So you have a will – but have you considered all of your assets?
You have drawn up your will with your solicitor and ensured that all your assets are going to the intended beneficiaries. Just in case you missed anything you included a ‘catch-all’ clause that divides equally between intended beneficiaries any residual assets.
What possibly could go wrong?
Let’s for one moment say that you are a business owner that owns substantial business assets including real estate in a family trust. You are the appointor and trustee of the family trust. Over the years you received distributions from the family trust which you have used to pay off the bank loans which were taken out to finance the real estate and other assets used in the business. Effectively this created a loan from the family trust to you, let’s say of $3m, which is an asset that has not been specifically considered in your will.
You have three adult children and your oldest son is working with you in the business and your intention is that he will take over the business and the family trust once you have passed away and your will reflects your wishes. The other two children will receive other assets.
After you have passed away, your executor transfers the assets per the will, however as the $3m loan in the family trust was not specifically provided for in the will it will be dealt with under the ‘catch-all’ clause and it will be necessary for the family trust to pay out $2m to the two other children to satisfy the requirements under the will.
Although the business has sufficient assets to pay out the $2m, it would potentially require the sale of these assets which are essential for the business to operate or bank loan has to be taken out, putting the business into debt that may be difficult to service and put strains on cash flows.
You certainly did not intend for this to happen and it highlights the importance of careful consideration of all assets to avoid unintended consequences.