is used to determine the distribution of the estate, to those persons entitled to it.
Currently, if you are married or are in a de-facto relationship and have children, the first $150,000 will pass to your spouse plus your household chattels. The balance is then be divided equally between your spouse and your children. If you’re single with kids, your estate will be distributed equally between your children.
But writing a Will is so much more than just about money. It’s about protecting the most precious and valuable asset you have – your children. Without a Will, you won’t be able to choose the best person to look after your kids when you’re gone.
What happens to your kid’s if you haven’t appointed a Guardian?
If you haven’t appointed a guardian in your Will and both parents die, it’s usually family members that come to the rescue. However, it’s not uncommon, for family members to argue over who should be Guardian.
Where an agreement can’t be reached, the family court will step in and determine the issue. The court’s primary consideration will be the welfare of the children. It will assess what is in the children’s best interest. The result could mean that someone that you wouldn’t usually choose may be appointed as Guardian. The uncertainty, the financial and emotional cost of the process cannot be underestimated. It can easily be avoided if you select a guardian and make your wishes clear.
How should I choose a Guardian?
This is always the hard part and let’s face it no-one is going to do as good of a job as you – but there is someone out there who might come remotely close!
When choosing a Guardian, you need to ask, who has a close bond with your children, who has the energy, commitment, income, responsibility and time to take care of your children. You’ll need to assess your Guardian’s values, morals, religious beliefs and lifestyle choices and whether they’re likely to promote your children’s relationship with other family members. You’ll need to consider the location of your Guardian. If your Guardian lives overseas or interstate, it will mean a change of school, friends and familiarity for your children, at an already emotional and uncertain time.
You’ll also need to ask your Guardian whether they want to take on the role. After all, it’s a role that comes with great responsibility.
I always recommend that parents appoint more than one Guardian or at least a substitute Guardian. This is just in case the first is unable or unwilling to take up the appointment. The same advice is given when appointing Executors and Trustees.
Who will manage my kids’ finances?
If you die before your children turn 18, their assets will need to be held in trust for their benefit. To manage that trust, you need to nominate a trusted person, known as a Trustee in your Will. Think carefully about who the best person would be to safeguard your children’s assets and help plan for their future.
A Guardian and Trustee don’t necessarily have to be the same person. Your Guardian may be great with kids but not so great with money. Some parents also want to keep the roles of Guardian and Trustee separate. When you have different functions, it’s easier to account on how the money is being spent over the years. If you decide independent people for the roles, you’ll need to consider whether they can work together.
When will my kids take their Inheritance?
Consider what age you want your children to receive full control of their legacy. Unless the Will says otherwise, your kids will automatically receive access to their assets at 18 years old. Until such time, your chosen Trustee can advance monies for their maintenance, advancement and education. Many parents think that 18 years is too young for their children to be financially responsible, so it’s not uncommon to opt for 21 years and up.
Ok, I need a Will, what’s next?
More than ever, parents are thinking about getting their Wills done due to the coronavirus pandemic. Despite social distancing measures in place, a lawyer can help you prepare your Will and ensure that all eventualities are taken into consideration. If you are part of a blended family, have assets abroad, have business assets, getting the right advice is essential. So don’t put it off any longer and go and make that Will.