Legal Tip 164: How often should wills be reviewed?

Legal Tip 164: How often should wills be reviewed?

Generally wills should be reviewed at least yearly I think. It is just a matter of getting out a copy of your will and reading it through. As you go through it think about how your changing circumstances could impact or change the ways or where your gifts will end up.

And when special circumstances happen you should consider reviewing your will asap – even before the event happens. Examples

Divorce/Separation
Not only of yourself but of children and other family members. You may not want to give to your daughter’s husband if he is no longer her husband!

Marriage
Not only of yourself but of children and other family members.

Death
Someone dying before you will mean any gift to them will probably be invalid (this will depend on the timing and the way the will is drafted)

Births
I have seen some wills where the first child was named but the second one wasn’t because the parents hadn’t gotten around to changing their wills. In this case the second child was about 10.

Bankruptcy or Risk of Bankruptcy
You might not want to leave assets to a child in a high risk of bankruptcy. A testamentary trust may be more appropriate. Occupations and activies of people change so someone safe now may be at more risk later.

Relationships
Friends come and go.

Assets Changing
If you have left a specific asset and sell that asset then the gift will fail (known as Ademption) see Legal Tip 34: Ademption and Wills Legal Tip 34: Ademption and Wills

Types of assets changing
Different assets may be better off going to different people. This can save tax overall, especially where some beneficiaries of the will are non-residents or charities.

Changing Residency of Others
Beneficiaries sometimes become tax residents of other countries. This will affect how they will be taxed on any gift made to them – both in Australia and in the other country.

These are just some of the times when a will should be reviewed.

 

When to Review your Will



Wills should be check regularly – yearly at least I think. This doesn’t necessarily need to be done by a lawyer, but just by the testator digging out the will and reading it and making sure the contents will still apply as their life changes.



But wills should also be relooked at whenever any of the following happens:

1. Children are born

These could be your children, grandchildren or other relative’s children. I have seen one situation where the will named the first child, but then a second one was born and it took 12 years for the parents to update the will. If they had died during this time the second child would have missed out and would have had to challenge the will – extra costs.



2. Someone dies

If you have left a gift to someone in your will and they die, depending on the wording, that gift may go to someone else or it may go into the residue of the estate. Completely different outcomes can happen.

Also general beneficiaries could change – if your sister dies is her husband, for example, still a beneficiary of your will? It depends on the wording.



3. Marriage

In most states a will may be revoked by marriage (e.g. s 12 Succession Act NSW).

This is especially relevant to same sex marriages which may be happening in large numbers now due to the change in law.



4. Your Divorce

Divorce can partially revoke a will. E.g. in NSW a will may be valid still, but any gift to the former spouse under an existing will may be revoked. Any appointment of that former spouse as executor or trustee will also be revoked – see s 13 Succession Act NSW.

In the unusual situation where you may want to give to the person you just divorced a new will should be done.



5. Assets Change

If you leave someone your WBC shares but sell them and buy CBA shares the gift will probably fail – that is the CBA shares won’t pass in place of the WBC shares (again depends on the wording).

You might leave your ‘main residence’ to someone but move before death. This could result in a different property going to that person. Is this what you want?



6. Changing Family Situations of Beneficiaries

Your daughter may be going through a divorce. Should you change your will so that gold digging husband has less chance of getting your assets?



7. Changing Business situations of Family Members

Your son used to be a computer nerd, but now he is a reckless developer always sailing close to bankruptcy. Should you change your will to leave his share to a testamentary discretionary trust just in case he becomes bankrupt?



8. Growing Children

You may have appointed guardians of your children in the first will when the kids were say 2 years old. Now they are 15 so are the guardians appointed still a good fit? Have the proposed guardians separated, died, been imprisoned, converted to the wrong religion etc.?



9. Changing Tax Issues

Tax laws are constantly changing and so are you potential beneficiary’s circumstances. You son might be 12 years now, but 10 years he could be living and working in China and be a non-resident for tax purposes in Australia. Is it good to leave him all of those shares you own offshore?



10. Inheritances

Your parents or other relatives may die and leave you a large inheritance. This may need extra planning for.



11. Change of Mind

You might simply change your mind about something in your will, such as

- Funeral instructions

- Gifts

- Trust terms

- Executors

- Etc.

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12. Change of Laws

The laws are constantly changing and what works well now may not work well in the future.

Non-residents no longer get the 50% CGT discount on property. The law on this changed 8 years ago now, so where a beneficiary could be a resident of another country there are additional tax issues to consider which might mean a new will is needed. Land Tax laws for Testamentary Trusts have also changed recently.



If any of the above happens then review your will immediately and seek legal advice if need be. Even without any major issues happening it may be a good idea to review your will with your lawyer every few years.

 

• When borrowings materially change can be a trigger too. For example you dont want to have a high borrowing on IPs and leave assets to the kids and leave youir wife incapable of maintaining or refinancing loans etc.
• This can also include a consideration of increased life insurance. The will should also consider the insurances both in and out of super bearing in mind that the cover in super may not become part of the estate for some people. But this cover may be a consideration in a alteration to the estate interests
• Change of residency for you or beneficiaries. Legal advice on wills that consider Australian and Non-Australian assets may be important.