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Common estate planning mistakes to avoid

October 25, 2017  |  #Money Management

Planning your estate can at times feel overwhelming. Avoid these common mistakes to ensure that the distribution of your assets is carried out as you hope.

No one wants to disrupt their lives by thinking about death, but knowing your loved ones will be provided for once you’re gone makes it worthwhile. Creating a comprehensive estate plan involves developing an end of life strategy for distributing your assets (i.e. a will), and ensuring that said plan is regularly reviewed as your life progresses.

It’s understandable that people may feel overwhelmed when setting up for retirement and beyond. To help you feel confident in how you proceed, we spoke to financial planner David French from our Baulkham Hills office about three common mistakes in estate planning and how to avoid them.


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1. Not considering superannuation beneficiaries

“You see a lot of people not realising that their super fund contains life insurance, which can actually be their largest benefit, and in many cases, there is no nominated beneficiary,” David says.

Grandfather playing with his grandchild

Planning for the protection of your loved ones doesn’t have to be scary.

Most employer’s default superannuation funds must offer a minimum level of life insurance. However they may also include disability covers such as total and permanent disability and income protection.

The premiums are paid from your superannuation at competitive rates. This is because the default group policy of super fund life insurance spreads the risk over a greater number of people.

Greater levels of insurance benefits are paid through default group insurance rather than government safety nets, according to KPMG. Furthermore, a huge 80 percent of premiums paid to default group insurance is returned in claims, compared to the 50 percent paid back to individual insurance holders. This means super insurance benefits allow you to take better care of your loved ones in the case of death or disability.

Whether a super fund offers binding beneficiary nominations or not, you may nominate one or more dependents to receive your super account balance and any life insurance payments. Nominations can only be your spouse, children and anyone financially dependent on you. Where no beneficiary is nominated, the super trustee will decide to whom your assets will go, which can cause delays and arguments in your family.

2. Failure to review when circumstances change

“I often talk to clients about updating a will following changes to personal circumstances; whether it be a personal relationship, marriage or divorce, it is a necessity to update the will,” David advises.

Any changes to you or the people in your life should trigger a review of your will. As your will represents how you wish your estate to be distributed, the arrival of new dependents (in the case of childbirth) or dissolution of a relationship may mean that you wish to add or remove people from your will.

Changes in relationships shouldn’t be the only cause of consideration, however. Here are just some of the times you’ll want to readdress your will:

  • When moving to a new state or territory, as succession laws may vary.
  • If your own financial situation changes significantly.
  • In the case of personal circumstances changing for yourself or your beneficiaries. Disability or developing fiscal irresponsibility such as a gambling problem or an addiction could be a cause for reconsideration.

David also highlights that changes to a business within the estate need to be looked at:

“If a small business is involved, any changes to the business (including with partners etc.), should trigger a review of the estate plan. Superannuation and insurance policies for the business should also be considered.”

Grandmother and young grandchild reading together on the couch

After celebrating the latest addition to your family, it might be time to review your will.

3. Neglecting to seek professional advice

“The DIY situation can be potentially dangerous. To ensure that everything is passed on according to your wishes and to avoid unnecessary arguments, I highly recommend working with legal and financial professionals,” David suggests.

While we all want to expect the best, assuming family members will distribute your estate without dispute is, unfortunately, often a mistake. Spelling out your wishes clearly and thoroughly can avoid familial conflict following your passing. Often, this can be much easier said than done.

“There is a lot to consider when setting a plan and it can often be overwhelming,” says David. With numerous assets to consider in an estate plan, various possible scenarios to provide caveats for, and complicated succession laws, failure to take professional legal and financial advice on board can cause your passing to leave greater familial distress and delay in its wake than necessary.

At Invest Blue, strong relationships build the basis of how we provide advice. We want to protect the relationships between members of your families, and help you leave the people you care about with enough to carry them through difficult times.

For advice on protecting the future of your loved ones, contact us today.

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