October 15, 2019 Don’t have a will? Here’s what you need to know
This week I want to touch on something I haven’t covered in previous blogs.
Nearly half of adult Australians don’t have a will. That’s a lot. If you don’t have a will, that’s certainly no criticism, but more to say that you’re not alone.
To be fair, it’s not something that’s really top of mind for your average Joe. And fair enough – no one likes to think about death.
In the case of passing away, ensuring your family’s set up, that your assets go to the people you want them to go to and that you don’t have a situation where your family’s squabbling over your estate and who gets what – it’s important to lock all that down.
I’ll be honest, having a will and taking the time to undertake your estate planning gives you a certain peace of mind, particularly in terms of safeguarding your family if, touch wood, something happens to you.
Okay, so what does ‘estate’ mean, exactly? Well, we’re talking the obvious ones such as your home, investments, savings and the like.
You might also have collectible art, jewellery and whatnot. One thing that’s important to point out is that superannuation isn’t normally considered part of your estate.
If you’re in the don’t-have-a-will camp, here’s a checklist of what you need to consider and get rolling on…
Drafting a will
I’ll start with the obvious one. First, let’s consider what happens if you don’t have a will.
Long story short, your assets don’t necessarily go to who you want them to and are distributed according to relevant state laws.
You make a will through a solicitor or, if you’re a bit more DIY, there plenty of will kits floating about online.
It covers how you’d like your assets to be distributed, who’s going to look after your kids (if they’re under a certain age), specific instructions around what you want to happen at your funeral.
It also stipulates trusts you want to be established. Put simply, it effectively kicks in once you pass on.
One important thing to point out is that you should keep it up to date over the course of your life, particularly if your circumstances change, whether you get married, divorced, have kids, have grandchildren, or all of the above.
Get an estate plan
This is the wider plan around what happens when you die – for context, your will is included within your estate plan.
You must be at least 18 to make one, and it not only covers what’s to take place upon your death but governs how you’ll be cared for if you’re unable to make your own decisions in down the track – and by that I mean both medically and financially.
An estate plan includes stuff like your will, who you nominate your super to go to when you pass on, a testamentary trust, powers of attorney, power of guardianship and the like.
Determine what happens to your superannuation
This one’s super important. I can’t stress that enough. Most people don’t realise this but your super’s not automatically passed on to your loved ones.
The rules around your particular superannuation fund will ultimately determine where the money goes.
Here, what you need to do is make a Binding Death Benefit nomination (or Non-lapsing Death Benefit nomination) with your super fund.
That way, the total of your super balance, as well as any life insurance associated with the fund, is paid to your loved ones, for instance. You should periodically review these type of nominations as they typically lapse every three years or so.
The consequences of tax when you die
As with super, this one’s vitally important. If you don’t get your estate planning right, there’s every chance the beneficiaries of your estate will get hit with a massive tax bill from the ATO.
In other words, how you set up your estate plan to distribute your assets determines whether your loved ones will need to pay Capital Gains tax, for example.
The ins and outs of this are too much to go into in a paragraph or so, but that’s what we’re here for – I’m always happy to talk you through all the nuances.
Arrange power of attorney
Last but not least, make sure you appoint a Power of Attorney. Simply put, this is a person you nominate to act on your behalf up until you pass away.
This is particularly important if you end up in a situation where you can no longer manage your own affairs, due to having an accident, for example, or if, say, you end up with dementia.
The extension of this is appointing a long-term Power of Guardianship – whoever you nominate will effectively make decisions about where you live, your lifestyle and ultra-important stuff such as healthcare
While the above checklist covers the main points you need to consider, there are a few other important considerations you need to make.
If you don’t have a will and keen to get your estate planning in order and locked down, feel free to give us a shout.