Part Four: Wills
If you only do one part of the asset and estate planning process, make it your will. We don’t like to be the bearer of bad news, but to put it directly, a will applies to everyone (sorry Jeff Bezos).
What happens if you pass away without a will? We’ve built this quick quiz so you can find out.
Even if your wishes are simple, creating a will is a smart decision. On average, the distribution of your assets takes 6-12 months and costs between $5,000-$12,000 with a will, compared to $15,000 and 18-24 months+ without one.
Our guide will explore the three key decisions you'll need to make when creating your will, as well as three extra considerations for parents. Plus, discover your options if your partner has a will and passes away before you.
🚨 Denotes parent-specific points in our guide.
Wills 101
A will sets out how you’d like your assets to be distributed after you die. It can also include:
Funeral and burial/cremation instructions
Instructions for payments of debts and liabilities
Gifts to named individuals, charities or other groups
🚨 Appointment of a testamentary guardian for minor children (we run through this in more detail below)
🚨 Instructions in relation to education and welfare of children
🚨 Specific terms relating to a family business or family discretionary trust if you have one, such as who will have the power to appoint trustees of the trust
The three key decisions
Decision 1: Who is your executor?
An executor is tasked with executing your will. Basically, they get the keys to the castle, such as legal access to your bank accounts. It’s your executor’s responsibility to manage the distribution of your estate according to your wishes.
You can appoint one or more executors as long as they are over the age of 18 and are of sound mind, or they are a trustee company under the Trustee Companies Act 1967.
Given the weight of this role, it’s important to pick the right person or people. A good executor will be as neutral as possible to minimise the chance of conflict. Ideally, you’re looking for someone who is organised, empathetic, trustworthy, experienced and accountable to others.
🚨 Often, partners will appoint each other. As people age, appointing a child or other family member is common. If your affairs are very complex, then it could be appropriate to appoint a professional executor, such as a lawyer or an accountant, alongside a family member or friend.
Decision 2: How should your assets be distributed after you die?
You will need to decide who will receive your assets after you die. As you might expect, this part of the process can be very sensitive and will vary depending on your personal circumstances.
🚨 Partners will often leave their assets to each other and, after the surviving partner's death, to their children once they reach a certain age, e.g., 18 years old. However, this won’t be appropriate if:
You have separated from your partner
You and your partner have entered into a relationship property agreement (also known as a prenup), which dictates how assets are to be shared and classified on death
You have vulnerable family members, and it would not be appropriate for them to receive and have control of your assets outright
It’s important to note that on your death, your partner may have certain rights to your assets under the Property (Relationships) Act 1976. If your will goes against these rules, then it could be challenged in court. Your lawyer can provide details on this so you can keep these rules in mind when making your will.
🚨 Decision 3: Who should be appointed as the testamentary guardian of your children?
You will need to decide who you will appoint as the testamentary guardian of your child (or children).
A testamentary guardian is responsible for supporting your child’s development and helping to make important decisions in a child’s life. These include
Where they live
Where they go to school
What religion they’re raised with
Major health decisions, such as medical treatment
These responsibilities end when your child turns 18.
Myth-busting: there is a common misconception that testamentary guardians also have the automatic right to provide day-to-day care for a child. This is not the case. If a testamentary guardian wants to be involved in a child’s day-to-day care, they must apply to the Family Court for a Parenting Order.
Scenario: what happens if you die, but your child’s other parent is alive?
The surviving parent would usually have the day-to-day care of the child (unless they are unwilling, unable or unsuitable). Your appointed testamentary guardian would be entitled to assist in big decisions involving your child’s welfare.
This is especially important if there is a conflict between two sides of a child’s family. Your appointed testamentary guardian is essentially your voice after you’re gone. They have a legal right to continue to input into your child’s life.
Scenario: what happens if both parents die?
If both parents die, it is assumed that the family will take over the care of your children. If there is a dispute, an application to the Family Court for a Parenting Order can be made.
Choosing a testamentary guardian
You can name only one person to fulfil the role of a testamentary guardian. While you can appoint them without telling them, we recommend you consult with them prior to their appointment and keep their appointment under review.
Here’s a checklist of things to consider when selecting an appropriate person for this role:
Loves your children
Shares similar values and beliefs to you
Has a similar parenting style to you
Has adequate financial resources to fulfil the role (especially if they will also be assuming day-to-day care of your children)
Is an appropriate age and of good health to be able to fulfil the role
Lives in an acceptable location (especially if they will also be assuming day-to-day care of your children. You may not want your children to have to move cities or countries, or you might not mind)
Can fulfil the role even with their own existing family and work commitments
There might not be someone who ticks all the boxes, so you’ll need to prioritise this list.
