Home' SA 50s Lifestyle : SA 50s Winter 11 Contents 10 Winter 2011
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Protecting your family from
an inheritance nightmare
Estate planning is a topic that
many people would rather not
talk about too often but it's an
important part of the entire financial
planning process for anyone with
responsibilities, whether it is family
With one in three Australian
marriages ending in divorce and
people living longer, the number
of blended families in Australia
is increasing and family life is
becoming more complex.
The need for comprehensive estate
planning has never been more
apparent. For many people these
days, it means considering all
possible scenarios and implications
when mapping out how they wish to
have their estate -- that is, all of your
assets and money -- managed after
It isn't easy making difficult
decisions about loved ones and
it's even tougher for those in de-
facto relationships and second
or subsequent marriages, where
there are children from previous
The difficulty in choosing
beneficiaries and amounts to be
bequeathed means that many
couples choose not to make a
decision at all.
While estate planning laws vary
in every State, wills are rendered
invalid by marriage and may
become partially invalid by divorce
wherever you live. So it's particularly
important for everyone to make a
new will after marrying or divorcing.
Following are some of the estate
planning issues you should consider,
in consultation with your solicitor
and financial planner:
Keeping your will up to date
If you already have a will, you should
update it when your financial or
relationship circumstances change.
While remarriage may revoke an
existing will, divorce may not.
Provide for dependants in your
If dependants do not have specified
entitlements set out in a will, they
may have to make a claim for
entitlement through the courts, at
the expense of the estate.
Nominate guardians for your
If you have children under the age of
18, appointing a guardian for them
in your will may help avoid disputes
between family members by making
your intentions clear.
However, it is not binding as the
Family Court can override your
choice of guardian and appoint a
different guardian when it considers
this to be in the child's best
Careful planning to minimise tax
The executor of a will may decide
to sell the estate assets rather
than pass them directly onto the
beneficiaries. In this case, capital
gains tax may be incurred, reducing
the money the beneficiaries receive.
Bequeathing assets not owned
People need to understand what
they can and can't bequeath. Assets
owned by joint tenants, trusts or
companies can't be included in a will.
Don't assume superannuation will
bypass the estate
Large super funds will usually
automatically pay superannuation
benefits to the deceased person's
estate. Having the funds included
as part of the estate increases the
risk of money falling into the wrong
hands if the estate is challenged.
To ensure superannuation benefits
are paid directly to a beneficiary and
not included as part of their estate,
a person needs to provide a binding
death benefit nomination directly to
their super fund.
Managing family trusts
Family trusts need trustees to
manage them. If, for example, a
person stipulates in their will that
when they die their sister is to be
the person who appoints the trustee,
what happens if the sister dies a
short time later?
If the sister has in her will that a
cousin is the appointer, the family
trust moves to the control of that
cousin. When making a will, think
about these scenarios. It may
be appropriate for a second or
third person to be nominated as
To ensure your assets remain
within your family for its benefit,
a Testamentary Trust might be an
option. Put simply, this is a trust
established by a will.
Rather than assets being distributed
upon death, some or all of the
assets would remain in this trust
for the benefit of a specific group of
beneficiaries named in the will.
There are also tax advantages in
having a Trust to ensure more
income is distributed to "dependent"
children. Let's say a father leaves
daughter, who later separates from
The Family Court in a divorce
settlement may well rule that the
spouse is entitled to a proportion of
the inheritance. However, this could
be avoided if the assets had been
left to the children in a trust. Be
clear and concise. Ambiguity in a will
can lead to unnecessary disputes
over meaning and the wishes of the
deceased person may not be carried
out as intended.
While the saying "you can't rule
from the grave" carries some truth,
planning for what will happen after
you die will ensure your hard earned
assets are protected and your
wishes carried out.
Estate planning is just as important
as planning financially for other
stages in your life, such as marriage,
starting a family or retirement. After
all, why work to create wealth only to
see it dissipated by not planning for
its distribution after your death?
While only a qualified practitioner
can legally prepare a will, a financial
planner can help you navigate
your way through the complexities
of estate planning and provide
a framework for ensuring all
considerations are covered when
mapping out your final wishes.
*Mark Borg is an Authorised
Representative of AMP Financial
Planning Pty Ltd, ABN 89 051 208
327, AFS Licence No. 232706.
Any advice given is general only
and has not taken into account
your objectives, financial situation
or needs. Because of this, before
acting on any advice, you should
consult a financial planner to
consider how appropriate the advice
is to your objectives, financial
situation and needs.
By AMP Financial Planner Mark Borg*
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