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Life Insurance

How to write a will

2022-09-21 00:00

  • A will states how you want your assets distributed after you pass away
  • Not having a valid will in place can slow down the distribution of your assets and may lead to unintended outcomes
  • Life insurance can provide a valuable source of funds to help eliminate debts and provide for your dependants if you die unexpectedly

What is a will?

A will is a legal document that states how you want assets such as property, shares and other possessions distributed after you die. The assets covered by your will are known as your 'estate'. 

A will can also include funeral instructions, guardianship of dependants, and plans for any trusts or ongoing charity support you want set up. 

Importantly, your will should specify who you've chosen to act as 'executor', as it will be their role to ensure your wishes are carried out. The executor can be a trusted friend or family member, or an appointed professional such as a solicitor or trustee company – who may also be able to help you prepare a will. 

When should you write a will?

Experiencing a major life event such as marriage, buying a home or starting a business is a good opportunity to write a will that reflects your new circumstances. One life event in particular that often triggers the need for a will is the arrival of children.

"Having young people to look after is a big incentive to get your affairs in order," says ANZ Head of Legal, Estate Planning Peter Holdsworth.

"You need to think about who will look after your children if one or both parents pass away and it's likely you'll want to nominate a guardian for them in your will."

What makes a will valid?

The will is only valid when it is in a written format and signed by you and two witnesses. The witnesses cannot be included as beneficiaries in your will. The witnesses also need to sign a document to state that you appear to be in a state of sound mind when you signed the will.

DIY will kits are available to make this process easy. However, you should consider getting advice from your solicitor and financial adviser to ensure your will is valid and covers everything it needs to.

When you withdraw your FHSS contributions (and the deemed interest it's made) for your first-home purchase, your savings will generally be taxed at your marginal tax rate less a 30 percent offset.

What happens if you die without a valid will?

If a person dies without a valid will, this is called dying 'intestate' and means the estate will be administered according to a formula set out in the relevant state law. This can take a long time and may result in some or all of your estate going to individuals you hadn't intended to be beneficiaries.

"An unsigned will or an incomplete will, or having the idea of a will in your head, is of no benefit to anyone," Holdsworth says.

What's an estate plan?

An estate plan includes a will and other legal arrangements, such as powers of attorney and nominated insurance beneficiaries, and clearly states what medical decisions to be made on your behalf if you become incapacitated. A power of attorney is an important legal document used in appointing an executor to act on your behalf – that is, to be your decision maker – in property and financial matters.

In your estate plan you can also nominate the person responsible for care of minor children, and how they are to be cared for until age of 18. 

Don't forget about tax

Tax can be an important consideration in estate planning as the outcomes can vary significantly depending on your personal circumstances and beneficiaries.

For example, if you have a life insurance policy owned outside of super, your death benefit can be paid tax-free to anyone. However, if you have a life insurance policy owned inside super, only a spouse or financial dependant can receive this money tax-free. Anyone else is likely to have to pay tax on these amounts, which could significantly reduce the end benefit to them. 

Your estate plan should take a broad view of your assets, including superannuation and life insurance, to ensure the way you plan to distribute assets is both fair and tax-effective.

Start the conversation

A good place to start is to discuss your will with your partner or other loved ones, including potential guardians for your children. Once you have an idea of your goals, a financial planner can help you put in place a comprehensive estate plan that meets those objectives, while making sure you have sufficient life insurance to make it happen.

Find out more about the different types of life insurance and have your big questions about life insurance answered.

How to write a will

Discover more about life insurance

Insurance can help protect you and your loved ones from the unexpected. We've partnered with Zurich Australia – one of Australia's largest and most experienced life insurers – to help you take care of yourself and the ones who rely on you.

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