Smart.Happy.Money 24: Let's talk about death

Has someone you loved ever died? Have you had the responsibility of managing their estate? It is not very nice. Not only are you going through a time of grief but all of a sudden you are trying to find and clear up the financial affairs of the person that has passed away.

There are a few things you can do to lessen the impact that your death will have on your loved ones.

It all comes down to good estate planning.

Estate planning is getting the right assets into the right hands at the right time. And it can save a lot of trouble for the people you leave behind.

So what makes a good estate plan?

1: A Will

This is the most well-known estate planning document. A Will is a document that outlines how your estate should be managed should you pass away. This includes the financial aspect of your estate but also, your underage children and perhaps specific gifts you want to leave to particular people.

The type of Will that you use can matter. While a Will kit purchased from a post office does indicate what you would like to happen to your estate, often due to ambiguous language being used, they can be unclear or challenged. It is better to have a solicitor prepare your Will as they will use language that will ensure that your wises are carried out.

A properly drafted Will is also important if you have minors as your beneficiaries. This is because you may wish to leave assets to minors in a testamentary trust. A structure that allows you to set rules around when and why they can access funds until a particular age.

Let’s say for example, you leave $250,000 to an 11 year old. Without a testamentary trust structure in place, the 11 year old or their new guardian would have full access to these funds. They would also be taxed at the highest marginal tax rate with no tax free threshold. Having the funds in a testamentary trust means that you could specify that the funds are not accessible until the age of 25 unless it is for the purposes of education, or something like that. The testamentary trust would need to complete a tax return each year, but it would receive the normal tax free threshold and then marginal tax rate. A much better outcome.

2: Binding nominations on your superannuation accounts.

Your superannuation does not automatically form part of your estate. It is very important to have in place, binding or non-lapsing nominations instructing the trustee of your superfund what to do if you pass away. If you pass away without one of these, the trustee (who most likely knows nothing about you) will have to make a determination as to who receives your funds. That is not a great outcome.

3: An executors kit.

It is a great idea to have a kit ready for your executors to access should you pass away. In this kit you can have details of the banks, investments, insurance policies that you hold as well as the contacts for your advisors, lawyers and accountants.

This will remove much of the burden on the executors to figure out where everything is. As they will be handling your estate, its best to make it as easy as possible for them to get it right!

4: Powers of Attorney

The final part of estate planning is putting some thought into who will look after your estate if you should live, but be incapacitated or unable to manage your own affairs. This is done through Powers of Attorney. A POA is a document that gives somebody the authority to act on your behalf if you cannot. This can be medical, financial or all encompassing. You may also like to create a document that outlines your wishes when it comes to resuscitation.

There you have it, 4 important steps that we all should make to get our affairs in order. How much does it all cost? Well, it varies, as an estimate I would expect to pay $2000-$3500 to get everything in place for a single or couple.

It is a great investment in your wealth legacy and the future of your family.

Death is not nice to think about, but with some carful planning you can make sure that your legacy lives on the way you want it to.

We have a quick 5 minute survey to help you and out what Estate Planning documents you need. You can find the survey here

More info on Estate Planning can be found on the BGN Financial Management website here

Until next time,


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Ben Graham-Nellor is an advisor, coach, blogger and speaker who has worked in the financial services industry for over 15 years. He believes that by educating and advising people today, they can improve their tomorrow.

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