Understanding the Clauses in Your Estate Planning Will: What You Need to Know

Unless you are a solicitor, it can be hard to know what everything means in your Will. Especially if you rely on an estate planning Will that can be 30 pages in length.

That’s why we provide a plain-language summary of every clause in your Will. This document makes it easy to cross-reference what clauses in your Will mean.

This plain-language summary also explains the different trust and tax options your loved ones will have no matter their life circumstances, tax status, or needs after you die.

The more options they have, the more chances they have to protect inheritances long-term and minimise the ongoing income and capital gains tax burden on inherited assets.

And here's the rub. Australian law says that if these legal and trust options are not included in the Will, loved ones cannot use them even if needed.

We have provided an example plain language summary below. Depending on your wishes, the clauses below may not represent the exact clauses found in your Will. If there is a particular clause you would like a definition for that has not been defined by this summary document, don't hesitate to contact us.

--------------------------------------------------- TABLE OF CONTENTS SEGMENT 1: DISTRIBUTION OF MY ESTATE 

1. Cancellation and Declaration 

2. Segments 

3. Expressions

4. Executors and Trustees 

5. Initial Administration 

6. Testamentary Expenses 

7. Personal & Household Possessions 

8. My Estate Distribution (In Wills for couples only) 

9. If My Spouse (or Partner) Does Not Survive Me (In Wills for couples only)

10. Guardians (Optional clause only) 

11. Financial Gifts (Optional clause only)

12. My Remaining Estate Balance 

13. Direct Descendants 

14. Back-Up Estate Distribution Plan

15. Earlier Vesting 

16. My Organs (Optional clause only) 

17. My Mortal Remains (Optional clause only) 

SEGMENT 2: PRIORITIES, INSTRUCTIONS & AUTHORITIES 

18. Executors’ Priorities 

19. Benefit Adjustments 

20. Executors’ Discretion & Terms 

21. Express Options 

22. Discretionary Use of Testamentary Trusts 

23. Terms of Preservation Trust For Beneficiaries Under The Controlling Age 

24. Estate Testamentary Trust 

25. Control of My Non-Fixed Trusts (if any) 

26. Control of Self-Managed Superannuation (if any) 

27. Superannuation 

SEGMENT 3: TRUST TERMS & ADMINISTRATION 

28. Beneficiary Controlled Testamentary Trusts – Declaration of Terms 

29. Right of Residence 

30. General Powers of My Executors and Trustees 

31. Prospective Beneficiary 

32. Specific Powers of Executors and Trustees 

33. Provision of Advice 

SEGMENT 4: DEFINITIONS, INTERPRETATION & EXECUTION

34. Definitions 

35. Interpretation 

36. Execution

After stating your full name, address, and occupation, your Will incorporates the following provisions.

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SEGMENT 1: DISTRIBUTION OF MY ESTATE

1. Cancellation and Declaration

• This clause cancels or revokes any previous Will or Codicils you may have made.

2. Segments

• This clause outlines the various Segments of your Will to help make the Will simple to navigate and understand.

3. Expressions

• This clause names the primary beneficiaries of your Will.

• This clause also sets a Controlling Age. This is a sensible precaution preventing beneficiaries from taking complete personal control of their inheritance until they reach the age you have nominated. Children under the Controlling Age will still have access to funds for important things like education, housing, medical treatment, and general well-being expenses but cannot waste large amounts of their inheritance on immature purchases.

• This clause also includes a general statement authorising persons appointed to any roles under your Will (e.g. executors, trustees, etc.) to act jointly or, if only one survives, to act alone.

4. Executors and Trustees

• This clause is where you nominate your first and second-choice executors. It is important to note that you should review and update your Will if any of your named executors die or become unavailable for other reasons.

• Due to the long-term asset protection and tax minimisation opportunities that this Will can provide to beneficiaries, this clause also provides a sensible recommendation to your executors and primary beneficiaries to consult with a professional financial adviser, accountant, and/or experienced estate planning lawyer in respect of any dealings with your estate assets.

• To allow each adult beneficiary full, free, and flexible control over their inheritance, this clause also states that each primary beneficiary is the trustee (or ‘controller’) of their respective share of your estate.

• Additionally, one of the key safeguards this Will provides is for your executors to take over as trustee if a primary beneficiary is bankrupt, incapacitated, experiences a relationship breakdown, or has not reached the Controlling Age.

5. Initial Administration

• This clause outlines your executors’ first initial duties and priorities following your death, namely dealing with the initial testamentary expenses, creditors, and death benefits, and refers your executors to the authorities and powers provided to them to help make sure your estate is distributed as per your wishes in the most time and tax efficient way possible.

6. Testamentary Expenses

• This clause outlines to your executors what are to be treated as testamentary expenses.

