Estate Planning for Young Families: The Importance of a Will
Often people do not turn their minds to getting a Will until they go through a health scare, are going overseas, entering retirement or after going through a less than ideal experience after the death of a family member who did not have an up-to-date Will, or any Will at all!
When you die, your estate—all your property and assets—will need to go somewhere or to someone. Your Will is a legal plan of how your estate will be distributed and managed at this time. There are many life events which should inspire you to sort out your Will, and starting a family is definitely one of them.
We get it, most people do not want to think about death or the possibility of dying when they have young children. But turning your mind to these important questions and having a plan in place for the disposal of your estate and care of your children will create peace of mind for you and make things easier for the people you care about should anything happen to you.
In fact, every person should have a Will regardless of their age, what they own or their relationship status. Failure to prepare a Will means you have no formal arrangements in place for the disposal of your property and assets.
A person who dies without leaving a Will is said to have died intestate, and the estate passes to the next of kin according to a legal hierarchy of beneficiaries. So, the benefits may not necessarily go to those whom you would have chosen had you made a Will. If you and your partner die without a Will, your kids could be taken into public care whilst guardians are appointed, or your children may end up being raised by a person you would not have chosen for them. Any person that can show sufficient interest can apply to the court for an order to raise your children
It is clear that dying without a Will can have considerable consequences and the cost of determining these issues can dilute your estate. The take-home? Make a will while you can!
Things to consider when preparing your Will
Who will take care of your children?
A testamentary guardian is an adult designated in a parent’s Will to care for that person’s child in case both parents die before the child turns 18. A guardian will have to make decisions on your children’s upbringing, such as such as where they live, where they go to school, what they are allowed to do and so on.
You and your partner should each name the same person as the guardian of your child to avoid conflicts.
You should think about their parenting style, values and beliefs; are they willing and physically able? where do they live – as you may not wish to uproot your child. Are they financially stable and able to make good financial decisions?
Who should administer the estate and manage the money for the children until they receive their inheritance?
Your Executor is the person responsible for administering your estate when you die.
In making a will, you can choose who is to be the Executor and therefore who will manage the money for your children and can choose what benefits they are to receive before they turn the specified age.
This person will, among other things, be responsible for paying off your debts and taxes and distributing your remaining assets in accordance with your wishes. They will also manage the money available for your children’s upbringing, including day to day living expenses, education and health needs.
The person needs to be willing to act, not too old, within Australia, and appropriately skilled (particularly if you require them to make investment decisions). If you have young children, the role of the Executor could last for several years.
You should have a conversation with the person who you would like to appoint to ensure they are willing to take on the task and tell them your wishes in making provision for your kids before they receive their inheritance.
What age should your children receive their inheritance?
You should consider whether your children will be mature enough to manage a large amount of money when they turn 18. Without a will, your children become fully entitled to their share of your estate as soon as they turn 18. Most people recognise that an 18-year-old may not be mature enough to such a responsibility.
When making a Will, you can specify that your children will not receive their inheritance until they turn a more appropriate age (such as 21 or 25).
Can the children’s inheritance be used before they turn 18?
When your children turn 18, they will be considered adults and no longer under guardianship. However, prior to this your Executor manages the money available for your children’s day to day living expenses, education, health needs and for such things as trips, sports and the like.
The Executor can also choose to release money for a deposit on a home or to purchase a motor vehicle; to provide your children with the opportunity to travel or to pay for private school fees.
You should consider whether you include any direction in your Will enabling the caretakers of your children and their inheritance to utilise money from your estate to pay for things which otherwise would be made at the discretion of your Executor.
The conversations required to make and put in place decisions, which will protect and nurture the children should both parents die, are crucial.