Each year large numbers of Australians die without a Will. As our lives become more complex, it is an oversight that can be as costly as it is heartbreaking.
None of us like to contemplate our own mortality but unfortunately the adage about death and taxes being life's two certainties is absolutely spot on. Just as we prepare for tax time, it's worth putting plans in place for what happens when we die. Dying without a Will known as dying intestate may not be a problem if you have few assets, have been married to the same person all your life and have no kids. In that situation everything you own passes to the surviving spouse.
Our high divorce rate means an ex, a new spouse or partner and even stepchildren can enter the inheritance scene. Our assets are also more complex, with superannuation often ranking as the second most valuable asset after the family home. We may have business interests or investments held through a trust or partnership structure that can further cloud the picture.
Intestacy can leave a trail that leads to court
Essentially, a Will dictates who will receive each of your assets when you die. Without a Will in place, your estate will be divided up according to the laws that apply in your state or territory. While these statutory decision trees are set in stone, they are unlikely to be in line with your wishes. This is especially the case if you have separated (though not formally divorced) from a former spouse, who could potentially inherit everything you own if you die intestate, leaving a new partner with nothing. What can follow is years of legal wrangling and stress as the various parties turn to the courts to sort out an often complex, and highly distressing, situation.
The bottom line is to speak to your financial adviser about arranging a valid Will. All the hard work invested in following a tailored financial plan could unravel in the blink of an eye if you die intestate. And no matter whether you are part of the SKI set and plan to spend the kids inheritance or leave a large estate, the reality is none of us know when we will pass away, so the merits of having a current Will apply equally to everyone.
Not every asset is covered by a Will
One of the benefits of discussing your estate plans with your financial adviser is that he or she has a clear picture of your asset position. This is important because not every asset you own forms part of your estate. Many people are surprised (and often just a little unnerved) for instance, to discover that it can be left to their fund trustee to decide who inherits their super. There is a way to have a say in how your super is bequeathed, and it involves completing some paperwork called a binding nomination. This spells out to the fund trustee who you would like to inherit your super and any life insurance held through super. This too is an area where professional advice is a must as complex tax rules apply.
Only certain people can inherit your super tax free notably your spouse and dependent children, or a person with whom you share an interdependent relationship - like, say, two aged siblings sharing a home together. Your financial adviser can help you make important decisions about who inherits your super, guiding you through the possible tax pitfalls to ensure the best outcome for everyone involved.
The critical thing is to take action today. None of us know what lies around the corner. Once your estate plans are in place, be sure to review those plans annually or following any major change in your life or asset holdings.
This information is current as at 27/11/2015.
BT Financial Group - A Division of Westpac Banking Corporation. This document provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information does not constitute financial advice. It has been prepared without taking account of your objectives, financial situation or needs. Because of this, before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation and needs. Information in this blog that has been provided by third parties has not been independently verified and BT Financial Group is not in any way responsible for such information.