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Financial Planning for the Future: Wills 

Financial Planning for the Future: Wills 

Mention the terms ‘estate planning’, ‘will’ or ‘inheritance’ and thoughts of lengthy documents and complex legal terms often come to mind. But it’s not as complex as you might think. When you do begin planning your will, your financial planner should ask two key questions: 

  • Who do you want to inherit your assets?
  • Who would you like to handle your financial affairs after you die? 

These are important questions because the answers directly impact you, your loved ones and any business associates you may have. So let’s take a look at how you and your financial planner can answer each question to form the basis of a quality estate plan.

Who would you like to inherit your assets?

Currently around half of all Australians die without a Will also called ‘intestate’. Intestacy isa problem that can leave families struggling with complicated legal processes at a time of grief. The affairs of a person who dies intestate can be properly managed by someone who is granted ‘letters of administration’ over the estate by the probate court. However, if mismanaged or challenged in court your legacy can become significantly less valuable. At worst, the way your assets are distributed could be determined by a formula set out by legislation.

This situation can occur from either a simple oversight or not having a professionally prepared an up to date Will, so let’s consider the key elements of intestacy

The perils of leaving your legacy to fate and the state

To begin with, if you die intestate, your assets will be divided in accordance with the law of the state or territory you live in. While this varies slightly across the country there is a good chance the distribution formula won’t reflect your preferences.

If you have separated, divorced, re-partnered or are part of a blended family, it’s almost certain that dying intestate will see your assets distributed in a way you had never intended.

This explains why a Will forms the core of your estate plan. It gives you control over the legacy you leave behind by clearly spelling out who you would like to bequeath your estate to. This doesn’t mean a Will can’t be contested, and this can certainly happen if someone feels they should have been provided for and weren’t. However, using a solicitor to draft your Will can go a long way to ensuring it will stand up to any legal challenges.

Choosing your beneficiaries and possible tax implications

To begin preparing your Will you need to think about your assets and who you would like to inherit them. Superannuation, including an allocated pension, is treated separately from your will so it’s likely you will need to make a death benefit nomination to indicate who you wish to receive your pension or superannuation funds when you die.

It is important to note that assets that are owned jointly, such as family homes are also treated separately from a Will. Under joint ownership (as opposed to tenants in common), the death of one owner simply results in the survivor taking on full ownership. 

Deciding on your executor

Once you have decided how your assets are to be distributed, the next step is choosing an executor. This is the person responsible for putting your wishes into action by collecting and managing all your estate assets, paying taxes, debts and other expenses. More importantly they are responsible for distributing your estate in line with your Will. 

A testamentary trust can be useful

A testamentary trust is a trust fund specified within your Will and will become available to your trustee after your passing.

A testamentary trust allows you to specify the control of assets for a beneficiary(s). Its terms are set out in your Will and it is activated on your death. Instead of ownership of assets passing directly from one person to another, the assets are passed to the testamentary trust and then administered by a designated trustee – usually a family member, a trustee company, accountant or a solicitor.

Having drafted a Will, be sure to keep it up to date. A Will should be altered each time a major life event occurs such as marriage or divorce, the arrival of children or grandchildren or if you acquire or dispose of substantial assets especially those noted in your Will. 

Minor changes can be made using a codicil (an attachment to your existing Will). For major changes, drawing up a new Will can make things clearer.

Who would you like to handle your financial affairs? 

None of us likes to think about becoming mentally incapacitated or being unable to make our own decisions. Hopefully, you never need to rely on your attorney but the important thing is to be prepared. Making these decisions today will give you peace of mind for tomorrow.

Nonetheless, you should appoint someone you trust, and it’s worth discussing your choice of attorney with your loved ones.

Another step worth considering is whether you wish to appoint an enduring guardian, a person who you can appoint to make decisions when you are unable to do so. Your guardian’s role will be tomake medical and lifestyle decisions that best represent your choices on your behalf.

Don’t leave the planning for later

It’s easy to put estate planning on the backburner. After all, life is about enjoying the here and now. The problem is that none of us knows what lies around the corner. That makes estate planning something to address today through open and frank discussions with those who matter in your life. If you need to have a discussion about what is next when it comes to estate planning and financial strategies, get in touch with the team at Master Your Money Now today. 

If this is a topic that you would like to discuss in more detail, please go to www.MasterYourMoneyNow.com.au/getstarted to book in your complimentary 30-minute strategy session.

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Disclaimer: This information is general information only.  You should consider the appropriateness of this information with regards to your objectives, financial situation and needs. Past performance does not guarantee future returns.

Chris Carlin is an Authorised Representative (No. 1235031 for financial services and No. 514748 for credit) and Master Your Money Now Pty Ltd ABN 65 627 229 681 is a Corporate Authorised Representative (No. 1265677 for financial services and No. 514747 for credit) of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523

 

 

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