Inheritances: three reasons for a will even if you’re not wealthy

Aussie inheritance sizes have surged amid property and super booms, but a key statistic still worries financial specialists.

Death is never fun to talk about, and that’s probably why a majority of Aussie adults don’t write down their wishes for when they’re gone.

Inheritance sizes are growing rapidly as property prices boom and superannuation savings multiply, and insurance and estate planning specialists say you don’t have to be wealthy to need a will.

New research from Finder.com.au shows 58 per cent of Australians – more than 11 million people – do not have a will and 2 per cent are not sure whether they do or don’t.

People don’t like thinking about their own mortality and “some find the process of getting a will to be overwhelming,” says Finder insurance spokesman James Martin.

However, without a will your parting gifts to loved ones could be a huge financial mess and a family war over your finances.

Here are three key reasons why people of all levels of wealth need wills.

CHILDREN

“If you’re the parent or guardian of someone who’s under the age of 18, then it’s really important to nominate someone to be their guardian if you are no longer around, regardless of your financial position,” Martin says.

Adult children can also be assisted if you include a plan for your funeral arrangements that offers “some form of relief to your family during a challenging time”.

Inheritances can be protected for your children by setting up a testamentary trust that stops others from stealing assets and can direct when the children can access all the money, usually at age 21 or 25.

Experts say wills protect children and can also save on tax. Picture: iStock

TAX

Nobody likes paying extra tax when they’re alive, so why do it once you’ve passed away?

Testamentary trusts are great for minimising tax, because children inside the trust are taxed as adults rather than the penalty tax rates of up to 66 per cent that kick in when a minor’s investment income exceeds $416 a year.

Crystal Wealth Partners executive director of financial services John McIlroy says “you can leave behind the best structure for your beneficiaries”.

He says charity donations can also be left in wills to help those beyond your own family.

“Ensure you obtain and outline the correct details of the organisation you wish to donate to. As certain charities can change names, merge or cease to exist, being clear in your will about your interests and where you would like part of your estate to go is also important.”

KEEPING THE PEACE

There’s nothing like an inheritance to spark a vicious family fight, and while wills can’t prevent conflict they can at least let your family – and potentially the courts – know your wishes.

McIlroy says while there are state-based laws and guidelines that determine who gets what, family disputes “occur quite frequently” and can result in expensive legal costs that eat into inheritances.

Asset size doesn’t matter. A family may battle furiously over a $50,000 estate while another left with much more money remains amicable – with the help of a will.

CHEAP OPTIONS

Getting a will drawn up by an estate planning lawyer could cost less than $1000 for a couple, but if investments and testamentary trusts are involved a fee of more than $2000 is more likely.

There are DIY will kits and online will kits costing as little as $30 but McIlroy is not a fan of these “when you see the kind of mess you can leave behind if you don’t do it properly”.

Martin says even if using a DIY will kit it would be a good idea to have it reviewed by a legal professional.

“You could compare quotes for legal services, rather than going with the first option,” he says.

WHEN WRITING A WILL:

• Consider property titles, as owning real estate as a joint tenant means when you die the property passes to the joint owner regardless of what’s written in your will.

• Think about future events such as births and marriages, and prepare to revisit your will when life changes.

• When children are involved, be mindful of how you word your will, and avoid making assumptions.

• Remember that superannuation does not automatically form part of your estate, so set up a binding death benefit nomination in your super fund.

Source: Crystal Wealth Partners

Originally published as Inheritances: three reasons for a will even if you’re not wealthy