Why a cheap will can become an expensive financial mistake for your family

Many people who carefully manage their finances are prepared to entrust the distribution of their life savings to a cheap online will or a do-it-yourself will kit.

The irony is that the decision to save a few hundred dollars on a will can sometimes create thousands of dollars in additional costs for the family left behind.

A will’s role in financial planning

A will is often viewed as a legal document. In reality, it is also an important financial planning tool. It determines how assets are transferred, who controls those assets after death and how efficiently beneficiaries receive their inheritance.

For many Australians, their estate may include a family home, investment property, bank accounts, term deposits, shares, vehicles, personal possessions and superannuation (depending on arrangements). Collectively, these assets may be worth hundreds of thousands, or even millions, of dollars.

Against that backdrop, the cost of preparing a will is usually a very small component of a person's overall financial position.

The real risk is not the cost of making a will. The real risk is getting it wrong.

See also: When do I need a will

Where DIY wills fall short

A common misconception is that an online will is sufficient because it produces a document that appears legally valid. While many online platforms can generate a basic will, they cannot always identify issues that arise from individual family and financial circumstances.

For example, a person may own property jointly, have children from a previous relationship, operate a family trust, own a business, have substantial superannuation benefits or wish to provide unequal gifts to beneficiaries. 

These issues can have significant financial consequences and may require advice that extends beyond simply completing a template.

Where a will contains errors, ambiguity or omissions, the costs are often borne by the estate itself.

Family members may be required to obtain legal advice to determine the deceased's intentions. Probate applications can become more complicated. 

Disputes may arise between beneficiaries. In some cases, court proceedings become necessary to resolve uncertainty that could have been avoided through proper planning.

Even where litigation is avoided, delays can create practical financial difficulties.

When a cheap will costs expensive problems

Beneficiaries may be unable to access funds needed to maintain a property, pay expenses or discharge liabilities. Mortgage repayments, council rates, insurance premiums and other costs do not stop simply because a person's estate is being administered.

The family home is often where the greatest financial impact is felt.

For many Australian families, the home represents the largest asset in the estate. If there is uncertainty regarding ownership, beneficiary entitlements or the validity of a will, the sale or transfer of the property may be delayed. 

During that period, holding costs continue to accrue and the value ultimately available to beneficiaries may be reduced.

A professionally prepared will does more than record instructions. It provides an opportunity to identify risks before they become expensive problems.

An experienced practitioner will typically discuss the ownership of assets, family circumstances, potential claims against the estate, superannuation arrangements and the practical administration of the estate. These discussions can uncover issues that might otherwise remain unnoticed until after death.

How important is estate planning 

Importantly, reviewing a will should not be a one-off exercise.

Major life events such as marriage, separation, the purchase of property, the birth of children or grandchildren, retirement and changes in financial circumstances should prompt a review of estate planning arrangements.

Many Australians understand the value of obtaining professional advice before purchasing a property, investing substantial sums or entering into a business transaction. Estate planning deserves the same level of attention.

While an online will or DIY will may appear to save money in the short term, the potential financial consequences of mistakes can far outweigh the initial savings.

In the context of an estate that may contain a family home, savings, investments and superannuation, a properly prepared will is not merely a legal expense. It is an investment in protecting family wealth and reducing the risk of future financial and personal disputes.

For most people, the question should not be whether they can afford professional advice. The better question is whether their family can afford the consequences if they do not obtain it.