This simple guide outlines three factors you should take into account as the foundation of any Estate Plan.
Depending on which statistics you look at, between 50% and 75% of people do not have a valid will, or a will that is relevant to their current circumstances. I warn all my clients that lawyers make far more money out of poorly prepared estates than they ever made from assisting someone with their will.
And yet I know that for many people that isn’t the reason that they put off estate planning. Two of those reasons include that people don’t want to think about end of life (“I am too busy living”) or preparing a proper Estate Plan can feel overwhelming.
3 things your Estate Plan should take into account
In an effort to encourage you to make a start, I want to give you three take-home points that will help busy women in thinking about, updating, or creating an Estate Plan.
- People want to know what you think
- Your superannuation nomination is not both binding and permanent
- You already have an Estate Plan, even if you don’t
People want to know what you think
I am starting here because estate planning is often overlooked. People invest countless hours and too much emotional energy in ‘discussing’ what the deceased person wanted. Also people struggle with seemingly arbitrary decisions, giving them the reasoning can often help them to accept your decision.
One of the problem areas is funerals. The most common things clients say to me are “they know what I want” or “they can do whatever they want”. Believe me: they don’t “know what you want”.
They have to decide which clothes (including underwear and bra) you are buried in. They have to notify everyone of your death and funeral, they have to decide on the channels to do that — do you want them to use a notice in the newspaper, do you want them to use social media? Do they know how to get into your phone to get hold of your contacts?
Have you told them whether you want music played — and which music — and whether you want bible readings or poetry or flowers or a green funeral or …. You get the idea of how much is involved!
Even if you honestly want them to do ‘what they want’ you should leave them a list. Planning a funeral in the days following your death is stressful and exhausting. Someone who thought they wanted to do their own thing may quickly become overwhelmed by the sheer quantity of matters that need to be resolved and attended to.
If you give them a list you are giving them the option to simply do what you wished, as you wished. If you like you can even write on the list, “Do what you want, but if you want to know what I would do, I would ….”
Other areas where people argue about what you wanted include the financial trusts that you set up for your children. When you are setting up a trust there is a kind of spectrum between being very prescriptive about what they are allowed to do (and therefore excluding a lot of options) and being a bit more liberal with the directions so there is some flexibility.
The problem with being incredibly prescriptive is you don’t know what your child might need. Ten years ago would you have guess that a child at a public high school needed to bring their own laptop to school? If you are going to provide some flexibility then the problem can be that people don’t spend money as they are scared to do the ‘wrong thing’.
If you write down what you want for your children (eg: yes if their Aunt is going on a big expensive holiday to Disneyland please use some of my life insurance money so they can go too), then this will help the people around your children to make decisions without feeling guilty about whether they are doing the right thing.
The best thing about this point is, you can do this without a lawyer. Start a document now — perhaps a digital document so it is easy to add things in later — and do a brain dump tonight of what you want to happen and why. Alternatively, work with a professional financial advisor. Many of them use estate planning software tools that simplify the wealth management journey of individuals.
Your superannuation is not binding and permanent
Your superannuation nomination can be binding, or it can be permanent, but in almost all cases it cannot be both. Your superannuation is not controlled by your will unless you have an up-to-date nomination paying it into your will, but that nomination is not permanent you need to keep updating it.
In most Australian states and territories, there is a Tribunal where people can apply to claim against your superannuation, and this Tribunal does not consider a nomination that is more than three years old to be binding upon them.
They can overrule your superannuation company. It isn’t just a question of what your superannuation trustees think or what their rules say, but also whether or not they can be overruled by someone else after your death.
Your superannuation nomination, or your binding death benefit nomination, is the document that says who gets your superannuation when you die. Update it every three years. If you can’t remember when you last updated it, update it again.
Updating it more regularly isn’t going to hurt you, but an old nomination might be a big problem. You don’t need a lawyer to help with this step either, just call your super company and ask for the form.
Now for some of you, your superannuation company may not let you do one of those. However many superannuation companies say that, but when you check, you discover you can choose to have your superannuation paid into your Estate.
Why does it matter? Because you don’t want the wrong person getting your super. As an example, in one case someone claimed that the deceased person used to come to their house, mowed their lawn, and give them a wad of cash every week.
The surviving spouse was adamant that this didn’t happen, that they would have noticed if their spouse disappeared each week and that they managed the household budget and would have noticed the cash. It didn’t matter, the Tribunal paid the claimant some of the superannuation funds.
Make sure your superannuation nomination is up to date so that no one else can make this decision for you.
You already have an Estate Plan — even if you don’t
Whether or not you have a will when you die something will happen to your body, something will happen to your assets and liabilities, and something will happen to all your personal items. That is your Estate Plan. If you have not communicated your decisions and choices, that Estate Plan will be decided based upon intestacy laws, pragmatic requirements and other things will happen on an ad hoc basis.
You may not have a will, you might have a will that is out of date, or you might have an up to date will, but regardless — something will happen. Additionally there will be other factors, like insurance or jointly held assets, that pass outside of your Will. Something will happen, it is just a question of whether it will be what you want. You need to understand the complete picture, not just your Will.
Isn’t an Estate Plan just a Will?
No. A will is just a will. There are many things that happen after you die, or that happen before you die if you lose capacity, that are not covered by a will. You don’t want just a will, you want a complete Estate Plan.
I also believe that a great Estate Plan should take care of life admin tasks at the same time, because there is so much cross over, and because I know that you are busy. My system helps you to do both. For instance, this month in my group our topic has been children, choosing a guardian, sharing information, setting up a system for them.
One of the tasks that has been very popular is setting up an email for the child, this is valuable if you are alive because you have reserved them an email with their full name and you have sent them fun little stories and photos that they will love, and this is valuable if something happens to you because your fun little stories will include important information like their favourite toy or their bed time routine.
