The Perils of DIY Wills
Search the internet and it’s not hard to find any number of Do It Yourself (DIY) Will kits for purchase at a relatively low cost. Even at the post office, DIY Will kits are strategically placed alongside the serving queue, leaving you to ponder whether you should grab one or not. Before succumbing to temptation you need to think about how you would feel if it turned out that your DIY Will caused nothing but financial and emotional trouble to those you left behind.
Simple or Complex?
If your affairs are simple, a DIY Will kit may be adequate in your circumstances. However, it is likely that your affairs are not as simple as you think. While most DIY Will kits contain warnings to obtain legal advice if your situation is complex, very few offer advice on what constitutes a complex situation. The following is a list of common situations that a DIY Will kit may not be appropriate to cover:
• Blended families
• Children and grandchildren under 18 years of age
• Family members with a disability
• Shares held in private companies/units held in unit trusts or managed funds
• Interests in businesses
• Significant debts owed to you by another person or organisation
• Taxation issues
In addition to the very limited application of a DIY Will, there are a few common mistakes that, if made, could result in anything from delays in obtaining Grant of Probate (or Letters of Administration) through to the Will being rejected on the grounds that it is invalid.
Mistake Number 1 – Giving away jointly held assets under your Will
People are often confused about their rights in relation to joint ownership and assume that they can deal with the jointly owned asset in their Will. This is not the case. An asset that is held jointly automatically passes to the survivor and does not form part of the estate. If you have assets that are owned by your company or trust, these assets remain assets of the company and trust when you die. In these situations it is important to deal with the control of the company or trust, not the assets held by the company or trust.
Mistake Number 2 – Failure to properly sign or date your Will
Something as simple as this can make the Will invalid. A properly executed Will requires two adult witnesses who are not beneficiaries under the Will. Also, don’t forget to ensure that you and the two witnesses sign each page of the Will.
Mistake Number 3 – Failing to appoint an appropriate Executor and Trustee
The role of the Executor and Trustee is to administer your estate. In some circumstances, that role could last for years where:
a) there is a life interest
b) a trust or conditional gift is created, or
c) where minor beneficiaries have to be cared for.
It may be wise to choose an impartial individual to act as the Executor and Trustee so as to avoid conflicts that may arise between the Executor/Trustee and the beneficiaries during the long term administration of the estate.
Mistake Number 4 – Making provisions that result in a Capital Gains Tax (CGT) liability to your estate
An example of this is where your Will gives a beneficiary an option to purchase real property. The general rule is that CGT is not assessed when an estate asset is gifted or passes to a beneficiary.
Mistake Number 5 – Leaving family dependants out of your Will
This could happen where you specifically name your children and then subsequently have more who are not included in your Will. A professionally prepared Will would make provisions to include all of your children as at the date of your death.
Mistake Number 6 – Poor or inadequate drafting of bequests
Poor or inadequate drafting of bequest clauses can result in a gift to a beneficiary lapsing, thereby failing to provide for someone even though it was your intention to do so.
Mistake Number 7 – Hand written amendments
If you must make hand written amendments make sure that they are in ink, the directions make sense and such amendments have been properly signed and witnessed. Failure to do any of these things could render either the amendments or the entire Will invalid.
Mistake Number 8 – Failure to adequately deal with the residue of the Estate
Sometimes in the enthusiasm to prescribe specific bequests to particular beneficiaries, a clause dealing with the distribution of the residue of the estate is either omitted or incorrectly dealt with under the Will. The residue is intended to catch all of the assets not specifically given away under the Will, including gifts that have failed. It is therefore essential to include a clause which sets out how 100% of the residue of your estate is to be dealt with, because failing to do so could result in a partial intestacy (dying without a legally valid Will).
Mistake Number 9 – Attaching additional documents to your Will or separating the pages
Whilst it may be tempting to attach notes or related documents to your Will so that they stay together, the indentations from a paperclip or fold back clip may produce a requisition from the Probate Registrar asking for an explanation of what was attached, so the rule is, never attach anything to your Will. The same goes for removing the staple or binding that holds your Will together. It may make it easier to photocopy, but leaving evidence that suggests that the Will could have been tampered with in any way (including extra staple holes that could suggest that pages have been removed or substituted) can render your Will invalid.
The task of drafting a valid Will is not as straight forward as you may assume and while a DIY Will may appear to be cost-effective, it could end up unnecessarily costing your estate thousands of dollars in legal fees or creating unnecessary adverse tax outcomes.
It is recommended that you seek legal advice before preparing your Will. A legal firm will be able to explain the finer points of what you can and can’t do and offer you options that you may not have thought possible.
Ai Phan is Senior Associate with
Tri-meridian Corporate and Commercial Law