There are an extraordinary number of succession myths that keep circulating, like rumours that just don’t go away. Some go back generations and are passed down by friends and family. Some are pretty innocuous, but most are plainly wrong and can have significant consequences on estate planning. Let’s look at the most common.
Thinking you don’t need a Will because you’re married
This one is disarmingly common and a persistent myth. Many people mistakenly believe that once they are married, all their wealth simply goes to their spouse automatically, no questions asked. They are, of course, invariably shocked to hear that this is not the case, and that without a Will, their spouse will only get about one-third of their assets, their children the rest, and if they are minor children, in a Trust that is controlled by others.
The consequences of dying intestate (without a Will) are many and complex and stretch well beyond this simple outcome. We know where this myth comes from. It comes from prior generations who had fewer assets and held them very simply. It used to be routine for the family home to be owned jointly by husband and wife, as too the one bank account. Joint assets like these do go automatically to the other joint owner. So, if all your assets are owned jointly, then you do not need a Will to cover them, as the path of inheritance of these assets is already set. This is worth thinking about beyond husband and wife, because putting assets in joint names can also be a useful strategy to make sure certain assets are not left in a Will and therefore not challengeable.
Believing that you don’t need a Will because you have no assets
This is very common for those young adults who have just entered the workforce. They are invariably surprised to learn that their super fund, with maybe only a few hundred dollars in it, may also have a very large life insurance policy attached to it. On death, this can cause an estate to swell from modest to large.
It’s also common to forget about future assets, in particular what you may inherit yourself. If you have children, then a Will becomes very important for determining who becomes guardian of your minor children, regardless of whether you have many assets. If a client is in this position, we usually recommend they see a financial advisor to talk about life insurance. Having a sizeable policy provides enormous comfort for the children who might be orphaned without the Will-maker.
The “just give them something” and they cannot challenge myth
There is a persistent myth that when writing a Will, if you leave someone something, anything, even one dollar, then that person cannot challenge the Will. It’s nonsense, and it’s one of the most dangerous assumptions we see people make. What matters is whether the amount you have left them is adequate and proper in all the circumstances. This is a very subjective test with many considerations that vary from person to person and change over time.
One dollar may in fact be adequate and proper, if you have others who have much greater need and you have very modest assets to begin with. But it has nothing to do with “leaving them something.” It is entirely about whether the provision made is adequate in all the circumstances.
A Power of Attorney has the right to access my assets
Being a Power of Attorney does not mean that they can start helping themselves to a bit extra at the ATM or carving up parental assets as if they have already passed away. Not true. Not ever.
If you are a Power of Attorney for someone, you undertake to use their assets only for their benefit and best interests. This is a contract you are subject to under the Guardianship and Administration Act, and if you misuse another person’s assets, you are personally liable for the loss. In particularly egregious cases, this can result in criminal sanctions.
Sadly, this myth perpetuates and encourages some people to indulge in what is called elder abuse. A word of caution to anyone thinking they can get away with it because no-one is looking. More often than not, financial elder abuse ends up being fully investigated and subject to Court proceedings once other family members find out about it. Even if only in the name of self-interest, because they see that their future inheritance as set down in the Will is getting diminished at the hands of the abuser.
Executors have the keys to the castle
A myth that still circulates is that the Executor of your Will can do as they please with the estate assets, including making up their own mind on who gets what and when. In rare circumstances, some Wills are specifically drafted to give their Executor very broad discretionary powers. But unless you create such a Will, your Executor is bound to follow your Will to the letter.
If the Will says I give one quarter of my estate to the dog home, the Executor cannot change that simply because the dog home is not their favourite charity. We know where this myth comes from. Executors do have power to administer the estate, which includes selling assets, transferring assets, paying debts and taxes, organising inventories and the funeral, and many more tasks. And some people think this degree of administrative power gives them extended powers.
The administrative freedom they may have is always tempered by the purpose and terms of the Will. If my Will says give one quarter to the dog home, then the Executor does have power to work out what exactly one quarter is, to sell assets to find the money to make it happen, and then go about it. But the dog home must still get the quarter.
The Executor does get the literal keys to the castle, but only so they can open it up, have a good look to inventory what’s in it, make sure it stays insured and kept in good condition before either selling it and its contents or transferring it precisely as the Will says. We’ve seen Executors think that they are allowed to move into the castle and live there for months or even years, rent-free. Unless the Will allows this, then doing such a thing makes the Executor liable to the beneficiaries for their loss.
A “you get nothing in the Will if you challenge” clause
Another very common and persistent myth, particularly among the elderly, is that a clause in the Will can go along the lines of “Anyone who challenges this Will or fights over it gets nothing.” Such a clause is worthless from a legal perspective.
We suppose the only value such a clause has is that it might be persuasive if other family members believe in the same thing. But any beneficiary who goes to see a lawyer will be told swiftly to ignore it and that it’s meaningless. Courts will not entertain them, and the reason is simple. The right to challenge a Will is not given by the Will maker; it is given by Parliament via legislation. Neither you nor I nor anyone else (other than another Act of Parliament) can take that lawful right away. The only way I can stop someone challenging a Will is to either die with no assets in my estate, or actually make adequate and proper provision for the person.
You must treat all children equally
This is a tough one. We all like to think we are equal, especially among our siblings. But we are not. And there is no law which says I must treat them equally in my Will. In fact, it might just be the opposite, and I might have to leave things to them unequally.
The hard thing about this one is that morally, we feel obligated to treat our children the same, because we love them equally. But this might not be reflected in financial consequences of inheritance. For example, if I have four children, three of whom have gone and made good lives for themselves, and one who at age 35 is still living with me at home, whom I support and look after, my obligation to look after the least successful of them is higher.
Depending on how much wealth I have to leave overall, I might actually have to give a larger share, or even all, to the dependent child. Naturally, this can be deeply upsetting to the successful children, who often believe the ‘black sheep’ is their own worst enemy and should not get more. This is a surprisingly common scenario, and care is required to create a landscape that gives the best results to all.
Testamentary Trusts are just for the rich
Just as we see the use of Discretionary (Family) Trusts at all levels of Australian society, the use of Testamentary Trusts in Wills is equally as valuable for everyone, from young adults to the elderly, and from the modestly provisioned to the wealthiest among us. Testamentary Trusts are the answer.
They are our best defence against attacks on beneficiaries’ inheritances from divorce and bankruptcy, and they are also tax-effective harbours for assets for children who are not legally allowed to inherit until adulthood. Testamentary Trusts are also almost infinitely customisable, with their limits bound only by your imagination.
Want to make sure a spendthrift child doesn’t blow their inheritance? A Testamentary Trust is the answer. Want to ensure your partner is only allowed to invest in blue-chip shares, not cryptocurrency? Again, look to a Testamentary Trust.
We once saw a Testamentary Trust in a Californian Will where each child received a large initial gift, but any further inheritance was conditional on showing they had invested the first wisely and avoided frivolous spending. The possibilities are as varied as the people who make them.
Getting the right estate plan in place
The greatest myths in estate planning have one thing in common—they cost more than just money. They cost peace of mind, family unity and, at times, legacy itself.
Don’t let these mis-truths guide your future. Speak to one of our lawyers today to ensure your wishes are properly protected and your estate plan is designed to deliver exactly what you intend.
