The Hidden Risks of DIY Wills: Why a Simple Mistake Can Cost Your Family Thousands

Many Australians are turning to online Will kits and DIY Will templates in an effort to save money. While these documents may appear straightforward, they often fail to deal with the practical and legal complexities of modern estate planning.

Unfortunately, the cost of preparing a proper Will is often insignificant when compared to the legal fees, taxation consequences and family disputes that can arise from an ineffective or poorly drafted Will.

A Will Is More Than Deciding Who Gets What

Many people assume that preparing a Will simply involves listing who should receive their assets. In reality, a properly drafted Will should also consider:

• who will administer your estate;

• whether beneficiaries require asset protection;

• what happens if a beneficiary dies before you;

• whether children or vulnerable beneficiaries should inherit immediately;

• how superannuation benefits will be dealt with;

• potential taxation consequences;

• family law risks; and

• whether the estate can be administered efficiently and with minimal conflict.

Every family is different, and a Will should be tailored accordingly.

The Risks of DIY Wills

1. Your Will may not properly dispose of all of your assets

Many people do not appreciate that not every asset automatically forms part of their estate.

For example:

• superannuation benefits;

• death benefit nominations;

• jointly owned property;

• assets held by discretionary trusts;

• company interests; and

• overseas assets,

may each require separate consideration.

A DIY Will often fails to address these issues, resulting in unintended outcomes.

2. No Protection for Your Children’s Inheritance

Leaving assets directly to an adult child may appear simple, but it can expose that inheritance to significant future risks.

These include:

• relationship or marriage breakdown;

• bankruptcy;

• creditors;

• financial exploitation;

• poor financial decisions; and

• unnecessary taxation.

A properly drafted Testamentary Trust Will can often provide substantially greater protection while also offering taxation advantages for eligible beneficiaries.

3. Family Circumstances Change

A Will prepared today may no longer be appropriate in several years’ time.

Examples include:

• marriage or separation;

• the birth of grandchildren;

• acquiring investment properties;

• establishing family trusts or companies;

• commencing a business;

• receiving an inheritance; or

• significant changes in personal wealth.

Many DIY Wills are never reviewed after they are signed.

4. Incorrect Execution Can Invalidate a Will

Even where the contents of a DIY Will appear adequate, strict legal requirements apply to its execution.

Mistakes involving witnesses, signatures or alterations can create uncertainty regarding the validity of the Will and may ultimately require Court involvement to resolve. They may also result in requisitions being raised by the Court during the probate process, requiring further evidence, affidavits or legal submissions before probate can be granted.

Responding to and resolving those requisitions can add significant delay and legal cost to the administration of the estate - costs which may have been avoided had the Will been properly prepared and executed in the first place.

5. Ambiguous Drafting Can Lead to Family Disputes

Poorly drafted clauses frequently result in disagreement between beneficiaries.

Common examples include uncertainty regarding:

• who receives a particular asset;

• what happens if an asset has already been sold;

• how debts should be paid;

• whether gifts are intended to be equal; and

• whether grandchildren inherit if their parent dies before the Will-maker.

Clear drafting significantly reduces the likelihood of disputes after death.

6. Tax Consequences Are Often Overlooked

A Will may have significant taxation implications.

Depending on the assets involved, issues may arise concerning:

• capital gains tax;

• superannuation death benefits;

• taxation of investment income;

• testamentary trusts; and

• succession planning for family businesses.

These issues are rarely addressed by generic online templates and may materially affect how assets should be structured and distributed.

Where taxation consequences may arise, appropriate advice should also be obtained from a qualified accountant and tax adviser before the Will and broader estate plan are finalised.

7. Executors May Be Given Inadequate Powers

The executor of an estate is responsible for administering the estate, paying liabilities and distributing assets.

Many DIY Wills fail to provide sufficient powers for the executor to:

• sell assets;

• manage investments;

• operate businesses;

• deal with trusts; or

• administer complex estates efficiently.

This can result in unnecessary delays, additional legal costs and, in some cases, Court applications.

A Proper Estate Plan Is More Than a Will

For many people, a comprehensive estate plan may also include:

• an Enduring Power of Attorney;

• an Appointment of Medical Treatment Decision Maker;

• appropriate superannuation death benefit nominations;

• succession planning for family trusts and companies;

• business succession arrangements; and

• a Testamentary Trust Will where appropriate.

Each document should operate consistently with the others to achieve your intended outcome.

The Cost of Getting It Wrong

A professionally prepared Will is often one of the least expensive legal documents you will ever sign.

By contrast, an invalid, ambiguous or poorly drafted Will can lead to Court applications, disputes between beneficiaries, substantial legal costs and lengthy delays in administering an estate. It can also create unnecessary uncertainty and stress for family members at an already difficult time.

Proper estate planning is about more than preparing a Will. It is about ensuring your wishes are clearly documented and capable of being carried out, protecting those you wish to benefit and preserving the assets and wealth you have worked hard to build.

Obtaining appropriate legal advice at the outset can significantly reduce the risk of problems arising after your death, when mistakes may be difficult, and considerably more expensive, to correct.

How KCT Legal Can Assist

At KCT Legal, we take the time to understand your family circumstances, financial position and long-term objectives before preparing your estate planning documents.

Whether your estate is straightforward or involves investment properties, family trusts, companies or blended families, we can provide tailored advice and prepare an estate plan designed to protect both your assets and your beneficiaries.

If you would like advice regarding your Will or estate planning, please contact KCT Legal to arrange an initial consultation.