Thursday, May 17, 2012

Why Having a Will Makes Good Financial Sense

You spend a great deal of time and energy building up your wealth over a life time, so why not take just a fraction of that time creating a will to ensure your hard earned assets go to the right people? A recent Roy Morgan poll conducted in 2010 in Australia showed that 36.1% of people over the age of 25 (equivalent to over 5 million people) do not have a will. A legal will is perhaps one of the most important documents you will ever have to make in your life time, and the financial (not to mention emotional) consequences of not having one are great for the loved ones you leave behind.
So why make a will?
You have say in who gets what:
By specifically directing which members of your family get what, you can ensure sentimental assets stay in your family by explicitly expressing it in your will. Dying without one means that a court will decide who will get what according to formulaic intestacy rules. This means the court will decide how your estate should be distributed with your loved ones having no say on the way your assets should be dealt with. It is also likely the court will distribute it in a way that you yourself would not have wanted. Moreover, if members of your family or friends are unsatisfied with distribution, expect your will to be subject to protracted court proceedings which could incur unnecessary financial and emotional toll on your family and friends.
If you get married or divorced
The general rule is when you get married, any existing wills are cancelled. Therefore, if you are going into marriage with significant assets, it is important to draft a new one once you get married, regardless of whether or not you already have an existing will. Similarly if you are divorced or separated, ensure you have a solicitor create a codicil to your existing will. This basically is a formal document attaching to the will expressing any further additions you would like to add to the will.
Allows you to get clear on tax liabilities
Drafting a will with a solicitor also ensures you think through the tax implications of the types of gifts you leave behind for family and friends. For example, if you decide to leave your house to one of your children, the sale of this asset later down the track may attract capital gains tax. Drafting a will can ensure you are clear about what taxes might result from certain provisions in your will and allows you to plan ahead.
Sarah Paige is interested in investment management and is currently enjoying all things dividend yield related.

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