7. Personal & Household Possessions

• This clause outlines the gifts of personal and household possessions or ‘Chattels’ that you wish to leave to specific people. The clause references any lists you have left with your Will portfolio or other ‘personal papers or files’. The list must be signed and dated by you. Relying on a list that is separate to your Will saves you from having to continually update your Will should you wish to add to or amend your list.

• In your portfolio, you have been provided with a Family Heirlooms and Chattels Record for the purpose of recording your wishes for gifts of personal chattels.

8. My Estate Distribution (In Wills for couples only)

• This clause explains who is to receive the balance of your estate as the primary beneficiary of a testamentary trust. The ‘balance’ of your estate is your estate less any specific gifts of purely personal items as per the previous clause. Inheriting via a testamentary trust provides important asset protection and tax advantages to beneficiaries.

9. If My Spouse (or Partner) Does Not Survive Me (In Wills for couples only)

• This clause stipulates that if your spouse or partner dies before you or within 30 days of your death, the following clauses apply.

10. Guardians (Optional clause only)

• This clause is only relevant if you and your spouse or partner both died leaving children under 18 years of age. The purpose of the clause is to nominate the people you would prefer to be appointed as guardians of your children. While this nomination via your Will is non-binding, it is sensible for a Will Owner who has young children to make it clear via their Will who their guardian preferences are.

• This clause also directs your executors to ensure that your children’s lifestyle is maintained and provides the authority to your executors to allow funds to be made available for education, development, and advancement to a standard applicable at the date of your death.

• The appointment of a guardian is subject to Court approval and there is always the possibility that a Court may exercise its overriding discretion to appoint or remove a guardian other than your nominated guardian. Your children may wish to reside with someone other than your nominated guardian. In these circumstances, the Court as always would take your children’s best interests into account in deciding the issue.

• The guardian must ensure that the child is appropriately housed, clothed, cared for, and educated, and must make important ‘life decisions’ for the benefit of the child.

11. Financial Gifts (Optional clause only)

• This clause lists the people and/or organisations (if any) you have nominated to be a recipient of financial gifts. For couples, these financial gifts would be made on the death of the last of you.

12. My Remaining Estate Balance

• This clause divides the remaining balance of your estate between your nominated primary beneficiaries, with each surviving beneficiary benefiting from the protections and tax minimisation opportunities of testamentary trusts.

• Your estate distribution is subject to the Benefit Adjustment provision in Segment 2 that aims to protect your specific distribution wishes (i.e. equal or unequal shares).

• The terms applying to any beneficiary-controlled testamentary trusts created by your Will are set out in Segment 3.

• The beneficiary-controlled testamentary trusts are optional, meaning beneficiaries do not have to receive their inheritance via a testamentary trust, discretionary, meaning they have full control over their own trust, and individual, meaning that two or more children do not have to share control of a single testamentary trust, thereby reducing the potential for tension and conflict between them.

• Inheriting via a testamentary trust can provide long-term asset protection and tax minimisation opportunities to beneficiaries.

13. Direct Descendants

• This clause states that, in the unlikely case of your primary beneficiaries dying before you, leaving children of their own, the share of any deceased primary beneficiary is to be divided equally between any children of your deceased primary beneficiary.

• As with your primary beneficiaries, this distribution is based on providing direct descendants to benefit from the option to inherit via a separate beneficiary-controlled testamentary trust they control.

• Furthermore, and while highly unlikely, this clause states that the share of any deceased child of a primary beneficiary flows down to their children if any, thereby distributing your estate to direct descendants.

14. Back-Up Estate Distribution Plan

• As the name of this clause suggests, having a backup plan for your estate is important to include but very unlikely to be needed.

• It states what is to happen to your estate if none of the persons referred to in the preceding clauses lives to inherit as a primary beneficiary of your Will. Without this provision, there remains a chance that your estate could end up in the hands of the government.

15. Earlier Vesting

• This clause ensures that a beneficiary does not ‘miss out’ because they have not attained the Controlling Age by the time the trust ends.

16. My Organs (Optional clause only)

• This clause expresses your non-binding wishes concerning organ donation. For information about The Australian Organ Donor Register, where you can record your legal decision to become an organ or tissue donor after death, go to https://register.donatelife.gov.au/

17. My Mortal Remains (Optional clause only)

• This clause expresses your non-binding wishes regarding whether you are to be buried or cremated. Under Australian law, your executors have the authority to make the final decision regarding your mortal remains.

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SEGMENT 2: PRIORITIES, INSTRUCTIONS & AUTHORITIES

18. Executors’ Priorities

• Segment 2 of this Will is primarily concerned with ensuring as far as possible:

i) your primary beneficiaries receive their share of your estate; and

ii) your beneficiaries receive an inheritance in the most cost & tax-effective way; and

iii) your executors obtain appropriate taxation and financial advice.

