Navigating complex family relationships and blended families can be challenging at times particularly when a family member passes.
A good estate plan can help to make sure your wishes are carried out when you pass away. The most important part of an estate plan is a will, which outlines how your assets will be divided among your family.
These documents specify who will make decisions about your finances and healthcare if you become unable to do so. Having a well-crafted estate plan can give you peace of mind knowing that your affairs will be taken care of the way you want.
Professional advice is vital in estate planning to make sure that you have considered all matters, including tax, and that your loved ones are protected. It is also important to clearly communicate your wishes, particularly when there are complex matters involved so that your wishes are clearly understood.
Here are some of the things to think about.
Superannuation
A binding death benefit nomination should be at the top of your list when you are considering the distribution of your superannuation funds.
This makes certain that your super death benefit is paid to those you choose because without one, the trustee of your super fund will make their own decision.
The nomination is usually valid for 3 years before it lapses and must be renewed.
Blended families
If you have been married more than once and/or have children with more than 1 partner, your will helps to provide for those you choose effectively.
For example, you may wish to ensure that your children receive the proceeds of your estate rather than your spouse or ex-spouse. Alternatively, you may need to ensure your will protects your current spouse from the claims of previous spouses.
When it comes to the family home, the type of home ownership is important. If you have purchased as 'joint tenants', the entire asset will pass to the surviving spouse. On the other hand, if you have purchased as 'tenants in common', each spouse can distribute their share of the house to others.
You may also wish to include a ‘life interest’ in the home so that your current spouse can continue to live in the home until their death before it ultimately passes to your other beneficiaries.
Trusts
Any existing family trusts should be reviewed with a blended family in mind. Check that the trust deed provides clear instructions for succession, if you want to ensure your children from past relationships are catered for.
Your will can also establish new trusts, known as testamentary trusts, to provide for any dependents with disability, when you are worried that a child may waste or misuse your assets, or to allow for young children.
A testamentary trust can also help to protect your adult child’s interests if they were to divorce a partner or are facing bankruptcy. Any inheritance they receive from you would become part of their property and can be considered in a divorce settlement or called on by creditors.
Passing on a business
If you are in business with partners or would like to hand on the family business to one child but not others, a life insurance policy may be a useful strategy – sometimes known as estate equalisation – to even the distributions from your estate.
In the case of a business partnership, you would name your partner or partners as beneficiaries of the life insurance policy, to effectively ‘buy you out’ of the business. Where it’s a family business due to be passed on to 1 child, your life insurance would go to your other children to match the value of the business.
Note that it is crucial to continually review the value of the business and the value of the life insurance to ensure they remain current.
What's next?
Professional advice is important when estate planning to ensure all matters have been considered. Navigating estate planning can be tricky and sometimes very emotional, particularly when your circumstances are a little more complex.
To ensure your estate plan meets your wishes and takes into account all the aspects, speak with your local Nexia Adviser.
