Common Misconceptions About Estate Planning

Common Myths About Wills and Estate Planning in Western Australia

An estate plan involves more than signing a Will and storing it in a safe place.

A comprehensive Western Australian estate plan requires careful thought about several matters and regular review to make sure it still reflects your wishes and covers unexpected events.

This article looks at some common misconceptions about Wills and estate planning in WA. The information is general only, and you should get professional advice specific to your circumstances before taking any course of action.

"I have a Will — isn't that an estate plan?"

A Will is a great start. However, a Will alone does not appoint a trusted person to look after your financial and property affairs when you are away or incapacitated.

A Will also cannot appoint a guardian to make health and lifestyle decisions on your behalf if you lose capacity, taking into account your morals and values.

Tip: Several documents form part of a comprehensive Western Australian estate plan. Think about what you would do if something unexpected happened and you could no longer manage your own affairs. Talk to your lawyer about appointing an attorney or guardian to assist you if you become incapacitated.

"My spouse will automatically manage my affairs if I lose capacity."

This is one of the most common misconceptions. Many people assume their partner has automatic authority to manage their financial affairs or make medical decisions if they become incapacitated.

In Western Australia, without an Enduring Power of Attorney (EPA) and an Enduring Power of Guardianship (EPG), your spouse has no automatic right to manage your affairs. The State Administrative Tribunal may need to appoint an administrator or guardian instead.

Tip: Prepare and sign an EPA for financial matters and an EPG for personal, lifestyle and medical decisions. These documents are essential companions to your Will and make sure your chosen person can legally act on your behalf.

"Estate planning is only for the elderly or wealthy."

This is not the case.

Whatever your age or financial position, a proper estate plan lets you appoint a trusted person to administer your assets when you die and make sure your property goes to the people you choose. A well-structured estate plan also helps you maximise what you leave to your loved ones through appropriate tax planning.

A comprehensive estate plan also helps you prepare for unexpected illness or incapacity by appointing someone you trust to deal with your affairs when you cannot.

Tip: Think about your current and future assets — they soon add up. Consider who you would like to benefit and how you can maximise the value of your estate for your beneficiaries. Estate planning is particularly important for young families in WA to make sure guardianship arrangements are in place for minor children.

"A Will covers all my assets."

Many clients do not realise that certain assets may not be controlled by their Will. Non-estate assets typically include jointly held property, superannuation, assets held in family trusts or companies, and life insurance policies with nominated beneficiaries. These assets pass outside your Will according to their own succession rules.

Tip: Put together an asset register that identifies which assets will form part of your estate and which will pass outside your Will. This helps make sure your estate plan addresses all your assets and avoids unintended outcomes.

"I can leave jointly held property to whoever I wish."

The right of survivorship in joint tenancy means that when one owner of a jointly held asset dies, that asset automatically passes to the surviving owner or owners, regardless of anything stated in a Will.

Jointly held assets such as real estate often make up the bulk of an estate's value. For spouses and de facto partners, this arrangement often works well, as most would simply want the surviving partner to benefit.

However, joint ownership may not be appropriate where property is held with certain other family members, non-family members or other entities, or where property remains jointly held after divorce or separation. It is often not suitable for blended families in Western Australia.

Tip: Review your assets — real estate, bank accounts and investments — and check how they are held. Your lawyer can help with this and, if needed, sever joint tenancies so your share of a property can be held separately and left to whoever you choose.

"My superannuation will automatically form part of my estate."

This remains one of the most widespread misunderstandings.

Many clients do not appreciate that superannuation death benefits sit outside their estate unless specifically directed otherwise. Superannuation death benefits include a member's account balance and any life insurance held in their fund. These can only be paid to a "dependant" as defined by superannuation legislation, either as determined by the fund trustee or in accordance with a valid Binding Death Benefit Nomination (BDBN).

Your BDBN can direct that your superannuation death benefits be paid to your Legal Personal Representative to be distributed in accordance with your Will.

Tip: Review your superannuation nominations to check whether you have a valid and current BDBN in place. Talk to your lawyer about the formalities required to sign a BDBN and strategies to reduce adverse tax on payment of your death benefits to your intended beneficiaries.

"Testamentary trusts are only for wealthy people."

Testamentary trusts in Western Australia can provide significant tax advantages and asset protection benefits for beneficiaries of even modest estates.

They are particularly useful where there are minor children, vulnerable beneficiaries, concerns about a beneficiary's relationship breakdown, or creditor issues. Income generated from testamentary trust assets can be distributed in a tax-effective way, with minors taxed at adult rates rather than penalty rates.

Tip: Talk to your Western Australian lawyer about testamentary trust options, even if you consider your estate to be modest. Depending on your circumstances, the long-term tax savings and protection benefits may outweigh the initial setup costs. Your lawyer and financial adviser can assess this for your specific situation.

"My overseas assets will be covered by my Australian Will."

Assets in other countries may require separate estate planning documents that comply with local succession laws.

Different countries have varying rules about inheritance, forced heirship and estate taxation. Your Western Australian Will may not be recognised or may create complications when dealing with overseas assets.

Tip: If you own assets in other countries, get advice from lawyers qualified in those jurisdictions to make sure your international arrangements are coordinated with your Western Australian estate plan.

"Once I have a Will, I don't need to review it."

Many clients set and forget their estate planning documents, not realising how changes in relationships, assets or legislation can affect them.

In Western Australia, marriage automatically revokes a Will (unless made in contemplation of that marriage). Divorce also automatically revokes a Will (unless made in contemplation of that divorce). If you are separated but not yet divorced, your Will is not automatically revoked. It is important to review your Will promptly in that situation.

Changes in asset values, new acquisitions or disposal of specifically gifted items can all affect how your estate plan operates.

Tip: Review your Will each year — for example, when your annual tax return is being prepared. In most cases no changes will be needed, but it is good practice to make it a regular habit. If you separate, divorce or your financial or personal circumstances change significantly, contact your lawyer straight away to find out how these changes affect your existing Will and, if needed, to prepare a new one.

"If I die without a Will, my assets go to the Government."

If you die without a Will in Western Australia, your assets are distributed according to set formulas in state legislation.

These rules attempt to reflect what most people would expect in terms of who should benefit from an estate and provide a specific order of distribution to the deceased person's next of kin.

The difficulty with these rules is that they do not take into account the wishes or individual circumstances of the deceased.

Tip: Do not rely on the Western Australian intestacy rules to determine who benefits from your estate. Only where a person dies with no surviving relatives entitled under the intestacy rules will the Crown have a right to the estate. If you have no close family, this makes a Will even more important.

Conclusion

Effective estate planning takes time and careful thought. A comprehensive plan should include a Will, an Enduring Power of Attorney, an Enduring Power of Guardianship, and possibly testamentary trusts and superannuation death benefit nominations. Regular review is essential to make sure your plan keeps pace with your circumstances and any legislative changes.

If you or someone you know would like more information or advice about estate planning in Western Australia, please contact us on 0421 145 637 or email val@crystallawyers.com.au.