Planning for the inevitable and getting your estate in order

Dying is not something we like to think about, however, a bit of pre-planning can save a lot of heartache for those we leave behind. Here are three important areas to consider with examples and possible solutions.

Allocation of your super

In most super funds, the trustee decides who gets your super including any life cover. The super rules require the fund to pay your dependants as defined in the legislation.

Example

A divorcee may want to leave money to their children from a first marriage but not to their ex-spouse. You cannot be certain the trustees will not apportion part of your super to your former partner unless you make a Binding Death Benefit Nomination and instruct the trustee to distribute the amounts to your nominated beneficiaries.

Possible solution

Some super funds allow you to make a Binding Death Benefit Nomination that will direct the super fund trustees in how your super is to be paid out. This ensures your super is paid out as per your wishes, rather than at the discretion of an unknown trustee.

Perils of dying intestate

Without a “last will and testament” your assets are distributed according to a formula in state legislation. This may mean your assets are not distributed in the way you had wanted.

Example

A 27-year-old single female was killed in a car accident. She had life insurance in her super fund, and $95,000 was paid to her estate. She had no will and no dependants. Her estate was distributed according to the formula – half to her natural mother and half to her natural father. This was not what she would have wanted because her parents divorced when she was very young, and her father had not played any role in her life since then.

Possible solution

Ensure you have a current will and be very specific with your wishes.

Providing money for your dependants quickly

Upon death, your latest will should be found and accepted by the courts in a process called probate. People who may benefit from your estate can challenge your will, and it may take some time before assets are distributed.

Example

The main family breadwinner dies. The family know that a will has recently been completed. However, they cannot find the will and other documents needed for both the funeral and to produce for the courts. This is a common situation that can cause significant distress. An estranged child also challenges the contents of the will and delays the distribution of assets. In the short term, the surviving spouse may have insufficient money to live on and a high level of stress at a time when they are least able to cope with it.

Possible solution

Firstly, ensure you have all the necessary records in a safe place. Always tell the executor of your estate where to find this information in the event of death. To ensure family members are protected, a life policy or superannuation account can be paid to nominate a beneficiary. On proof of death, the superannuation fund or the life office will pay the policy proceeds directly to the beneficiary without the need to pay money into the estate.

What to do now

Give your adviser a call. Estate planning is a necessity for all of us, and your adviser can assist you in minimising the stress on your family and making sure your wishes are followed.