Best be prepared!
Happy New Year! It’s been a bit of a wild start to the year with all the bushfires. But all the warnings to prepare your home and family to either stay and defend or leave early got me thinking about the decisions we make before disaster comes to call.
Now you might think it’s a bit morbid starting a new year thinking about what could play out if the worst should happen, but if you’re not in the thick of the fires or any other imminent disaster, this time of year can actually be a good time because you’ve got a bit of time to think about estate planning – who benefits and how. And, as always, the best time to plan for something is when you don’t need it.
So we thought it might be useful to look at what you need to consider as part of being prepared for the worst. Estate planning is not just about having an updated will in place – but we’ll start there.
Let’s start with the most obvious key to your preparation. Did you know that around 45% of Australians don’t have a will in place when they die? But wait, it gets worse – if you die without a Will and your only living relatives are more distant than cousins, your entire estate will pass to the government. That’s pretty motivating.
Your Will should be updated when you purchase/dispose of assets, retire, gain/lose family members or if there’s a significant shift in asset values. If you’re thinking it’s likely to cost a fortune to set up a will, you can purchase a will kit from the newsagent or have one prepared by the NSW Trustee & Guardian which also has a good downloadable guide to wills, estates and trusts; or you can consult your solicitor.
Choosing an Executor
Your Will activates upon your death and the Executor is the person that manages what happens afterward. It’s not just the carving up of the estate though, which usually takes around a year to complete if there aren’t hold ups. The person who holds this role makes sure bills are paid (like funeral expenses, mortgages, rates, utilities), final tax returns are completed and children are looked after. Whilst this can be a trusted friend, it can be an onerous task especially for someone who’s already grieving your loss. So we often suggest that it may be best to have someone you trust along in conjunction with your solicitor.
Having your Will in place seems like it should be the end of it all, but did you know that your Super isn’t governed by your Will? No? It’s actually governed by the trust deed of your superannuation fund and the corresponding legislation and only a limited type of relationship is permitted for someone to benefit directly from your super fund. Beneficiaries must be your spouse, children, or someone who is financially dependent on you; or someone with who you have an interdependency relationship (ie: a very close personal relationship that involves provision of financial, domestic or personal support); or your personal legal representative.
How do you make sure your money goes where you want it to? You must make sure you complete a beneficiary nomination form with your fund. And make sure that you keep it current as these forms generally expire every three years.
There’s been a lot said and written about this lately but mostly just to do with property. Let’s look at protecting people. The absolutely best time to get life, income and trauma insurances are when you’re young and nothing health-wise has happened yet, otherwise you might find it a bit harder to come by. But it’s always worth pursuing.
A common mistake a lot of people make is to think they’re protected under their superannuation. And then, when the worst happens, they find out that either the level of coverage wasn’t enough to support their lives or that the insurance only covered accidental death. When that happens, family members who are already grieving the loss of their loved one, are plunged into extra uncertainty over how the mortgage gets paid, how they’ll put food on the table, etc.
So where do you start? Look at how much debt you have including credit cards, and might have into the future and look at a life insurance policy that will pay it all off if you die. Ensure it’s a life policy not some other limited cover like accident insurance.
Legal guardians of your dependents – done as part of your will
If you’ve got children under the age of 18 (or children/spouses with a significant disability), you need to decide who they will be looked after by in the event of your death. If you don’t, then it will be left to your family (who are already grief-stricken) and/or the State Government to decide – and that can include putting them into foster care. And deciding on who does what can be particularly thorny if various family factions don’t get along – especially if there’s also money involved. So make sure that’s sorted early.
Guardianship – over you
We all like to think we’ll be completely in charge of our faculties until the end, but just in case, you need to decide who is going to make health decisions for you, should you be unable to do it for yourself. Appointing this person requires a goodly conversation with them firstly to get their consent, and also about your wishes for end of life treatment. Not an easy conversation to have, but a very necessary one. Plus you might want to put those wishes in writing, just in case another family member disagrees with a chosen course of treatment. It will make it just that little bit easier for everyone concerned.
Power of attorney
Your Will only activates upon your death. If, for some reason you become incapacitated or unable to manage your own affairs you need a Power of Attorney in place so that person can act on your behalf. There are different levels of Power of Attorney but, generally speaking, you can appoint someone to act on your behalf in various aspects of your life, whether that be your medical health and welfare, your business or financial life or absolutely everything. This person has the ability to make decisions on your behalf so again, they need to be a trusted person or maybe even a joint Power of Attorney with a trusted individual along with your solicitor or accountant.
And that’s where we can help. If you’re looking for someone to help with estate planning, especially the tax and business implications, we’d be delighted to help. You can call us on 02 6023 1700 or get in touch via the form below.
Got a question? Get in touch
If you've got financial or business questions, or you just want to run something by us, we'd be delighted to really talk to you – in person, over the phone - call us on 02 6023 1700 - or you can use the form below and we'll get back to you.