Most people are aware that a valid will determines how their assets are dealt with after they are gone. Wills generally provide for the appointment of a trusted executor or executors and for gifts to chosen beneficiaries. They may also appoint testamentary guardians for minor children and give directions for specific funeral and burial arrangements.
When to review your will
Many people make a will, arrange for it to be safely stored and then forget about it. Reviewing your will is just as important as preparing (and properly executing) it, particularly when life events occur that may mean that your will no longer reflects your wishes.
Your will should be reviewed when your personal or financial circumstances change. The following events might prompt you to review your will.
Marriage. The Wills Act 1936 (SA) provides generally that a will is revoked by marriage of the testator unless the will is expressed to be made “in contemplation of marriage”” and that marriage takes place.
Newly married couples should review their wills to ensure that they take account of new circumstances. Even if the wills were made in contemplation of marriage, if some time has passed since preparing them, then they should be reviewed to ensure that they take account of your present circumstances.
Separation. If, after making a will, the willmaker’s marriage ends, then the will is revoked with respect to any gifts of property to their former spouse, the appointment of the former spouse as executor, trustee or guardian and the grant of any power of appointment in the will to the former spouse. In simple terms the former spouse is regared for legal purposes as having themselves died on the date of the divorce. The Wills Act 1936 (SA) provides however that certain other parts of the will remain valid.
Given that divorce results in some provisions of a will remaining valid and some not, you should always review your will to ensure that your new circumstances are taken into consideration.
Note also that some time passes before a divorce is finalised. We therefore recommend that you immediately arrange to review your will on separation from your spouse or de facto partner.
Birth of a child. The birth of a child or children will usually warrant revision of your will to ensure that the child is adequately provided for in the event of your death. Your will can be drafted to distribute assets equally amongst your children, even those that may be born after your will is made (this is an interesting area when one considers the increasing scope of artificial reproduction practices).
Death or ill health of an executor. You may have appointed an executor or trustee of your estate who is no longer alive, is aging, is mentally or physically unwell, or who has moved to another jurisdiction. In these circumstances you might consider appointing a new executor. Your will can provide for a substitute executor if your appointed executor is unable or unwilling to act. There is no limit to the number of executors you may appoint (other than practical considerations). Your executors should be capable of administering your estate in accordance with your wishes, which is often carried out under the guidance of a solicitor.
Death of a beneficiary. A gift to a beneficiary who dies before the willmaker may fail unless a contrary intention is stated in the will. If the beneficiary was a child of the deceased then the Wills Act 1936 (SA) provides that the deceased child’s children will instead take the gift. That will depend vary much as to the terms of the will and whether a contrary intention is expressed in it by the willmaker. If the testator has no children and a substitute beneficiary is not nominated the gift will fail and it will then fall into and form part of the residuary estate. This can have unintended effects. A will that nominates a beneficiary who has predeceased should be reviewed to ensure that it still has the desired effect.
Disposal of a specific gift. A specific gift is clearly identified and separate to other property of the estate; such as a specific prestige motor vehicle. If you sell or dispose of such an asset after you make your will then the gift will fail. The result is that the disappointed intended recipient of the gift may receive nothing at all or a much lesser share of the estate than what you intended. This may have a significant effect, particularly if the asset was of substantial value.
Acquisition of interests in a company or partnership. Property owned by a company cannot generally be disposed of by will however the shares in a company may be gifted. If you acquire an interest in a partnership you should consider what happens to that interest when you die. Most partnership agreements set out what happens when one partner dies and how that partner’s share of the partnership is distributed. New business interests should always prompt a review your will.
Increased wealth, potential challenges to a will, vulnerable beneficiaries. Your will may incorporate a testamentary trust to provide for minor beneficiaries, protect beneficiaries under legal incapacity, safeguard the beneficiaries’ assets from creditors or family provision claims and provide certain income tax advantages. If you would like these protective measures incorporated in your estate planning and the value of your assets warrant the administrative and accounting costs of establishing a testamentary trust then it is worthwhile discussing various options with your solicitor.
Summary
Life is unpredictable and change is inevitable over time. For better or worse life changes are likely to impact upon your estate planning. For good measure, you could diarise to review your will each time your tax return is prepared. Remember that your superannuation, binding death benefit nominations, appointments of power of attorney, advance care directive substitute decision makers or enduring guardians also form part of effective succession and estate planning. These should also be regularly reviewed.
If you need assistance or advice on how to proceed please contact us on (08) 8344 6422 or email [email protected].