Two Questions to Help You ‘Start the Conversation’ of Estate Planning

As with any major decision in life, it can be difficult to know where to start. So we have answered two questions to help you ‘start the conversation’ and hopefully ‘keep it going’ in relation to your estate planning. In this article we break down two important decisions you will need to make when making a Will: who will be your executor/s and who will be your beneficiaries?

And in honour of Wear It Purple Day today, all examples used in this article are drawn from the LGBTQIA+ community.

Who Should You Appoint as an Executor?

The executor of your Will collects in all your assets, pays all your debts and then distributes whatever is left over to the beneficiaries in your Will. It’s such an important role and comes with a lot of responsibility.

You can appoint anyone over the age of 18 as your executor. But we usually wouldn’t recommend you appoint someone as young as 18 to this role.

In our experience, most people appoint their spouse, child, parent, or other family member as executor (or a combination of them). Sometimes, family members are not appropriate options as spouses or children cannot act as an executor (for many reasons including family disputes or conflicting duties).

Alternatively, a person can appoint a trusted advisor (e.g. an accountant, solicitor or trustee company), but executors of these kinds normally charge fees to administer your estate which is payable from your estate.

Here is an example of what can go wrong if you do not get legal advice when choosing an executor.

Jon’s home-made Will appoints his husband Simon as executor. Jon’s whole estate is left to his children from a previous marriage. Jon’s current superannuation death benefit nomination has expired, but an earlier nomination left 100% of the superannuation to Simon.

Simon, as Jon’s spouse, wishes to make a claim on the superannuation. However, as Jon’s executor, Simon has a duty to maximise the estate for the benefit of Jon’s children. This means Simon has a duty to apply for the superannuation to be paid to the estate (Jon’s children), which Simon knows is not want Jon actually wanted.

Further, Simon might want to make a claim on Jon’s estate on the grounds that, as the surviving spouse, Jon should have left him something under his Will.

In both of these situations, Simon probably has a conflict of interest between his duty to Jon’s children to maximise the estate and his own self-interest in seeking payment of the superannuation to himself or more from Jon’s estate. 

Had Jon gotten his lawyer to draft this Will, these conflicts could have been planned for and avoided.

Who Can You Leave Your Estate To?

Firstly, your estate is made up of your assets and liabilities (including real property, cash, shares, and personal items such as clothing, jewellery etc).  However, there are some assets, such as superannuation and life insurance, that might not form a part of your estate.  This is another reason why it is important to get a lawyer to prepare your Will.

The people who receive your estate via your Will are known as beneficiaries.  You can leave your estate to anyone; some people, however, want to name charities as the beneficiaries.

When considering whether to leave your estate to a charitable organisation, it is important you do your research and seek legal advice to ensure the right charity ends up with your intended gift.

Here is an example of the decision-making process about the ‘gifts’ in a Will.

Kat is recently single after separating from her girlfriend of 20 years, Mel. Kat has no siblings and her parents have both died. Kat’s previous Will gifted her whole estate to Mel’s nieces. Kat no longer wants to leave her estate to Mel’s nieces as their separation ended badly.

Kat cares about her friends but does not want to leave all of her estate to them. Kat is also passionate about social justice issues, and after discussing with her lawyer, Kat decides to leave her estate as follows:

  • all of her jewellery to her best friend of 35 years;
  • all of her personal items, furniture and clothing to a women’s charity;
  • 20% of her remaining estate to be split equally between five close friends; and
  • the remaining 80% of her estate to be split equally between four charities.

Once you have decided who is to receive property from your estate, you will also need to decide how the gifts are to be made to your beneficiaries. Common examples include:

  1. directing your executor to sell everything and distribute cash;
  2. gifting specifically named property to particular beneficiaries (e.g. I give my diamond watch to my sister); and/or
  3. with specialist advice, establishing trusts to protect your beneficiaries, such as trusts for children under 18 years or testamentary discretionary trusts.

Here is an example of how a gift might be structured in a Will.

Jamie wants to gift her beachside apartment at Noosa worth $800,000 to her wife Kate. Jamie also wants to leave her other beachside apartment at Burleigh Heads to her friend Sebastian worth $700,000 but she wants to make sure Kate and Sebastian both receive an equal share from her estate.

Jamie does not have sufficient cash assets in her estate to equalise the distribution, so after discussions with her lawyer, decides to include an equalisation clause in her Will that if Kate accepts the gift of the Noosa apartment, she must pay Sebastian cash (in this example $50,000) so they both receive an equal amount from the estate of $750,000.00.

With any major life decision, the best way to ensure your family and friends understand and carry out your wishes is to communicate with them.  Things happen throughout your life which may affect your Will and cause you to rethink and change your wishes. Therefore, it is important to review and amend your Will regularly so your wishes are up to date and can be carried out as you had intended.

If you would like to ‘start the conversation’ about your estate plan, please contact our team.

“The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.”
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