19. Benefit Adjustments

• When you have two or more primary beneficiaries, this clause instructs your executors to protect your wishes for the equal or unequal division of your estate to your primary beneficiaries by considering common issues including:

i) Financial gifts made to primary beneficiaries during your lifetime, which you have recorded in writing (see your Beneficiary Loans Record in your Will Wizard portfolio);

ii) Amounts owed to you by any of the primary beneficiaries under a written loan agreement (see your Beneficiary Loans Record in your Will Wizard portfolio);

iii) Any financial obligation you may have at the date of your death as guarantor for any of the primary beneficiaries (see your Beneficiary Loans Record in your Will Wizard portfolio);

iv) Superannuation and pension death benefits paid to one of the children who is a dependant and another who is not a dependant;

v) Life insurance policy ownership: e.g. death benefits paid to a child nominated as a policy owner or beneficiary;

vi) Discretionary trust allocations (it may be appropriate to provide that the discretionary trust become a restricted, fixed, or discretionary trust for a beneficiary unlikely to have children);

vii) Personal chattels of significant monetary value (for example a valuable artwork or piece of

jewellery).

20. Executors’ Discretion & Terms

• This clause provides specific authorities to your executors to alter the terms of a beneficiary-controlled testamentary trust with the prior consent of the primary beneficiary.

21. Express Options

• The type of trust that might best suit a primary beneficiary given their circumstances and the various tax and other laws that may or may not impact their inheritance in the future is impossible to predict. As such, this clause provides examples of different types of trust options possible, giving your executors the discretion to vary the terms of the trust so that each beneficiary can choose the type of trust that best suits their needs and circumstances. Once again, a beneficiary should get professional advice before deciding on the type of trust that best suits their needs.

22. Discretionary Use of Testamentary Trusts

• This clause provides your executors (with the consent of the relevant primary beneficiary) with the authority to bypass or avoid a beneficiary-controlled testamentary trust. Instead, your executors are given the power, subject to the primary beneficiary’s consent, to distribute an inheritance directly to a beneficiary. 

Your executors, again subject to the consent of the primary beneficiary, also have the power to distribute to another trust. It is important that testamentary trusts are optional, as there can be adverse tax consequences should a beneficiary choose to reside overseas.

23. Terms of Preservation Trust For Beneficiaries Under The Controlling Age

• This clause would only apply if one of your beneficiaries were under the controlling age at the date of your death.

• This clause imposes positive obligations on your executors to make sure that beneficiaries under the controlling age are properly housed and maintained until they reach the controlling age set in your Will.

• Your executors are obliged to review any underage beneficiary’s circumstances and needs at least every six months and to consider any recommendations made by their guardian.

• This clause includes several issues on which a beneficiary must satisfy the executors before they can take control of their own trust.

• The executors are required to comply with the prudent person rule set out in the Trustee Act in respect of the investment of funds for minor children.

24. Estate Testamentary Trust

• This clause gives primary beneficiaries the option to postpone the distribution of their inheritance from the estate trust to their own trust.

• There can be any number of reasons for a beneficiary choosing to delay the distribution. A few examples include:

I. A primary beneficiary who is planning to return to Australia to live as a resident following working overseas but is yet to return;

II. A primary beneficiary may receive professional tax advice regarding the benefits of a potential delay given their age or income;

III. A primary beneficiary is involved in a legal dispute such as following a relationship breakdown, divorce, bankruptcy or being sued professionally.

25. Control of My Non-Fixed Trusts (if any)

• This clause provides your executors with the authority to assume control of any non-fixed trusts or the shares in non-fixed trusts you may have at your death and instructs your executors to then pass effective control to your primary beneficiaries.

26. Control of Self-Managed Superannuation (if any)

• This clause provides your executors with the authority to assume control as trustee of any shares in a company acting as trustee for any self-managed super funds you have at your death and instructs your executors to do everything possible to ensure that the terms of any valid binding death benefit nominations you have made are complied with.

27. Superannuation

• This clause provides for all or part of any superannuation death benefits received by the estate to be held or distributed on terms that satisfy the requirements for tax exemption. The terms of any superannuation death benefits distribution or testamentary trust may be set out in the Will, or a trust can be established after death into which the death benefits can be directly paid.

• This clause provides your executors with the option of placing all or part of any death benefits paid to the estate in a special superannuation death benefits testamentary trust. Again, as with beneficiary controlled testamentary trusts, unwanted superannuation death benefit trusts can be avoided.

• To preserve the income tax exemption, beneficiaries of a superannuation death benefits testamentary trust are usually confined to tax dependents for death benefit purposes. A superannuation death benefits testamentary trust is essentially an alternative to the beneficiaries of the trust receiving a pension from the superannuation fund.

