Protect your estate from these mistakes

This article is designed to educate and prepare your clients for the often overwhelming task of estate planning. Five important components are discussed, which further break down the major issues that can arise if plans are not in place. A call to action is provided at the end of the article to seek professional help.

It’s a sad but unavoidable fact: one day we are all going to die. You will most likely have clear ideas as to how you would like your hard-earned wealth – your ‘estate’ – to be divided amongst your loved ones or other beneficiaries. However, estate planning is a complex area of law and basic mistakes can see Wills declared invalid, money end up with unintended recipients, or benefits reduced by avoidable tax bills. So how can you avoid making some of these mistakes?

Make a Will

Only around half of Australian adults have a valid Will. If you don’t have one, make one. Otherwise, your estate will be distributed according to a government formula, and if no beneficiaries can be identified your life’s savings will end up in state government coffers.

If you do have a Will make sure you review it regularly and update as required. Just a few of the key events for revising your Will include entering or leaving a marriage or de facto relationship, starting a family, establishing investment vehicles such as companies or trusts, changes to the financial or health status of adult beneficiaries, or gifting to charities.

Appoint an appropriate executer

Administering an estate can be a major undertaking. Ideally, you will want an executor who is competent, organised, honest, and unbiased. Often this will be a spouse who is also the sole beneficiary, and administration of the estate may be relatively straightforward. But it’s common to also nominate an alternative executor, should your spouse die before you. This may be an adult child or other close relative, and not necessarily a beneficiary. Whoever you nominate, make sure you tell them that they are a (potential) executor, and provide them with important information such as the location of the original Will, and contact details for your lawyer, accountant, and financial planner.

Identify assets that may not be dealt with by your Will

Any assets that you jointly own automatically pass to the surviving owner/s on your death. They are not subject to your Will.

If you have provided your super fund with a binding death benefit nomination your death benefit will be paid to the nominated beneficiary. This can be anyone, and not necessarily a beneficiary of your Will. If you nominate your ‘personal legal representative’ (i.e. your executor), the death benefit will be paid to the estate and dealt with according to your Will. If you don’t make a binding nomination, the trustees of your super fund are obliged to pay the benefit to your dependents, as defined by superannuation law. This may not coincide with your wishes.

Be fair

If someone has reasonable grounds to believe they should receive something from your estate but you have not provided for them in your Will, then they may be able to legally challenge your Will. Legal fees may be paid by the estate, eroding its value, so you’ll want to minimise the chances of the Will being contested.

Also be wary of ‘ruling from the grave’, for example by making any gifts dependent on a beneficiary either doing something (marrying a specific person) or not doing something specifically detailed in the Will.

Get expert advice

Estate planning throws up many other traps for the unwary, from paying too much tax on a superannuation death benefit, to not making provision for beneficiaries who are unable to adequately manage their own affairs. With so much at stake, it pays to consult a specialist estate planning lawyer.

Information on this site may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product.

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