Do you need to re-think your estate plan?
Here are 9 critical issues you might need to consider
1. Are the assets mentioned in your will actually yours to bequeath?
People often include assets in their will which they don’t legally own. For example, assets owned by a trust will generally continue to be owned by that trust after your passing.Assets that are owned in conjunction with another person (e.g. the family home and some investments) will generally pass directly to that person when you die. They won’t form part of your estate.Similarly, other assets like your superannuation, may be distributed directly to beneficiaries you have previously nominated outside of your will.
2. Newly married? How does that impact your existing will?
Marriage can automatically revoke a will so points to consider include:
- Has the marriage revoked the current will?
- Has the marriage revoked an existing enduring power of attorney or appointment of enduring guardian?What is the effect of any superannuation nominations? For instance, is a nomination of a previous partner still valid? If so, is this still desirable?
- How has life insurance been affected – are beneficiary nominations still appropriate?
3. Do you have minor children?
Ensuring your children will be cared for if you were to die, or if both parents were to die, needs careful consideration in your estate plan.
Does the will provide for the appointment of guardians of your choice? It may need to be updated to nominate testamentary guardians to take care of your children if both parents die at the same time.At what age does the will allow the children to inherit their share of the estate? It might be worthwhile thinking about including testamentary trust provisions in a will so that your children do not inherit everything at an age when they do not have the maturity to appreciate it.
What if both parents become incapacitated at the same time? Who would look after the children then, and what financial arrangements are in place to look after their schooling, maintenance, and so on?
4. Divorce – revising your estate planning is a must
Divorce may remove your ex as a beneficiary but it does not automatically revoke a will, so a review of your estate planning is crucial. Your ex could have a critical role as the trustee of a minor child’s trust even though you are long-ago divorced.
Many couples go through a separation period before getting divorced. A now ex-partner may still inherit if a person dies after separation but before divorce is finalised.
You might also revise any enduring power of attorney documents – you may not want your ex having a say in your finances and health and medical decisions.Also revise any trust documents because an ex-spouse may be able to take control of the trust.
5. Blended families can be an estate planning minefield
Blended families can cause a number of complications in your estate planning.Some issues to consider are:
- Does your will and trust documents reflect the proper beneficiaries?
- Consider whether the new spouse will be provided for in the will
- Consider whether any children of the new spouse from a previous relationship will be provided for
- Be aware of the Family Provision Legislation which in most states of Australia extends to stepchildren – they may be able to claim against your estate
- Determine which assets will be left to the new spouse and which to leave your children, and if any will go to a previous spouse
- Consider a Binding Financial Agreement with the new spouse.
6. Have you chosen an appropriate executor?
Choosing the correct executor – someone who has the time and wherewithal to administer your estate – is important because they can have the power in the estate. Choosing the wrong executor may cost your estate time and money and, in a worst case scenario, leave the beneficiaries with a long period of frustration and angst while they wait for their inheritance.
6. Could your estate be subject to family feuds?
It is becoming increasingly common for family members – and even other parties – to challenge a will in court, often at the expense of the estate (rather than the person lodging the claim).
Creating a detailed estate plan – with the help of an estate planning professional – can help minimise the chance of successful claims against the estate.As an example, this could include specifying why one child has been left a certain amount of money, while another child has been left less because, for instance, the parents may have assisted the latter child financially before the parents’ passing.
7. You may need to take taxation into account
Are you bequeathing assets like a business, property and shares? If you are, you may need to determine the taxation consequences if your objective is to create an equal distribution in terms of value.
For example, some assets may not have an accrued capital gains tax liability (such as the family home or an asset purchased prior to 19 September 1985), while other assets will already have an accrued liability.On the surface, both assets may be worth the same, but when you take tax into account, the net values may be very different.
8. Don’t ignore mental competency issues
Estate planning is not just about planning for death; it should also take into account what happens if should you become mentally incompetent due to illness or accident.
It is a good idea to formally plan for how you would like to be looked after if this were to occur, and to state who you trust to look after your financial and legal affairs.
Your financial adviser can work with you on with your estate planning in conjunction with an estate planning professional
If you have concerns that your estate plan might not be up-to-date, or not appropriate for your current circumstances, talk with your financial adviser. They can help you by putting you in touch with an estate planning professional.
by Anna Hacker BA (Hons)/LLB (Hons), Accredited Specialist – Wills & Estates, National Manager – Estate Planning, Flinders Legal (part of the Australian Unity Group)
Disclaimer: This article is not legal advice and should not be relied on as such. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial advice relevant to your circumstances before making investment decisions. Where a particular financial product is mentioned you should consider the Product Disclosure Statement before making any decisions in relation to the product. Whilst every care has been taken in the preparation of this information, Australian Unity Personal Financial Services Ltd does not guarantee the accuracy or completeness of the information. Australian Unity Personal Financial Services Ltd does not guarantee any particular outcome or future performance. Australian Unity Personal Financial Services Ltd is a registered tax (financial) adviser. Any views expressed are those of the author and do not represent the views of Australian Unity Personal Financial Services Ltd. If you intend to rely on any tax advice in this document you should seek advice from a tax professional. Australian Unity Personal Financial Services Ltd ABN 26 098 725 145, AFSL & Australian Credit Licence No. 234459, 114 Albert Road, South Melbourne, VIC 3205. This document produced in October 2016. © Copyright 2016