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Estate Planning – Top Tips and Traps

Are you clear about what will happen to your accumulated wealth once you die?  Have you documented a plan for who will be in control of your financial affairs upon your passing or if you lose mental capacity?  Are you worried that your financial legacy will be lost in legal disputes and fighting?

When it comes to estate planning, so much needs to be considered to avoid the pitfalls and traps that may lead to a dispute after you die.  Here are 7 top tips and traps to be aware of when it comes to estate planning:

1.  Make sure you have a will

By taking the time to write a will, you can save your next of kin uncertainty and stress.  You will also save the extra legal costs that might have to be paid to finalise your estate.  Even if you don’t think your estate is worth much, you should make a will.  You may have superannuation, or your death may result in an insurance payout, and these funds could form part of your estate.

2.  Make sure your will is up to date

Review your will every time you review your financial plan or if your circumstances change.  Events such as the birth of a child or grandchild, death of a spouse, marriage and divorce are obvious triggers to review your will.  Other triggers are around financial, home or property changes.

Any time you restructure your financial affairs, take out a major loan, buy or sell assets or change your superannuation arrangements, you should review your will. You may not need to change it but it is a good idea to check whether your will covers your wishes.

3.  Cover off your dependants

Dependants not adequately provided for (relative to the size of your estate) from your estate may contest your will by seeking a greater share of your estate.    If you want to leave someone out of your will, this should be made clear in your will or in a separate document.  Whilst this won’t necessarily stop that person from lodging a claim, it does mean they cannot argue they have been simply forgotten.  If you intend to leave a dependant out of your will (including an ex-spouse), you should obtain legal advice.

You should also nominate guardians for your children (if they haven’t turned 18), as well as any adult children or spouse who needs to be cared for because they are incapacitated.  If you do not nominate a guardian, it may be left to others, possibly the courts, to make this decision on your behalf.

4.  Consider debts & tax liabilities

You must specify that debts are to be paid out before the distribution of your assets.  Otherwise, certain beneficiaries might be unintentionally liable for your debt.  Similarly, tax liabilities such as capital gains tax on an investment property need to be taken into account.

5.  Don’t assume what is in your estate

Most people assume that everything they own is automatically part of their estate regardless of how (or where) those assets are owned. However, specific provision may need to be made for assets held in companies, trusts and their superannuation funds.

Many people own their own home with their spouse “as joint tenants”. This means that on the death of one of them, the property automatically passes to the survivor. It does not automatically form part of the assets of their estate. This also occurs with joint bank accounts.

Similarly with superannuation, unless a binding death benefit nomination has been put in place, distribution of a superannuation death benefit is at the discretion of the trustee of the fund. If this is an industry or retail fund, you will be relying on someone you don’t know to make a decision about payment of your death benefit. The situation can be particularly messy where second marriages and step children are involved.

For business owners this is exacerbated if their businesses and other assets are held in a company or trust. If they are held in a trust (particularly a family trust), then just as with a super fund, it doesn’t form part of your estate and you need to ensure that control of the trust assets passes to the intended beneficiary.

6.  Don’t take the easy way out

Don’t blindly default to the “him to her and her to him will” option.   Depending on the size of the estate and the family situation it may be worth considering the use of a testamentary discretionary trust (a trust established as a result of someone’s death).  Two examples where this may be relevant:

  • If, after you have died, your spouse re-marries or enters into a long term de facto relationship.  Any wealth left directly to your spouse can potentially be the subject of a matrimonial settlement between your spouse and their second partner should that relationship end in divorce. This could mean that money intended ultimately for your children is dissipated to the second partner.
  • If your children’s marriage or de facto relationship ends. In those circumstances, some of the wealth intended to benefit your children or grandchildren can be lost to the ex-spouse.

7.  Follow the proper procedures

Don’t use beneficiaries to witness your will.  Make sure your executor has the capacity and time to carry out the duties imposed by this role, and of course, ensure they know where your will is stored. There area number of rules to follow when making a will, including how it is prepared, signed and witnessed. Make sure you have it prepared professionally. The cost is far less than the potential legal fees for sorting out any problems later on.

More information

Thorough planning can maximise the value of the estate to those who it was intended to benefit, and avoid disputes.  The key to effective estate planning is to obtain professional advice.

Contact our experienced Wills and Estate Planning lawyers for a review of your existing will:

David Whitehill
Phone: 07 32106500
Email: dwhitehill@cp484.ezyreg.com

Glen McCracken
Phone: 07 4639 0307
Email: gmccracken@cp484.ezyreg.com

Katie Cameron
Email: kcameron@cp484.ezyreg.com
Phone: 07 4639 0323

PDF: Top Tips for Estate Planning


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