Protect your estate from these mistakes

Estate planning is a complex area of law, and basic mistakes can lead to Wills being declared invalid, assets ending up with unintended recipients, or benefits reduced by avoidable tax bills. So, how can you steer clear of these pitfalls?

Make a Will Only about half of Australian adults have a valid Will. If you don’t have one, it’s crucial to create one. Otherwise, your estate will be distributed according to a Government formula, potentially leaving your wealth in unintended hands.

If you do have a Will, ensure you review and update it regularly. Key events that warrant revising your Will include entering or leaving a marriage or de facto relationship, establishing or closing investment vehicles such as companies, trusts, and superannuation, and changes to the financial or health status of your beneficiaries and nominated executor.

Appoint an Appropriate Executor Administering an estate can be a significant undertaking. Ideally, you’ll want an executor who is competent, organised, honest, and impartial. While this may often be a spouse who is also the sole beneficiary, it’s wise to nominate an alternative executor in case your spouse predeceases you. This could be an adult child or another close relative, not necessarily a beneficiary. Ensure you inform them of their potential role and provide important information, such as the location of the original Will and contact details for your lawyer, accountant, and financial planner.

Make it Easy for Your Executor Simplicity is key. While you might understand your finances well, it can’t be assumed that your spouse or children have the same grasp of your financial situation, and they are often left to manage the aftermath. Start by creating a catalogue of your income and assets, akin to a personal balance sheet. For those feeling proactive, recording all online accounts can be beneficial too. Some may even simplify their finances further by consolidating shares, investments, and bank accounts.

Identify Assets Excluded from Your Will Assets jointly owned automatically pass to the surviving owner(s) upon your death. This is an important piece of information to know because it can speed up the transfer of wealth to your spouse if that is your goal.  It can also have unintended consequences for blended families where couples have acquired assets jointly later in life.

If you’ve provided your super fund with a binding death benefit nomination, the death benefit will be paid to the nominated beneficiary, not necessarily a beneficiary of your Will. Without a binding nomination, the trustees of your super fund are obliged to pay the benefit to your dependents as defined by superannuation law, which may not align with your wishes.

Consider Tax Implications Tax considerations in estate planning can be intricate and vary based on individual circumstances. Various strategies exist to manage the effective transfer of assets to beneficiaries, such as the re-contribution strategy to Superannuation, setting up a testamentary trust, or selling investments and shares over multiple financial years to mitigate legacy tax issues.

Seek Expert Advice Estate planning presents many potential pitfalls, from excessive taxation on superannuation death benefits to not providing for beneficiaries who are unable to manage their own affairs adequately. Given the stakes involved, consulting a specialist estate planning lawyer alongside a financial planner is advisable.