Why Estate Planning is essential at any age plus the 3 steps to get you started.

By Fox & Hare Wealth

We rarely give much mental space to the worst-case scenario, but after the year we’ve just experienced, more Australians are starting to plan for the future than ever before.  

New research by Finder.com.au found that from a sample of over 1,000 Australians, 70% were yet to prepare a Will. The survey also noted a 127% spike in traffic to Finder’s guide on how to create a Will since January 2020. In times of crisis, planning for the worst-case doesn’t seem so unnecessary after all.  

Despite this, it doesn’t just take a global pandemic to remind us of the importance of having a plan for the future. Finder’s survey revealed 34% of respondents say they’d be inclined to create a Will if they were sick or diagnosed with a terminal illness.  

The reality is that creating a Will and an estate plan shouldn’t be a job for retirement. No matter how old you are, what your relationship status is or how much money you have in the bank, here’s why you need to make planning for the future a priority in 2021. 

What is estate planning, and why is it important?  

Let’s talk financial lingo. Estate planning is jargon for creating a roadmap for what happens to your assets when you’re no longer around. It helps give you peace of mind knowing your assets will be distributed in-line with your wishes.  

A key part of estate planning is creating a Will (a formal document that outlines how your assets will be distributed). But it also involves nominating your super beneficiaries, nominating a Power of Attorney as well as documenting your wishes for medical treatment if you’re unable to speak for yourself.  

Here’s why it’s important: it ensures your loved ones are taken care of after your death, removes the likelihood of family disputes and arguments, plus ensures you receive the kind of medical care and funeral you want if you can’t advocate for yourself.  

Do you need to make a Will a part of your financial plan (even if you’re young)? 

Absolutely. While most people put their attention towards savings, Super and investing, planning for the future needs to be a key part of your financial plan (no matter how old you are!).  

While we want to do everything we can to take care of our loved ones, lack of planning can mean our assets and money don’t go to the specific people we want them to. Recent research has shown that 70% of wealth transfers between generations fail because there wasn’t an estate plan in place. 

The ABS’ latest report on household income in Australia has revealed that average household wealth has jumped over $1 million for the first time ever. While younger Australians might not be hitting that mark yet, there is still enormous value in creating an estate plan now that you can adapt and change as you accumulate assets (such as buying a home).  

Why is planning for the future important?  

For women 

While everyone should have an estate plan, there are extra considerations for women. In Australia, women live on average 4.1 years longer than men, which means there is a stronger likelihood that female partners will outlive their spouses.  

Plus, the gender pay gap of 14% in Australia means that women face a unique set of challenges in terms of protecting their money (which will need to last longer, too). If estate planning discussions aren’t had early between spouses, women may be left without enough money to support themselves during retirement.

By putting an estate plan into action early, women are giving themselves the best chance of safeguarding their assets, receiving the right entitlements from their spouses and ensuring wealth is distributed in-line with their wishes between generations. It’s all about having the paperwork in place to ensure you and your loved ones are taken care of if the worst was to happen. 

For same-sex couples 

Australian families look very different to past generations. Over the last 20 years, the outdated ‘nuclear family’ model has given way to a range of unique and diverse family structures.  

For those who are in a same-sex relationship or a de-facto relationship, having the legal documents in place to plan for your future is especially important and will save your loved one’s significant headaches down the road. 

If you die without a Will, for example, this is known as intestacy. In this case, your surviving spouse or children will need to apply to the Court to seek an Order for your estate to be distributed. There are complex steps and rules involved, and this process can be incredibly costly, too.  

By spelling out exactly where you want your assets to go (and how much of your super they’ll receive) with a clear estate plan, you can ensure your estate will be distributed in-line with your wishes.  

1. Create a plan for your Super 

Here’s the thing: super isn’t covered by your Will. In fact, Super is the most common thing Aussies forget when planning their estate. Why? Because super is held in a trust by your super fund trustee and governed by super law, meaning it’s not personally held by you like an asset such as a house or car.  

As a result, you’ll need to nominate a super beneficiary (and ensure this is up-to-date with your wishes). In a nutshell, a super beneficiary is someone who receives proceeds from your super account when you die. By nominating a beneficiary, you’re giving clear instructions to your super fund about who you want this person to be. 

What types of nominations are available? 

Typically, you have a few options: 

  • Binding nominations: this option meets all the important legal requirements for your super fund’s trustee to pay specific amounts of your super to the people you nominate (meaning you have total control over what happens). 
  • Non-binding nominations: while the people you nominate will be considered, this option means your super fund’s trustee has the final say over who receives your super (and how much they are allocated).  
  • No nomination: as you’d guess, this is where you don’t make a nomination and your fund’s trustee will pay to your estate or determine the most suitable person to give your funds to. 

Who are you eligible to nominate as a beneficiary for your Super? 

  • Your current partner (that includes if you’re in a de facto or same-sex relationship) 
  • Your children when aged between 18 and 21 years old (every Superfund is has different terms so it’s important to check yours specifically) 
  • Anyone that’s financially dependent on you when you die  
  • Your estate or legal representative (this is usually done if you want to nominate other people in your life to be your beneficiaries through your Will) 

How to nominate a beneficiary for your Super: 

  • Check what beneficiary arrangements your fund offers  
  • Make sure your nominees are eligible to be a beneficiary  
  • Sign the nomination form and return to your super fund  

It’s important to keep tabs on this as your beneficiaries may lapse. Keeping these nominations up to date is your best bet to ensure your super goes where you want it to. 

2. Safeguards your assets 

An up-to-date Will is essential to ensure your assets are distributed as you’d like. Things like your home need to be included in your Will to spell out who will receive this property when you die.  

It’s important to chat to an estate planner early on (especially if you’re thinking about buying a property) as the way you own your home can also have an impact on how it is distributed when you pass away.  

3. Ensures your wishes are followed  

We don’t like to think about it but having a plan in place if you aren’t able to advocate for yourself is incredibly important. Creating an Enduring Power of Attorney document allows you to nominate someone to make personal, health and financial decisions on your behalf. That means you can receive the kind of medical care you’d like and have a clear plan for things like your funeral if you were to suddenly pass away. 

Let’s look at an example: say you’re involved in a major crash while driving to work that causes a serious brain injury. If you have an Enduring Power of Attorney document in place, your nominated loved one (such as your partner or parents) will automatically have the legal authority to advocate on your behalf. Plus, they’ll know exactly what you want them to do with your assets and finances and even what kind of medical treatment you’d like to receive.  

If not, there’s no guarantee that your wishes will be followed or that your loved ones will automatically be able to act in your best interest when you can’t speak for yourself.  

The bottom line  

No one wants to leave their family with uncertainty. By having a clear estate plan in place from the beginning, you can rest assured knowing your wishes are properly documented. This can reduce the likelihood of family conflicts and disagreements, which can easily become costly if legal advice is required.  

While we hope you don’t need it anytime soon, having an estate plan in place (even when you’re young) means your assets will always be distributed in-line with your wishes. Think of it as the easiest thing you can do to protect your loved ones, even if you’re not around.   

Want to make a difference to the lives of women, young women and girls in Australia? A gift in your will will allow us to continue our life-changing work and ensure women, young women and girls are supported. Whether large or small, every dollar is greatly valued because it will help us have a positive impact on a women’s life, and in doing so provide the greatest gift. Have questions on how to do this? We can help!

Fox & Hare is a financial advice & planning firm in Sydney, Australia. They coach young professionals, millennials and next-gen leaders with practical, honest financial advice that meets them where they are – and takes them where they want to go. Find out more about Fox & Hare.

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