• A pension from a superannuation fund is also taxed at concessional rates in the hands of the beneficiaries under 18. However, it does mean that capital is converted into income and your executors do not have day-to-day control of the money and cannot access the capital without bringing the pension arrangements to an end.

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SEGMENT 3: TRUST TERMS & ADMINISTRATION

28. Beneficiary Controlled Testamentary Trusts – Declaration of Terms

• This clause sets out the terms that administer each beneficiary-controlled testamentary trust established by the Will. The terms provide beneficiaries with freedom and flexibility to manage their inheritance almost as if there was no trust in place at all. The terms are similar to a discretionary trust established by Deed but include important differences. Among other things, the terms define:

i) The class of beneficiaries;

ii) Distributions of net income, capital, and other benefits to beneficiaries;

iii) The power to trustee appointments;

iv) The sharing of control if two or more beneficiaries take control of the trust after the primary beneficiary dies;

v) The circumstances where your executors assume control in the event of the primary beneficiary becoming bankrupt or otherwise under a legal disability; and

vi) The eventual winding-up of the trust.

29. Right of Residence

• The ‘Right of Residence’ clause spells out the terms and conditions regarding the Will owner’s direction to the executors to allow a primary beneficiary to have an enforceable personal right to reside in any inherited real estate or immovable property. This is designed to help mitigate potential land tax issues being levied on an inherited property a primary beneficiary may choose to reside in.

30. General Powers of My Executors and Trustees

• This clause provides executors and trustees with flexible administrative powers to ensure your testamentary intentions are met. The purpose of this clause is to ensure that your beneficiaries are provided with as much flexibility as possible to manage their inheritance for their benefit.

31. Prospective Beneficiary 

• This clause outlines the specific powers executors have regarding a prospective beneficiary. A prospective beneficiary is one yet to attain the relevant Controlling Age. Your executors have the power to apply money for the maintenance and support of the beneficiary and to distribute income and benefits to any dependants of the prospective beneficiary. Alternatively, your executors can also choose to make the prospective beneficiary the sole income beneficiary.

32. Specific Powers of Executors and Trustees

• This clause sets out a range of administrative powers for your executors and trustees. These powers provide your beneficiaries with almost unrestricted power to deal with their inheritance. Revenue authorities, beneficiaries, lenders, and other people dealing with the trust often wants to see specific authorisation of aspects of estate or trust administration. Authority is provided to your executors or trustees to add to these specific powers.

33. Provision of Advice

• This clause provides a further recommendation for your executors and beneficiaries to seek professional financial advice before any important investment decisions are made.

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SEGMENT 4: DEFINITIONS, INTERPRETATION & EXECUTION

34. Definitions

• Throughout your Will are specific terms that carry significant and specific meanings defined in this clause.

35. Interpretation

• This clause explains how the wording, provisions, and clauses in your Will are structured, and how they are to be interpreted.

36. Execution

• This clause ensures the validity of your Will. For a Will to be valid it must be signed by you in the presence of two or more witnesses, present at the same time, who also sign the Will in your presence. 

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Why are testamentary trusts so recommended?

Testamentary trusts can last for 80 years benefiting multiple generations. Testamentary trusts can help beneficiaries protect inheritances during common life problems like a de facto break-up or divorce, bankruptcy, and other financial problems. Testamentary trusts can help beneficiaries minimise the income & capital gains tax burden on inherited assets.

Who can use a testamentary trust?

Every beneficiary of your Will has the option to receive their inheritance in a testamentary trust. Every beneficiary can rely on single or multiple trusts - including different types of trusts - depending on what is a tax-effective strategy given their future needs and tax status. Beneficiaries can choose to also share a trust or share multiple trusts.

What are the terms of a testamentary trust?

All testamentary trusts have their terms (or rules) governing how beneficiaries can use them. These terms must be included in your Will. Your Will provides comprehensive & flexible trust terms to give beneficiaries freedom in how they receive and manage their inheritance. 

This flexibility is important, as a beneficiary's future needs and tax status are unknown.

Who can benefit from a Will Wizard testamentary trust?

Your Will ensures that a beneficiary's testamentary trust is for the benefit of the beneficiary unless the beneficiary authorises otherwise. 

For instance, a beneficiary may wish to minimise income tax by distributing the income earned from trust assets to family members at low tax rates. This income could pay for a child's school fees or living expenses, rather than being paid to the ATO.

What about your executors?

Your 'executor' is the person you nominate in your Will to be responsible for following your instructions and distributing your estates to your beneficiaries. 

In your Will, there is a five-page segment dedicated to establishing clear priorities, options, and authorities for executors. Additional information is provided via the Guide for Executors.