It’s hard to think about what happens after we’re gone. But putting a few key plans in place now can spare your loved ones stress and confusion during an already tough time.
Why Estate Planning Matters: Protecting Your Family’s Future
Estate planning is more than just a legal formality; it’s a vital part of personal financial advice that protects your family’s future. By taking the time to create a valid will, set up trusts and appoint someone you trust to make financial and legal decisions on your behalf, you’re ensuring your wishes are respected and your loved ones are looked after. A well-structured estate plan can prevent family disputes, reduce taxes and provide clarity during a tough time. In Australia, estate planning must adhere to specific state and federal laws, making it essential to work with a financial planner or lawyer. With the right guidance, you can ensure your estate, including your bank accounts, investments, and superannuation, is managed and distributed exactly as you intend, giving you and your family peace of mind.
Here are three important areas to consider, with real-life examples and simple solutions that can make all the difference.
1. Who Gets Your Super? Don’t Leave It to Chance
Many people are surprised to find out that your superannuation doesn’t automatically form part of your will. Superannuation death benefits are not automatically included in your estate assets and may be subject to different rules. Instead, the trustee of your super fund decides who gets your benefits, including any life insurance attached to the fund.
Real-life example: A divorced parent wanted to leave their super to their children from a first marriage, not their ex-spouse. But without a formal nomination in place, the trustee could legally allocate some (or all) of the super to the former partner, depending on their interpretation of dependency and legal obligations.
What to do: Super funds allow you to make a Binding Death Benefit Nomination, which directs the trustee to pay your super to specific beneficiaries. Binding death nominations are legal documents that ensure your benefits are paid according to your wishes. It gives you more control and peace of mind that your super will be paid as you intend, not left to the discretion of a third party. If you have a self-managed super fund, special attention is required in your estate planning to ensure superannuation death benefits are paid to your intended beneficiaries.
2. Don’t Die Intestate
If you die without a valid will (dying intestate), your estate is distributed according to a formula in state legislation. That may not be what you wanted.
Real-life example: A 27-year-old died suddenly in a car accident. She had no dependents, no will and $95,000 in life insurance inside her super. Her estate was split equally between her biological parents, even though her father had been absent from her life since she was a toddler. This wasn’t what she would have chosen, but without a will, the law took over. Estate administration becomes more complex when someone dies intestate, as the law determines how assets are distributed.
What to do: Have a legally valid will drafted that outlines your wishes. Be specific about how you’d like your assets divided and make sure it’s updated as your circumstances change. Everyone should have a will to ensure their wishes are followed and to simplify estate administration.
3. Make Sure Your Family Can Access Funds Quickly
When someone dies, their will must go through the probate process — a court procedure that confirms the will is valid and allows the executor to administer the estate. The executor is responsible for managing the estate and ensuring all legal and financial obligations are met. Executor services can support the person managing the estate, helping to alleviate the emotional and logistical burden on loved ones. This process can take time and may be delayed if someone contests the will or if vital documents can’t be found.
Real-life example: A family’s main income earner died suddenly. The surviving spouse knew a new will had been drafted, but couldn’t find the original document or related financial records. To make matters worse, a distant family member contested the estate. As a result, accessing funds was delayed, causing emotional and financial stress during a time of intense grief.
What to do:
- Keep all important documents (including your will, insurance policies and key contacts) in a safe but accessible place and let your executor know where to find them.
- Consider a life insurance policy with a named beneficiary. Unlike assets in your estate, this money is paid directly to the beneficiary on proof of death, no probate required.
- Professional executor services can help manage and support the process of administering the estate, alleviating the burden on loved ones.
5. Making Your Wishes Known: More Than Just a Will
A valid will is the foundation of any estate plan, but true asset protection goes beyond that. Making your wishes known means considering your individual financial situation, personal circumstances and long-term goals. Comprehensive estate planning involves preparing a range of estate planning documents such as powers of attorney, enduring guardianship and trust agreements to ensure your affairs are managed according to your wishes if you’re unable to make decisions yourself. In Australia, it’s important to comply with the Wills Act and other relevant laws to ensure your estate plan is both valid and effective. By working with a financial adviser, you can create a tailored estate plan that reflects your individual circumstances and provides lasting security for your loved ones.
6. Common Estate Planning Mistakes to Avoid
Even with the best intentions, it’s easy to make mistakes in estate planning that can have lasting consequences for your loved ones. One of the biggest errors is dying intestate, passing away without a valid will, which means your estate will be distributed according to state inheritance laws, not your wishes. Another common trap is not regularly reviewing and updating your estate plan as your financial situation, personal circumstances, or goals change. Overlooking compliance with current laws and tax regulations can also lead to unexpected tax consequences for your beneficiaries. To avoid these issues, it’s wise to consult a financial planner who can help you create and maintain a comprehensive, legally compliant estate plan that reflects your wishes and protects your family.
7. Finding the Right Professional :Your Estate Planning Team
Having a strong estate planning team is key to your wishes being carried out smoothly and effectively. In Australia, that means working with a financial planner, legal expert and other professionals who can advise on estate planning, retirement planning and investment strategies. Make sure you choose advisers who have the right qualifications and an Australian Financial Services (AFS) licence so they meet professional standards and are up to date with the latest laws and regulations. By working with experienced professionals, you can be sure your estate plan is tailored to your needs, compliant with all legal requirements and protects your assets and your loved ones’ future.
8. Capital Gains Tax and Your Estate: What Your Family Needs to Know
Capital gains tax (CGT) can have a big impact on your estate, especially when it comes to the transfer or sale of assets like investments and property. In Australia, CGT is applied to the increase in value of certain assets, and if not planned for, can reduce the inheritance your loved ones receive. A financial planner can help you understand the tax implications and structure your estate plan to minimise tax consequences so your assets are distributed as you intend. Make sure you provide a relevant product disclosure statement and that your estate plan complies with all applicable tax laws and regulations. By addressing CGT in your estate planning, you can protect your family from unexpected tax burdens and preserve your legacy.
What Now?
It’s never too early to get your estate plan in order, but it can become too late.
Before making decisions about your estate plan, especially if you have business interests or require testamentary trusts, we recommend you consult with qualified financial advisers. They can help you tailor strategies to your individual circumstances and ensure all aspects, including business succession and trust structures, are properly addressed. Any examples provided are for illustrative purposes only and do not constitute general advice or recommendations for any specific financial product. Please review our Financial Services Guide before acquiring any financial products or services.
At Insight Wealth Planning, we work with you to ensure your legacy is protected, your family is looked after, and your wishes are clear.
Estate planning doesn’t have to be complicated. It just has to be done.
Ready to get started? Get in touch today.