How to get your financial affairs in order to best protect and provide for your loved ones
Have you ever thought about the fact that leaving money for your children, or assets to your grandchildren, might actually leave them worse off?
The truth is, it’s not just possible, it’s extremely common.
It is a challenging concept to be confronted with because it is the exact opposite of most people’s intentions.
We only leave our family money to try and help them and support them. But a lack of planning or knowledge around the processes can do the opposite.
Thinking about what happens when you pass away can be an emotional and challenging process to begin with – let alone, having to plan out what will happen with your possessions and assets.
Many people create their Will and think that is enough, but your Will is only part of an effective estate plan. A good estate plan takes into consideration so much more to help best protect your assets as well as your family.
A well-managed estate plan will ensure your finances are best managed and that your family will be okay when you are no longer around. Having an estate plan not only means that your family won’t have to manage your financial affairs, but it also means they can be protected and provided for now and in the future.
So what exactly is an estate plan?
“Estate planning involves developing a strategy to deal with your assets and investments when you pass away. Its aim is to provide peace of mind for you and your loved ones when you die, ensuring that your assets are passed on to your beneficiaries in the most simple and effective way.”1
According to MoneySmart, an estate plan includes legal documents such as:
- your Will
- a testamentary trust (as part of your Will)
- superannuation binding nominations: this is where your super balance gets paid to your chosen beneficiary
- an advance healthcare directive (what you would like done with your body)
As well as plans for when you pass away, an estate plan can include plans for how you want to be cared for (medically and financially) in the event that you are unable to make your own decisions anymore. This can include documents such as1:
- any powers of attorney
- a power of guardianship (giving someone the right to choose where you live and to make decisions about your medical care)
- an anticipatory direction (stating your wishes about your future medical treatment)
In general, the estate planning process can be broken down into three simple steps:
- Understand your assets (superannuation, investments, etc.)
- Identify risks (such as the potential for divorce, early death)
- Creating a plan that is tailored to your needs, family, and assets
Your estate plan is unique to you. It is important to take the time to understand your needs and create a plan that works best for you and your family members.
Here’s 3 common mistakes to avoid when creating your estate plan:
1. Forgetting about the tax implications
Taxes are an important consideration of your estate plan and should not be forgotten.
Benjamin Franklin once said:
“In this world nothing can be said to be certain, except death and taxes.”
An effective estate plan should take into consideration your beneficiaries’ financial situations and current strategies. This way, you can cater your plan to suit their needs in a way that will be tax-effective and make the most of your money.
Here are some tax minimisation techniques you could use:
- Creating a testamentary trust:
- Consider holding investments in a trust
- Leave assets with low or no capital gains tax liabilities to beneficiaries with high marginal tax rates and vice versa2
2. Letting your super go to waste
You work hard for your super your whole life. So, when you pass away, it is worth making sure your super is not going to waste.
As part of your estate plan, you should have a Binding Death Benefit Nomination which determines who will receive your remaining super balance. It is worth involving your family in this discussion and planning process as the person you give your super to will be affected.
There may also be an opportunity to manage or avoid death taxes that often apply to your superannuation. You can discuss your superannuation plan and tax minimisation strategies with an experienced financial adviser.
3. Waiting until ‘later’
It is never too early to start planning for your finances.
Unfortunately, death cannot be timed.
A Will is extremely important to have and regularly update – over half of all Australians die without a Will.
If you die without one, the law decides who will get your assets — and this may not be who you wanted.
The last thing your family needs when dealing with the death of a loved one is logistics to manage and finances to plan or fix.
At a time of loss and grief, you want to help and support them as much as possible.
What’s more, you want to ensure they are financially protected and benefited rather than hindered from your assets.
The best time to start your estate plan was yesterday. The second-best time is today.
Ready to plan your estate?
If you are ready to create your estate plan and best protect your family for the future, contact CCFPG’s experienced estate planning advisers.
With extensive experience in financial planning right here on the Central Coast, we can work in conjunction with your solicitor to help guide you and your family through the estate planning process and make the right decisions with your assets.
We ask the right questions to understand your family and your goals, so you can still look your family when you are gone.
2 Australian Unity (2018). What is estate planning Factsheet. https://www.australianunity.com.au/wealth/~/media/publicsite/documents/financial%20advice/factsheets/estate_planning/estate%20planning%20pfs092.ashx?la=en
Disclaimer: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.