FATHER’S DAY – A GOOD DAY TO CHECK YOUR LAST MESSAGE
It’s Father’s Day and many fathers are being thanked for all their efforts. It’s instinctive for most fathers to want to be great providers, to give their families the best security and opportunity.
Of course, it’s not only fathers that are providers – especially these days when families are so diverse and society has changed. Single-parent families, blended families and same-sex parents are all demonstrating that the traditional approach is not the only one. But one aspect hasn’t changed – the desire to protect loved and vulnerable family in times of trouble. It’s as strong as ever. Bad estate planning means trouble for those closest to you.
It is because of this that I find the lack of attention paid to estate planning so surprising. A 2016 study found that only “half of adult Australians have a will — but nearly half of those who do, don’t feel that their will is up-to-date or adequately expresses their wishes”. In other words, it is highly likely that on their deaths or mental incapacity, most people would, through their actions, demonstrate to those closest to them that they didn’t really care that much.
What can go wrong?
If you ever want to read some really interesting stories, Google “estate planning cases Australia”. There have been some very interesting cases (it’s always interesting when you’re not involved), over many years – better than any soapy. When money and relationships are involved, nothing is predictable.
If you ever want to read some really interesting stories, Google “estate planning cases Australia”. There have been some very interesting cases (it’s always interesting when you’re not involved), over many years – better than any soapy. When money and relationships are involved, nothing is predictable.
Common errors and omissions
I find this a fascinating area of personal finance and haven’t quite understood why it’s so neglected. Some of the common issues we see daily include:
I find this a fascinating area of personal finance and haven’t quite understood why it’s so neglected. Some of the common issues we see daily include:
- No plan at all: For many people, life is too busy and this is just not a priority. After all, they can’t see the urgency, as the probability is that they are unlikely to die for a long time. “It’ll never happen to me” is the plan.
- Plan not up to date: A will was done some time ago and hasn’t been updated. Circumstances and wishes have probably changed, and so has the relevant legislation, and their current estate documents will result in at best an inefficient outcome, and at worst, their assets being distributed not according to their wishes.
- Not thinking through all the scenarios: On New Year’s Eve last year, a seaplane crashed into the Hawkesbury River killing a family of five British tourists including Richard Cousins, the CEO of the world’s largest food service company. Mr Cousin’s estate has recently been wound up and Oxfam has received the equivalent of $70m at the same time that more than 7000 individual donors had cancelled their donations due to Oxfam’s recent scandals in Haiti.
- Documents that will fail: There are a variety of reasons why this may occur, some as simple as the documents aren’t legally valid.
- Beneficiaries not involved: Creating documents and structures is only the start of estate planning. Explaining them and their purpose to those likely to use them is in many cases more important. Preparing a will but not talking the details through with the future beneficiaries is like providing them with a toolbox full of tools, but never explaining how to use them.
- No equalisation provisions: Many parents help their adult children during their lifetime. It could be for a business, after a divorce, or to help purchase a home and the parents often want to equalise this after their deaths. However, few keep accurate records or include an equalisation clause in their wills.
- Little understanding of what assets are covered by a will, and what is not: For example, jointly owned, superannuation and trust assets are not.
- No recognition of digital assets: email accounts, Facebook, cloud storage and many others are in this category.
- Not understanding the elements of control of the assets: In a 2014 case, a wife specified that she didn’t want her superannuation proceeds to be paid to her husband. However, the husband was the only remaining member and trustee of the fund and decided to pay everything to himself.
- No guardians nominated: Approximately one-quarter of parents with minor children have nominated a guardian to look after them in the event of the parents not being able to. Often grandparents assume they will look after their grandchildren should their children die, but no discussion of the implications has been had.
- Oversimplifying: “I just want to keep it simple” is what I often hear. In that case, don’t have a will and let the laws of intestacy sort it out. Otherwise, just leave everything to your partner directly, and then your children. Following this approach is really saying that it’s too much bother to think about it too deeply. It’s the equivalent of keeping mealtime nice and simple — by buying McDonald’s.
It’s not simple but also not complicated – just takes a bit of effort. Father’s Day is a good excuse to make sure because at the end of the day, the last message is already in your estate plan.
