In a nutshell, estate planning is getting your financial affairs in order ahead of your passing. What it really means though is not leaving a bloody big mess for your spouse or kids to clean up. Families in conflict over money with more lawyers than you need, dragging it out for years, is a common result if you don’t leave some legally recognised instructions ahead of death.
‘She’ll be right mate! I don’t care what happens after I die because I’ll be dead?” is typical of the apathetic attitude that I encounter regularly. The fact is that two thirds of the adult population in Australia has a blind spot when it comes to making plans for death which is why only 30% of us have updated and valid wills. And a lot of those forget to do anything about their superannuation.
So to help you avoid having your estate chewed up in legal fees, here are five busted myths in this highly misunderstood area:
MYTH 1. “I don’t need a will because the missus / hubby gets everything anyway.”
A. That outcome is nowhere near guaranteed because it’s taken out of your family’s hands. After death the Public Trustee Office (or state based equivalent) pays out to beneficiaries according to a strict formula they use and it is likely to include a few more beneficiaries
MYTH 2. “My mortgage and other personal debt will automatically be extinguished when I die.”
A. You may die but your debts will live on forever, or at least until they are repaid, usually out of money and possessions in your estate. One way or another, it’s your family who bears the brunt. One of the easiest ways to deal with debt is to insure it, so it is repaid from insurance claim proceeds when you die. That really saves putting a massive hole in the family wealth.
MYTH 3. “I can get a will done for free at the Public Trustee’s office.”
A. Indeed you can and there’s an equivalent body in every state and territory. But preparing the will is where the free stuff stops. If you choose that option, the Public Trustee administers your estate as part of the deal and their services aren’t free; and it may take a while which can be very frustrating for a family who need the money and property asap.
MYTH 4. “I can save myself a fortune by completing a will kit purchased from a Post Office or newsagent.”
A. Good luck with that. The fact that you even consider this demonstrates your lack of knowledge in this area. If you leave out some of your money and assets you will create a partial intestacy and that part will go off to the Public Trustee to be dealt with slowly and expensively. If your will is not properly signed and witnessed, it will be invalid. Do yourself a favour and go see a solicitor.
MYTH 5. “My will takes care of everything I own, as well as everything I jointly own; plus my super, life insurance and companies and trusts I control.”
A. Wrong! A will only deals with money, property and other stuff that you own personally (i.e. in your own name only). That’s it! Everything else needs to be addressed separately. For most employed people, superannuation is the largest chunk of money they have. You must complete a form (look on your fund’s website) to nominate beneficiaries to receive your super. If you don’t understand the difference between a ‘binding’, ‘non-binding’ and ‘non lapsing’ nomination, please seek advice.
So there it is; five common mis-beliefs; and there are many other traps for new players. However, you can make the process quite simple and straight forward by going to see an experienced solicitor. A simple will doesn’t cost an arm and a leg. And for most people who don’t have companies and trusts, it is relatively easy to complete valid nominations for your life insurance and super in addition to your will. Any reputable financial adviser can help you with that. Contact me on 0408 756 531 if you would like to chat or ask questions.