Australia: Estate planning at tax time: a prime opportunity to ensure your assets are protected

Tax time: it's the one time of the year that you need to get your financial paperwork together and review your assets and liabilities. It's also a good opportunity to speak with a specialist wills and estates lawyer to ensure your estate plan is up to date and your assets are well protected.

The implications of having an outdated or non-existent will

Wills and estate planning are important, as they ensure that your assets are protected and will be transferred to your loved ones in the event of your death.

If you were to die intestate (ie without a will), your estate could potentially be left to the taxman. This is why it's imperative to ensure you have a valid will and an up-to-date estate plan that reflects your current situation.

Update your will and estate plan each year to reflect your current circumstances

Life is always evolving, and your circumstances can easily change from year to year. You might begin a new relationship, have children, or invest in property. Your assets could accrue, while your health could deteriorate.

There are many factors that have the potential to affect your current situation. One common occurrence is when property prices soar and the value of the family home skyrockets. This has led to many wills being challenged.

Changes to family structure can place your assets in jeopardy

Did you know that when you marry, any will that you have signed beforehand is automatically revoked? This could have a significant impact on your family, including any children you may have from a previous relationship.

On the other hand, if you have a child who is involved in a dysfunctional relationship, it may be their best interests to create a trust for them, as this can help you protect their inheritance in the event that they separate from their partner.

Review the executor of your will each year

Selecting the right executor of your will requires well-considered thought. You should also review your executor each year, as circumstances can often change.

If you are in a blended family relationship, it is especially necessary to have an executor who understands your life as it is today. After all, they will control your estate, including your funeral plans, and may need to deal with the competing interests of past and present partners, biological children and stepchildren.

Your executor is also a fiduciary who must act in your best interests

Acting as a fiduciary, your executor must set aside his or her own personal interest and ensure your estate is settled according to your wishes.

The importance of acting as a fiduciary is demonstrated in a case that went to court in 2014, where a man had died with two superannuation accounts and appointed his three children and de facto partner as his executors.

His de facto partner made an application for the benefits to be paid to her as a financial dependent. However, the other executors sought an order requiring that the lump sum benefit be paid to the estate, as there was a conflict of interest caused by her being an executor and she was in breach of her fiduciary duty. (See Brine v Carter [2015] SASC 205.)

Ensure that your superannuation will pass to your nominated beneficiary

Your superannuation doesn't automatically pass to your estate unless you elect that it does so. If you haven't nominated a beneficiary, your superannuation fund will have full control over deciding who your super will go to. It's one of the biggest sources of disputes arising after death.

Importance of making a binding death benefit nomination

In a recent case, a wife was made the administrator of her husband's estate after he died, leaving four superannuation accounts. The estate was to be divided between the wife and their two children. However, two of the death benefits were paid directly to the wife, one was paid to the man's estate and the fourth had not made a decision at the time the case was heard.

In its decision, the court acknowledged that if the husband had made a binding death benefit nomination or had included a specific clause in his will allowing the executor to apply to receive the superannuation personally, this dispute could have been avoided. (See Burgess v Burgess [2018] WASC 279.)

Online accounts and personal records need to be accessible

With many financial, work and personal records now being stored online, either on computers or in the cloud, it's imperative to make sure that your passwords and personal files can be easily accessed if you were to die.

Appoint and regularly review your power of attorney

If you were to be incapacitated or you're planning to travel overseas, having a power of attorney will give you peace of mind, knowing that someone you trust can make financial decisions for you.

It's wise to appoint a power of attorney while you are still competent and have the capacity to obtain specialist estate planning advice that is relevant to your particular circumstances.

Joshua Crowther
Estate planning
Stacks Law Firm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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