So, you’re writing your online Will. First things first – you’ll need to think about who you’d like to leave your estate to. We mean, that’s kinda why you’re writing your Will in the first place, right?!
While typically, Willmakers leave their assets to a surviving spouse or children, many people fail to consider who they would like to benefit in the event that their primary beneficiaries predecease them. Of course, as humans who tend to feel uncomfortable about death – (not all of us, sure, but many of us) – this isn’t really something we’d like to think about, but it’s an important part of the Will-making process that needs to be taken into consideration early on.
But first, a note on legal phrasing
In your search for answers online or in person, you might also see ‘back-up’ beneficiaries referred to as the ‘gift over’ or ‘alternate’ beneficiaries. Keep in mind that these refer to the same thing. In this guide, we’ll keep it consistent and refer to them as your ‘back-up’ beneficiaries, because that’s how we refer to them in our online Wills. Easy.
A ‘gift over’ you say? Why?
It’s quite literal, actually. A gift over (remember, this is the same thing as a ‘back-up’ beneficiary’) can be any type of asset, like a property or shares, for example. The term refers to the process of allowing a substitute beneficiary to ‘take over’ the gift from the original beneficiary listed, in the event that they die.
Got it? Great! Moving on…
What are beneficiaries?
Let’s start with a brief explanation of the purpose of beneficiaries. The whole purpose of your Will is to select beneficiaries who will inherit your assets in the way you wish. As explained above, in many cases, this will be a close relative, but it could also be a friend, or really anyone provided you have a good reason for leaving them, well, everything (or a select portion) of what you own. Either way, if you’ve clearly expressed your wishes in your Will, and the paperwork is legally up to scratch, then your assets will be left to the person or people of your choice when you die.
Why list ‘back-up’ beneficiaries?
We can think of plenty of reasons why it’s important to list back-up beneficiaries, but for the sake of time, here are four:
- A beneficiary may choose to decline their inheritance, in which case the need for another beneficiary would arise.
- A beneficiary may die before the deceased.
- A beneficiary may not be able to legally accept or manage the estate.
- A beneficiary may be unable to be located (after a reasonable amount of time).
What happens if I don’t designate back-up beneficiaries?
If you don’t designate a back-up beneficiary and there is ultimately a need for one, it may be like no beneficiary was chosen at all.
The laws of the state in which you reside will likely determine what happens next. Suffice it to say that a failure to nominate back-up beneficiaries can cause delays in the administration of your estate, as well as smaller inheritances for your loved ones (or organisations).
So to avoid all of this, be sure to always add back-up beneficiaries. It’s a simple fix.
Choosing an organisation or a charity as a beneficiary
Yes, you can leave a bequest to a non-profit or charity in your Will.
Leaving money to a charity isn’t difficult. Simply name the charity or cause, identify their ABN (to avoid any confusion) and then detail the amount or type of gift you wish to leave them.
To nail it all down, today we’ve learnt:
- To always, always, always include a back-up beneficiary or multiple back-up beneficiaries.
- That you can list a charity or organisation as a beneficiary or a back-up beneficiary, or leave them a gift.
- That there are many, many, many legal terms that all mean the same thing.
Need help getting your affairs in order? Or is your head circling with questions about beneficiaries or bequests? We get it. Contact the friendly Willed team today and we’ll help ease the uncertainty, pronto.
Disclaimer: The content of this blog is intended to provide a general guide to the subject matter. This blog should not be relied upon as legal, financial, accounting or tax advice.