🚨 Three extra considerations for parents
Financial provisions for testamentary guardian
Consider whether any financial provision should be made for your testamentary guardian from your estate to raise your child. For example, you may wish for any guardian who assumes day-to-day care for your child to be allowed to live in your family home.
Education and welfare
You may also want to express your wishes in your will about the education and welfare of your children. Whilst whatever you provide is not legally binding, it is often helpful to have your wishes formally recorded somewhere you know they will be found.
Protecting your child’s interests
It’s impossible to foresee and plan for every possible scenario that could play out after you’re gone. However, you may want to consider an often thought-about scenario: what happens if you pass away and your partner finds a new partner?
We’d all like to think our partner would continue to make decisions that are in our child's best interests, but life can get complicated. Here are some options to consider:
Have an informal mutual agreement with your partner that they will enter into a relationship property agreement with their new partner and vice versa. This would mean that any assets the surviving partner brings to a new relationship are their separate property. Although your partner may change their mind down the track, at least you’ve had the conversation (and they know you’ll be keeping an eye on them from your grave!),
Create mutual wills with your partner. This is where two people both agree on how their assets will be distributed and prevent each other from revoking or changing their will in any way that fails to keep the agreement the same or better.
Leave some of your assets, for example, a life insurance policy, directly to your children once they reach a certain age.
Create a trust in your will (which is called a testamentary trust)
Establish a family trust of which you, your partner and your children are beneficiaries and transfer your assets to this trust.
Setting up a trust has positives and negatives (like additional costs). If you want to explore whether it’s a suitable option for you, read our article on trusts and talk it through with your lawyer.
Your options when your partner passes away with a will
Even if your partner has a will, you have options. As the surviving partner, you have a choice to make within six months after a grant of probate or letters of administration:
Option A: make an application to the court under the Relationship Property Act for a division of property (generally 50% of relationship property if your relationship has lasted at least three years - you can read more here); or
Option B: accept the provision made for you under your partner’s will and in any other way by them.
If you don’t make an active choice within six months, then you’ll receive what you’re entitled to under the will, i.e. Option B is the default.
Here is an example in real life: Roimata and Benji are married, and Benji has children from a prior relationship. Benji passes away first.
Scenario 1: Benji’s will leaves his entire estate to Roimata.
In this scenario, Roimata’s options are:
Option A: receive half of their relationship property under the Relationship Property Act
Option B: receive his entire estate under his will
Roimata is likely better off (financially) selecting Option B, i.e. accepting the provision Benji has made for her under his will.
Keep in mind that Benji’s children can contest the will under the Family Protection Act 1955 on the basis that they consider inadequate provision has been made for them under Benji’s will for their proper maintenance and support. There is no presumption of equality or equal sharing under the Act, nor a benchmark of percentages children are entitled to.
If Benji’s children were to contest the will, the Court would consider a range of factors in deciding whether there has been inadequate provision, such as the size of Benji’s estate, competing moral claims from others, the personal circumstances of Benji’s children (their age, health, income etc.), any advantages Benji’s children have received from Benji during his lifetime, and the relationship of between Benji and his children, including any estrangement and reconciliation. Here’s a recent example in the news.
There is nothing stopping Benji from making financial provisions for Roimata under his will, but planning is needed to minimise any risk his children will make a claim under the Family Protection Act 1955.
Scenario 2: Benji’s will leaves 75% of his estate to his children and the remaining 25% to Roimata.
In this scenario, Roimata’s options are:
Option A: receive half of their relationship property under the Relationship Property Act
Option B: receive 25% of his estate under his will
In this scenario, Roimata could be better off (financially) selecting Option A, i.e. making an application to the court under the Relationship Property Act for a division of property.
In both cases, Roimata should get legal advice to work through her options.
Review, review, review
If you created a will before you were married, it is possible that it will no longer be valid. Wills are automatically revoked on marriage unless the will expressly states that it was made in contemplation of your marriage.
You might also have a will but find it is no longer fit for purpose as it was made before important life events such as marriage, children, marriage dissolution, starting a business, and a substantial increase (or decrease) in wealth.
An up-to-date will can ensure that your final wishes are met, and your loved ones are taken care of.
This is part of Crayon’s mini-series on asset and estate planning for parents:
Now for the important legal part: The information we provide is general and not regulated financial advice for the purposes of the Financial Markets Conduct Act 2013. Please seek independent legal, financial, tax or other advice in considering whether the content in this article is appropriate for your goals, situation or needs. The information in this article is current as at 13 December 2022.
All of our content is independent. Crayon provides you with accurate and valuable information you can use to make smart money moves for your family. We work with people we respect, and all collaborations are unpaid.
Sarah Kelly
Senior Associate, Private Wealth team at Dentons Kensington Swan
Stephanie Pow
Founder and CEO, Crayon
