What is the process of naming beneficiaries in a Will? When drafting a Will (or a last Will), the most important step is selecting beneficiaries who will inherit your property and other assets according to your preference. In fact, naming beneficiaries in a Will is the main purpose of the legal document.
You would want to choose who will inherit your properties, estate assets, or family heirlooms, and how to divide your assets. A Will serves as a general guide to your estate plan.
In most cases, beneficiaries include family members such as children, a spouse, or siblings. Some Will-makers include close friends or charities.
In a sense, a Will allows you to look after your beneficiaries after your death. Naming beneficiaries in a Will makes the entire process easier and reduces friction towards family members or other entitled persons. This article discusses the topic of naming beneficiaries in a Will.
The Importance of Making a Will and Naming Beneficiaries in a Will
Before proceeding to naming beneficiaries in a Will, one must first grasp the importance of having a Will. Basically, a Will allows the testator to make their opinions known even after their death.
The provisions of a Will have the same force and effect in the probate court as if the Will-maker stood before the court, instructing where the assets should go.
You may have large asset holdings, children from different marriages, or complicated family situations including blended families. A Will allows you to control the disposition of your properties and prevent future complications or family conflicts after your death.
Choosing and Naming Beneficiaries in a Will
Dependants
Dependants are the most important persons that you should name in your Will. Do you have anyone to whom you have a responsibility with even after your death? If you have a child, especially one who was still a minor upon your death, a guardian needs to take care of them, and the child should be a beneficiary in your Will.
Consequently, if you do not name your children as beneficiaries, complications may arise, as they fall under the list of eligible persons who can contest your Will by applying for a Family Provision claim.
Friends and Acquaintances
Beyond dependents, naming beneficiaries becomes a matter of personal preference. There may be people in your life that mean a great deal to you, whether or not a familial relationship exists. You may want to show that you value a friendship by naming a friend or acquaintance in your Will and leaving them specific gifts.
Organisations or Charities
A Will-maker can also choose to name an organisation or charity as a beneficiary. Maybe you are a dedicated member of a charity or non-profit organisation and you want to continue to be a part of their cause even after death. In that case, you can name them so they receive a part of your estate.
The Importance of Identifying Beneficiaries Clearly
Persons within your family may have the same name. For instance, your mother and sister may have the same name and the same surname. If your Will does not clearly indicate whether you meant the recipient of a gift to be your mother or sister, your executor would have to make enquiries to determine which of them was your intended beneficiary.
This will cause further family conflicts, as well as unnecessary delays and costs against the administration of your estate.
The Consequences of Dying Without a Will
You must understand that legal consequences arise for dying without a Will or dying "intestate." Making a Will allows you to choose your beneficiaries. If you die without a Will, you will have no control on the distribution of your assets.
The persons entitled to a claim of your estate will be governed under the intestacy laws of your state or territory. In NSW, for instance, properties will automatically be left to the next of kin, as provided under the intestacy rules under Chapter 4 of the Succession Act 2006 (NSW).
Under this Act, your assets will be passed on to your spouse. If you do not have a spouse, the order of relatives who are eligible to inherit is as follows:
- Children
- Parents
- Brothers and sisters
- Grandparents
- Aunts and uncles
- Cousins
The situation becomes complicated if you have a legal spouse and a de facto spouse (a new unmarried partner), or children from different relationships. A valid Will prevents complications between these parties.
In addition, if you die without a Will and without eligible relatives, your estate will be passed on to the government. Furthermore, intestacy rules only let your family members inherit from you. So if you wish to leave some of your assets to friends or acquaintances, having a valid Will is crucial.
Rights Enjoyed by Beneficiaries of a Will
Designated beneficiaries will face certain responsibilities, and enjoy certain rights. Each state legislation provides certain rights for beneficiaries. In NSW, the Succession Act lists some legal rights which beneficiaries of Wills are entitled to. These rights in beneficiary designations include the right to:
- Be informed whether or not the deceased has left a legally valid Will in place,
- Be informed if they have been listed as a beneficiary,
- Be informed about the nature and extent of the deceased person's estate,
- Receive a copy of the Will from the executor or any other person who can provide the beneficiary with a copy,
- Receive details on what their expected share can look like and details about when the allotment is supposed to take place,
- Be informed by executors about the administration of estate,
- Be informed by the executors if there are any anticipated delays in the distribution of the estate,
- Be informed about potential challenges or contests to the Will - especially if this affects their portion of the estate,
- Be informed about any liabilities (such as taxes or tax implications) attached to their portion of the estate,
- Be informed about any ongoing legal proceedings against the deceased,
- Receive a share of the estate within 12 months from the date of death of the deceased, and
- Right to receive a Statement of Distribution which provides information about the beneficiaries' share of the estate including how executors calculated that information.
Seeking Legal Advice
Naming beneficiaries in a Will is a crucial part of the making of a Will. Additionally, not naming beneficiaries in a Will results in complications or Will disputes. Conflict may arise between primary and contingent beneficiaries and multiple beneficiaries.
For instance, a primary beneficiary may refuse to receive all your assets, and another beneficiary designation, such as a contingent beneficiary, may want the claim.
Complications also arise when you choose to name a person with special needs, especially if that person is receiving government benefits. You may have a death benefit in an insurance company too. Hence, when drafting your Will, you must choose your beneficiaries wisely and think carefully before completing a beneficiary form.
JB Solicitors has a leading team of experienced estate planning lawyers that can help with all the processes associated with a Will. We offer legal advice and other legal services to ensure that our clients' legal matters are resolved.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.