it is easy to be fooled by these estate planning misconceptions, because there is a lot of misinformation out there. That’s why we’ve decided to clear up the most common estate planning misconceptions for you, so that you can better prepare your own estate planning.
Estate Planning Misconceptions: I own all my assets
In most circumstances, you do own all your assets, like your car and your term deposit. However, you may not realise that the way you own assets has a big impact on your estate planning. For example, if you’ve bought a house with your spouse, partner, family member or friend, you do not fully own that asset. You instead own the property jointly or as tenants in common. If you own the asset jointly with your spouse, and you spouse was to pass away, that share of the property immediately reverts to you – it doesn’t go into the estate of the deceased person.
If you an equal share of a property, called ‘tenants in common’, then your share will be included in your estate rather than ownership reverting immediately to the other asset owner/s. This means that if one of you were to pass away, your share of the property will be considered a part of your estate. This means that you could end up with an awkward ownership position, such as your new partner owning an investment property with a child from your first relationship, for example. Therefore, it’s important to know how you own assets. When writing your will, ask your solicitor questions about how you should own assets.
it is often the case that owning all your assets in your own name is not the right solution. For people in a blended family, or with a family business or with other complex needs, it may not be smart to avoid having all of your wealth to be a part of your estate. It also opens up the possibility of a challenge to your will following your death.
Another possibility is have a testamentary discretionary trust own your assets. Testamentary discretionary trusts are great estate planning tools because they can offer tax minimisation, asset protection and flexibility. A testamentary discretionary trust is a type of trust created under a will, comes into existence only upon the administration of the deceased estate.
Estate Planning Misconceptions: I can die without a will
Technically, this is true. Anyone can die without a will. However, if you die without a will, nothing can be expected to just simply fall into place. If you pass away and have not written a will, then the intestacy laws in your state will decide how and to whom your estate will be divided. In most cases, this is usually not how someone wished for their estate to be divided.
Not having a will is common for people who think they don’t own anything. But many people have a life insurance policy as part of their super, which can be tens or hundreds of thousands of dollars. Even young people and those who don’t consider themselves particularly rich still should write a will with the correct legal advice.
Estate Planning Misconceptions: My will takes care of my super
Your will cannot deal with your superannuation. How your super is disbursed upon your death is solely at the discretion of the trustees of your super fund. The way around this is to provide your super fund a binding death benefit nomination, which must be in writing and explains how you wish for your super fun to be distributed. This is an important – and often overlooked – part of estate planning.
Your other option is to establish a self-managed super fund, but this should be considered with the appropriate legal and financial advice.
Estate Planning Misconceptions: My money, my way
The law imposes a moral obligation on will makers to make adequate provision for their dependent family members. Therefore you may not be as free as you think to cut out family members. If your will is contested, the courts will determine if adequate and appropriate decisions have been made when distributing your wealth. For example, you may leave a large amount of wealth aside for one child and the rest of the children will receive a smaller amount. The court will take into account your other assets and the size of your estate among other considerations when making their decision. In some cases, the courts may decide to overrule some of your decisions. Therefore, it is important to ensure reasonable decisions have been made and a clear justification is listed in your will. Make sure you seek specialist legal advice – an Accredited Specialist can help to protect your estate from litigation.
Estate Planning Misconceptions: I can leave it all to my spouse
This is also known as the ‘they’ll do the right thing’ misconception. You may decide to give the entirety of their estate to your spouse, who will then ‘do the right thing’ and distribute the estate according to your mutual wishes. Unfortunately, sometimes this is not the case. Your spouse may choose to re-marry and your estate will be passed onto their new spouse and step-children and your family members may not receive anything. This is when testamentary trusts are useful, as they ensure the correct people will inherit your estate at the right time. You can list the beneficiaries and the person in charge of the testamentary estate to ensure the right decisions are made.
There are many estate planning misconceptions that can have a huge effect on your estate if you aren’t adequately prepared. Always seek the advice of a specialist in wills and estates who can advise you on questions like: what is in your estate? What can your family receive? How much is my estate worth? How do I protect my loved ones? Who is the best person to handle my estate? Don’t be afraid to ask question in order to receive the best advice.
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