Myth 1: Estate planning is for wealthy people
Estate planning may conjure an image of an ultra-rich couple working out how to divvy up their sprawling estate, luxury yacht and holiday homes between children and grandchildren. But it’s a myth that organising what will happen to your assets is only an issue for the wealthy, says financial planner Andrew Saikal-Skea. “People often have more assets than they realise. A robust estate plan protects those assets and looks at your overall position and goals while you’re alive and after you pass away.”
Myth 2: I’m too young to worry about a will
When we’re young, life is busy and we prioritise buying a home, paying bills, raising a family and keeping our career on track. But you’re never too young to think about estate planning, says Peter Tanner, manager of advice, enablement and experience at AIA Financial Wellbeing. “Younger people think it’s something to consider down the road. When you’re young, it’s hard to see the consequences of not having a will or power of attorney or binding nominations for your superannuation,” he says. “But anyone over the age of 18 – especially when they start working, open a savings account, start building super and begin to take on debt – needs to put a plan in place.”
Myth 3: Estate planning is just a will
Having a will is important but estate planning can include giving a trusted person the power to manage your finances if you become incapacitated. You can create a medical directorate that authorises someone to decide your medical care if you become seriously ill. “If you wouldn’t want to be resuscitated after a major heart attack or similar event, you can make your wishes known in advance,” says Tanner. For families with dependent children, estate planning spells out who you want to look after your children if you pass away. You can even determine who cares for pets.
Myth 4: My family will be able to sort things out
Not leaving anything to chance brings peace of mind. This includes having life insurance so that if you pass away, there’s money to cover debts and care for your family. “Think about your superannuation and ensure there are binding nominations as to who gets it and how it’s shared,” suggests Tanner.
Consider how your family can access and navigate your accounts and assets: “Often in a couple, one person is more involved in the finances and if they pass away, their spouse has to manage.” Safely record the assets you own and keep a list of passwords and numbers for accounts in a safe place that only your family can access.
Myth 5: If I die, everything will be shared fairly
Beneficiaries and inheritance can lead to fraught relationships. Without a will there’s no guarantee your assets will be shared equally or as you want them to be. “If you pass away without a will and you’re intestate, how your estate is divided varies from state to state,” says Saikal-Skea. “In the ACT, about $200,000 goes to your spouse and everything else is split between your spouse and children.” If you don’t have a spouse, there’s an order of relatives who can inherit, says Jessica Pramana, private wealth director at Commonwealth Private. “Intestacy usually means only family members inherit so a will is vital if you want to leave gifts to friends or charities.”
Myth 6: There’s no way to reduce estate taxes and expenses
Estate planning is an opportunity to think about how to arrange assets so that you meet financial and legal obligations, while saving beneficiaries from unnecessary taxes and penalties. “Leaving assets like art or jewellery to a beneficiary overseas may result in unintended tax consequences,” says Pramana. It’s worth checking whether a testamentary trust – where assets are put in a trust for your beneficiaries – is a good idea. Every person’s situation is different and a financial advisor can suggest relevant options for you.
“People often have more assets than they realise and a robust estate plan protects those assets.”