Estate planning is more than just wills…
Many people are unaware that there are other documents and issues that may affect the end-of-life circumstances or even the distribution of select assets…
Common ‘Epic Fails’ can be easily avoided with proper, specialist advice.
Estate planning is a complex and specialised area of the law with many potential risks.
Often people, even those who are financially successful and have planned well throughout their entire lives, are simply unaware of the issues that may be involved when it comes to properly distributing their assets under their will and implementing their estate plan.
Below are some of the most common mistakes people make when planning their estate.
Error 1 – Failure to adequately consider superannuation
Superannuation is the second biggest class of assets (behind residential property) in Australia and is growing fast. Many people, including some professional advisors, are not familiar with the issues associated with superannuation on death.
Superannuation must be considered in the context of the entire estate plan. This is because the first port of call for the distribution of superannuation funds on death may not be the will of the deceased, but the terms of the fund, superannuation legislation or the trustee of the superannuation fund. It may be necessary to prepare a binding death benefit nomination to ensure that an individual’s wishes in relation to their superannuation are achieved where there is a self-managed superannuation fund (SMSF), there are further issues to consider, including future control of the fund. These issues become even more important where borrowing arrangements are in place to purchase real estate. Failure to consider the issues of liquidity and succession scenarios may result in inequality or require that assets be sold prematurely or at a loss to meet the requirements of superannuation law.
Error 2 – Failure to consider including testamentary trusts (TT) in a will
Testamentary trusts provide multiple asset protection and taxation benefits and may be key to ensuring that the wealth you have created stays in your family for generations to come.
Many people are not aware of the benefits that a TT can offer. TT’s can offer flexibility and security benefits for loved ones well into the future, protecting their inheritance from creditors, predators and divorcing spouses.
Error 3 – Preparing a will…only
There are a suite of other documents that may be beneficial to utilise in an effective estate plan that considers all angles. Putting in place enduring powers of attorney or guardianship, advanced health directives, business succession agreements or binding death benefit nominations all may be critical parts of an estate plan.
Error 4 – Failure to choose the right people to implement your estate plan
Choosing the right executor, trustee, appointor and guardian (or legal guardian) under your will is very important. Each of these roles have very specific and particular demands.
Those appointed must be ready, willing and able to act for you and fulfil those demands. Extra care must also be given to choosing appropriate successors or ‘back-ups’ in these roles if the named person is unable to act or fulfil those duties and you should notify the people you have appointed.
Error 5 – Failure to provide for the succession of trusts and companies
Upon a person’s passing there may be other legal entities such as trusts, and companies held by the deceased through a structure. Often the will does not provide entirely for these entities although they may hold significant assets.
A tailored estate plan must adequately provide and deal with the entire spectrum of a deceased’s assets, including trusts, companies and other holdings. This can help to minimise risk and unnecessary expense for the estate and your beneficiaries in the future.
Error 6 – Failure to contemplate the possibility of marriage to a de facto spouse
A person who has been in a longterm relationship should take this into account in their estate plan for obvious reasons. A tailored approach to estate planning for second families can prevent ‘the ex’ from controlling an inheritance of the kids or disputes across family lines.
Error 7 – Failure to provide for a spendthrift or vulnerable children
Many people prepare wills leaving their estates outright to their children with little consideration of whether their child is well positioned to handle this wealth. This may mean that an inheritance is squandered unnecessarily by poor estate planning. Again, there are a number of approaches that an estate planning lawyer can remedy in a simple and effective way.
Error 8 – Failure to provide to update wills when your circumstances change
It is important to review wills regularly and update wills when necessary, such as if a beneficiary passes away or when the family situation changes (for example divorce, marriage, de facto relationship, marriage troubles or if new children are born). Many people also fail to update their wills when they become involved in a new business or establish a company or trust. This means the estate plan does not really fit the situation of the deceased and may cause unnecessary difficulties in the future.
Error 9 – Failure to obtain advice on the subject of a family provision application
Under law in each Australian jurisdiction, a Will can be contested for inadequately providing for the proper maintenance and support of a defined class of persons. These persons include spouses, de facto spouses, former spouses, children, adopted children, step-children or dependents of the deceased. If you decide to leave one of these ‘dependents’ out of your will then you must obtain specialist advice in regard to family provision applications and how to mitigate against the risk of one being brought against your estate.
Error 10 – Failure to adequately deal with real property under the estate plan
Whether a property is owned as joint tenants or tenants in common can have a huge impact on what goes into the estate and what stays out. To ensure that the gifts under your will truly reflect your intentions, arrange a consultation with us today. Do not leave it until it’s too late! Estate planning is an area where you only get one chance to get it right for your family and loved ones.
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