Nick Bruining: With trillions up for grabs, here’s how parents can stop inheritance squabbles in their tracks
Fights among beneficiaries of wills are rising. But parents of kids relying on an inheritance can take simple steps to avoid or minimise the chance of a dispute.
A new report by a WA-based specialist estate planning law firm has revealed that while fights among beneficiaries of wills are rising, those making wills can take simple steps to avoid or minimise the chance of a dispute once they’re gone.
The annual Inheritance State of Play in WA report, produced by Solomon Hollett Lawyers, said that about one-third of all beneficiaries expect some form of “inheritance dispute”.
Report author Morgan Solomon said that estate litigation instigated by aggrieved beneficiaries was the fastest- growing dispute area in WA’s Supreme Court
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By continuing you agree to our Terms and Privacy Policy.“We need to keep grief out of the courts. These are fights that destroy families and they are often preventable,” Mr Solomon told Your Money.
“There are plenty of people in the next generation, relying on an inheritance to ultimately set them up for their own retirement.
“It could be disastrous if they suddenly discover that a big chunk of their expected windfall goes off to someone they weren’t expecting.
“A staggering 32 per cent of millennials and 36 per cent of generation Z consider that receiving an inheritance is very important to their long-term financial security.”
Estate planning lawyers across the board suggest the key to avoiding estate distribution disputes is, where possible, to be open and transparent with all the stakeholders.
For example, a will maker could have a mistaken understanding about the complete financial position of one of their beneficiaries.
A parent drafting a new will observes that one of their children owns an expensive home, the latest tech and upgrades their car every couple of years. Thanks to that visible picture of success, the parent decides to redirect more of their estate to the apparently less fortunate child.
“What the parent might not know is that the ‘well-off’ child might be up to their eyeballs in debt and their financial plan is fully reliant on the expected inheritance,” Mr Solomon said.
“If an open and frank conversation takes place, adjustments can be made or expectations managed.”
Where a meeting or similar discussion can’t occur, a sworn affidavit or other similar document could be prepared at the time the will is signed.
The reasons behind a potentially controversial aspect of a will could be fully explained in this document and because it has been properly witnessed and sworn, could be admissible as evidence.
That may reduce the chances of a future dispute or challenge being successful, but is not an iron-clad guarantee. The aggrieved beneficiary could still choose to take the matter to court.
Another finding in the report reveals that over the next two decades, about $2.5 trillion of inheritance money across Australia will be distributed to beneficiaries using a fixed, State Government formula.
That’s because 44 per cent of the WA population risks dying without a valid will, or what legal boffins call dying “intestate”. That’s a 2 per cent increase on last year’s result. For those interested, the intestacy distribution formula is contained within Section 14 of the WA Administration Act 1903.
Notwithstanding estate distribution aspects, more than half of those West Australians with an existing will face potential technical issues when the will is called on. That’s because the wording of the document has not been revisited in more than 10 years.
Over that period of time, changes to superannuation death benefit rules along with substantial existing and planned changes to tax, aged care and other laws could see beneficiaries worse off or, in some cases, lose out altogether.
Finally, the nation’s surge in property prices over the past seven years has guaranteed that many seemingly simple estates are now worth millions of dollars each. That means mounting a claim disputing the contents of a will becomes, potentially, more economically viable.
While a cheap and simple will kit from the post office might be an option for some, a will properly drawn up by a solicitor could be regarded as a one-off insurance policy — a policy that really needs to be renewed every 10 years or so.
Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association
