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Modern Estate Planning

What is modern estate planning?

The short answer - Making sure that on your death, your assets pass to the people you want to benefit.

These days proper estate planning is about more than just making a Will. A number of factors (bi-products of the modern world) make estate planning far more complicated. Those factors are detailed below:-

Family structure

The Good Old Days

Mum, dad and the kids.

The Modern World

Mum, dad, children to former partners, step-children, ex-wives etc.

Divorce Rate

The Good Old Days

Low rates of divorce.

The Modern World

High rate of divorce (and increasing).

Assets and Liabilities

The Good Old Days

The family home and money in the bank.

Most people would only borrow to buy their own home.

The Modern World

The family home, money in the bank, superannuation, shares, investment properties etc.

Credit is rampant. More and more people are living beyond their means.

Litigation risks

The Good Old Days

Very few risks.

The Modern World

Litigation "mad" society - professionals and people in business are most at risk.

 

Most people will have one or more of the above in their lives, be it personally or in their family tree.

 

Superannuation

More people are holding more of their wealth in superannuation.

A common issue flowing through all estate planning now is ensuring that superannuation funds (including the proceeds of life policies held in the superannuation fund), pass to the intended beneficiary.

Most superannuation funds allow you to nominate who is to receive your superannuation if you die. 

What you may be surprised to know is that in many cases your superannuation fund can ignore your nomination and pay the superannuation to another person (being a dependent of yours) or to your estate.

Worse still, if you make no nomination, the superannuation fund will proceed to make its own decision without any guidance from you.

 

Life Insurance

Life insurance policies can be owned by either the person whose life is insured or by any other person.  Often they are owned through superannuation (in which case, the rules about superannuation described above apply to the insurance proceeds).

By way of example, a life policy may be taken out on the husband's life (i.e. payment is made when the husband dies) but be owned by the wife. In that case, the husband's Will would have no impact on who receives the insurance payout.

As part of proper estate planning, it is therefore important to check the ownership of life insurance policies. We can assist you with this.

 

Joint Tenants v Tenants in Common

When more than one person holds an asset, the asset will either be held as "joint tenants" or "tenants in common".

There is an important difference, which materialises on the death of a co-owner:-

  • assets held as "joint tenants" pass to the survivor automatically on death - the Will has no impact.
  • assets held as "tenants in common" pass according to the Will of the deceased.

Unless stated specifically for an asset, the law presumes assets are held as "tenants in common".

The most common assets that may be held as "joint tenants" will be houses and bank accounts.

As part of proper estate planning, it may be necessary (for example, if you want to leave your home to someone other than the co-owner) to check the ownership of the asset and change the asset from "joint tenants" to "tenants in common". We can assist you with this.

 

Blended Families

This is a particularly dangerous area. With second marriages (or relationships) often comes the fact that one (or both) partners have children with their former partner.

 

Testamentary Trusts (Flexible Wills)

At Mason Lawyers, we can either prepare a more Traditional Will for you or assist you with a more modern "Flexible Will" (incorporating a testamentary trust).

Making a Flexible Will (incorporating a testamentary trust) is generally about 2 things:-

  • Asset protection; and
  • Tax minimisation.

When making a Flexible Will, the most important thing to remember with a testamentary trust is that it is not about "who" is benefited, but "how" you benefit them.

There is an important difference, which materialises on the death of a co-owner:-

A Flexible Will incorporating a testamentary trust is a more flexible structure for the beneficiary. Each beneficiary can choose, at the time of your death, whether or not they want to take advantage of the more flexible structure. If a benficiary chooses not to take advantage of the more flexible structure, then the Flexible Will simply operates like a Traditional Will.