If you already have a Will then big tick for you! Effective estate planning ensures that should you die, your assets can be passed promptly and tax effectively to the people you love. As you can imagine, this saves a huge amount of pain and heartache for family members at what would already be an emotionally wrought time.
That said, just like life, an estate plan is not static. As life changes, a Will should be adjusted to ensure it remains relevant. There are many events that can trigger a need to review an estate plan, for instance:
- Marriage – which revokes the Wills made by the spouses when single
- Divorce – which revokes any gifts made under a Will to the ex-spouse
- Changes in the family such as births and deaths
- Changes in relationships such as children entering or leaving de-facto arrangements
- Death of a person who plays a key part in the estate plan such as an executor or trustee.
Here are some examples of situations where life changed and the estate plan did not keep up.
1. Who gets the house?
Joel was a young executive married to Jane, a corporate lawyer. They were both busy and successful in their careers and had no children.
They drifted apart and Joel started a new relationship with Sophie.
They rented an apartment together and six months later were delighted to discover Sophie was expecting their first child. Joel was finalising an important deal and planned to “get around to arranging things” as soon as the ink had dried on the contract.
That never happened because he was killed in a car accident driving home from the office. Joel and Jane were still married and as they had owned their house as joint tenants, it passed automatically to her. The trustees of Joel’s super fund split his super between Sophie and Jane. Sophie was left to raise their child on her own without the financial support Joel would have wanted.
2. Who controls the money?
Trevor and Jennifer had planned their retirement meticulously including an estate plan. Their Wills provided for a testamentary trust to be set up when they died. Trevor’s older brother agreed to be the trustee because he knew their family and understood what Trevor and Jennifer wanted. Their intention was that the trust would support their grandchildren through their education and establishment of their lives.
A few years later, Trevor passed away after a brief illness and Jennifer followed shortly afterwards. By this time, Trevor’s brother was in a nursing home suffering dementia and therefore could not fulfil his obligations as a trustee. The family had to approach the courts to appoint a replacement which meant the trust might not have been administered in the way Trevor and Jennifer had earlier wished.
3. Who supports Alex?
Mandy had brought up three children on a tight budget since divorcing their father. She arranged her finances well and took out insurance to ensure her children would be supported if she died or could not work.
Mandy’s Will appointed her sister, Penny, as guardian of her children and executor of her estate.
Unfortunately, Penny became seriously ill and Mandy agreed to look after Penny’s son Alex, as well as her own family. When Penny unexpectedly died Alex was left some money from her estate. When Mandy was revising her financial plans to cope with these events, her financial adviser recommended she apply to become Alex’s guardian, increase her insurance cover, appoint a new guardian for the children and include Alex in her Will.
These are common scenarios, so if your family situation or ideas change, be sure to ask for professional guidance in updating your estate plan accordingly.
—
If you like this article, you might be interested to know that we share useful thoughts and information like this in our monthly financial insights email. You can subscribe to that email here. All subscribers receive a copy of our e-book: The 5 Key Pillars of Financial Independence.
General Advice Disclaimer
This article contains general advice only, which has been prepared without taking into account the objectives, financial situation or needs of any person. You should, therefore, consider the appropriateness of the information in light of your own objectives, financial situation or needs and read all relevant Product Disclosure Statements before acting on the information. Whilst every care has been taken to ensure the accuracy of the material, Paradigm Strategic Planning or Sentry Advice Pty Ltd will not bear responsibility or liability for any action taken by any person, persons or organisation on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organisation should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.
Paradigm Strategic Planning Pty Ltd is an Authorised Representative of Sentry Advice Pty Ltd AFSL 227748