Estate Planning – from my own experience

Matthew McCabe, Financial Adviser, Judge Financial Planning

Over 4 years ago, I lost one of my closest friends.

Scott was a diesel mechanic in the mines, on good money and with the world at his feet. He supported his fiancé and her three kids, like they were his own. He was an extraordinary man. They had planned to wed the following year, and buy a house around the same time. Everything was going to plan, until an unforeseen accident took his life at the age of 26.

Scott was not only one of my closet friends, I was also his financial planner. I was trying to deal with the loss myself, whilst also experiencing first-hand what it is like for loved ones, when one passes without a will or superannuation fund nomination. I was supporting both Scott’s family and fiancé through the financial and legal minefield.

To be brutally honest, it was an absolute nightmare! Several months with legal fees, battles with the trustees of the superannuation fund and insurance company, with Scott’s family and fiancé receiving a small amount of superannuation and insurance benefits.

The two main learnings I got out of the experience, were;

• Financial things can be simple and easy for your loved ones when you pass, by having your wishes recorded in a Will and with your relevant superannuation funds.
• And your loved ones can be taken care of, through having a sufficient amount of protection or insurance cover.

What is estate planning?

While often difficult, having discussions with your family about estate planning, and how your assets will be distributed when you die, is so important.

Estate planning involves much more than having an up-to-date Will. A good estate plan will structure your estate so you can distribute your assets according to your wishes, protect your family’s interests and make sure your dependants are not hit with unexpected tax bills.

Firstly, let’s start with the basics and look at just how important it is to make a Will. A Will is a document that specifies how you would like your assets distributed or administered on your death. You can leave your assets to whoever you want. Unfortunately for those who survive you, any debts that you have while you are alive, remain as debts.

But what isn’t covered in a Will?

However, there are some assets that aren’t covered in a Will, including your family home when owed jointly. When you die the home automatically passes to your other joint proprietor.

Jointly-owned investments like bank accounts, assets owned by a family or company trust and life insurance benefits aren’t usually covered.

In addition, super benefits aren’t normally covered. You need to make sure you get in touch with the fund to nominate the people that you want to benefit. There are further taxation complications, if your benefit is to be passed to an adult child, friend, or someone who is not financially dependent.

Furthermore, because of the way our tax system works, on final distribution the reality may be quite different. There are different ways to balance things up. One is to include an equalisation clause in your Will, another is through your life insurance.

If you pass without a legal Will, you’re considered to have ‘died intestate’ and an administrator will manage your estate. The intestacy rules don’t take into account your personal circumstances, or what you might have wanted.

Buy/sell or shareholders agreement

If you have a business partner, it’s important to have a strategy in place that will ensure your share of the business is passed onto your estate as quickly and as efficiently as possible.

One such strategy is a buy/sell agreement, which uses a life insurance policy to pay for the future purchase or sale of shares in your business.

These agreements are usually triggered by a specific event, such as disability or death, with the proceeds from the insurance policy helping to transfer the full value of your share in your business to your estate.

In short, a proper estate plan is about making sure that the right funds end up in the right hands at the right time.

Please contact us to arrange a suitable time 02 4709 6741 or mmccabe@judgeaccountants.com.au

Alternatively, you can book an appointment directly