Disclaimer: This article is not a financial advice. This is just me sharing to the wall! I am simply recalling what, why, and how we did it ... This daunting task is, hopefully, simplified :)
A will is one of those things that most people put in the "too hard" basket. You either procrastinate or you forget about it altogether. But this should not be the case when you have dependents. Especially not so when you have a dependent who will be needing lifetime care (read: a special needs child). Contrary to popular belief, a will is not only for the rich and the famous. You, yes you, will need one too. Not only does a will ensure that your surviving family is looked after according to your wishes; a will also protects the time, energy and resources you spend in building your wealth.
Having said that, in my opinion, a will is not essential if one has straightforward investments. Your superannuation plan and life insurance policy will have nominated beneficiaries, after all.
But what if you have shares, investment properties, businesses and other assets? It is useful to consider how you want your dependents to receive their inheritance. Will they have access to it at age 21 or will they get it later? Will they be needing guardians? Who do you appoint as trustee, etc. The possibilities are endless; the whole exercise can be mind-boggling!
The hubby and I always knew that we needed a will. But like everyone else we found various reasons to defer attending to it. Finally, when last year's U.S. holiday became imminent, we thought, "OK, we can't put this off any longer. Who knows what could happen to us in this trip?"
So let's get cracking and try to dissect this thing called The Will. It might be useful to think of a flowchart when preparing it.
Case 1: One surviving spouse. Each partner draws up his or her will. The surviving spouse receives full inheritance when the other party dies. End of story. The surviving spouse must then update his or her will to take his or her new status into account.
Case 2: Both spouses fail to survive. You will need to appoint a guardian for your children. Ideally, this would be an adult next of kin. If no next of kin is willing or able - this is especially true for migrants with no relatives in their adopted country - then nominate a trusted friend. It is assumed that the guardian will provide care for the minor children. Therefore, this person must share your values as they will be caring for your kids. If you cannot find a trustworthy relative or friend, then the State may become the guardian for your children. The State will make the decisions about foster care, for example.
Appoint an executor. The executor is the person who ensures that all provisions in your will are executed accordingly. This is usually a lawyer. However, if the trustee (see below) is sufficiently familiar with the law he can become the executor too.
Appoint a trustee. The trustee is the entity who will carry out the provisions of your will. These provisions may include the sale of assets, distribution of assets to beneficiaries, settlement of debts (including death expenses), payments to the guardian for the children's food and lodging expenses, providing for the education of the children, etc. Whereas the guardian looks after your children, the trustee, on the other hand, manages your assets. The trustee and the executor can be the same person. However, it is not advisable for the trustee to be the guardian at the same time. For if the left hand - the trustee - gives to the right hand - the guardian, who will ensure that all transactions are at arm's length; i.e. honest? A lawyer or the State (called Public Trustee) can act as trustee in the absence of a trustworthy relative or friend.
Provisions for the children. The hubby and I declared in our will that our children must reach the age of 25 before they can have complete control over inherited assets. We thought that age 25 is the right age when they hopefully will achieve financial maturity. Prior to age 25, the trustee shall issue payments for their maintenance.
Case 3: The whole family fails to survive. Then you will need to specify provisions for other beneficiaries. You may nominate beneficiaries living overseas. You can allocate shares of your total assets to your surviving parents or siblings. You may want to "gift" $100,000 to your mother or father or other siblings, for example. These gifts will be awarded to them after the sale of your assets and payment of your debts.
This is where the right level of life insurance cover becomes essential. If you do not have sufficient cover, the proceeds from the sale of your assets may only be enough to pay off your bank debts; leaving your spouse, your children and other beneficiaries with nothing. A will in such a situation isn't worth the paper it is printed on.
How to get started. In Australia, you can get a booklet for a do-it-yourself will from your post office for a small amount. This is usually sufficient for simple wills. However, when you own a few assets, or you have investments in shares or other instruments or if you have a business, I strongly suggest that you engage a lawyer instead. A lawyer can take you through all the legal issues, answer all your questions and give you peace of mind knowing that you are going about ensuring the future of your dependents in the best manner possible. A fee of $200 to $300 is well worth it, I believe.
Saying this, even the best lawyer in the world cannot possibly draft a will that will cover every eventuality in your life. It is best to keep your will simple and just take comfort in the fact that a will can be changed any time. Who knows, you might win the Lotto or, God forbid, end up in divorce court. You might have a change of heart about your guardian or trustee. It is, therefore, a worthwhile exercise to revisit your will every couple years or as your circumstances or the circumstances of the parties involved in your will change.
So there you are folks, rather boring. But hey, it does feel good to get it out of the way. You can now rest in peace!
1 comment:
... what will happen if you do not leave a "WILL" and there is a remaining substantial fortune after the debts are all paid up by the insurance? Who will manage the money if both parents died and the surviving kids (minors) are left behind? just a question.... -Gee
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