Three big mistakes to avoid when planning your will

Recently, I launched a new book, Wills, Death & Taxes Made Simple. The catalyst for writing a book about estate planning was the discovery that 12 million Australians do not have a will, and 60 per cent have never given a thought to estate planning.

That’s a serious situation – and a signal that many people are unaware of the troublesome complexities that can devastate families if proper estate planning is not put in place.

Twelve million Australians do not have a will, and 60 per cent have never given a thought to estate planning. That’s a serious situation.Credit: iStock

I was chatting with the guy who takes care of my garden and I asked him if he had a will. He replied, “I’ve never got around to it. It all seems too much trouble.” I responded, “You’ve been married before, haven’t you? And don’t you have children from that relationship?”

It was yes to both questions. He got a shock when I told him that, according to the laws of intestacy, his previous family may get a bigger share of his money than he would like if he dies without a valid will.

Estate planning is a huge topic because it covers myriad such issues, many of which are uncertain. It’s not just the interplay of important topics such as tax, superannuation and Centrelink – the estate planning laws differ from state to state.

To this heady mix we add human psychology. Many people just don’t get around to making a will and, even if they do, there are the other challenges of choosing an appropriate executor and handling the competing interests of family members.

It’s well worth spending some time on estate planning to take care of those you leave behind.

Then there are further complications due to the number of people living longer and re-partnering later in life, and also the possibility of diminishing mental capacity.

And there’s more – many people have children living overseas, and more than 50 per cent of Australians were born overseas or have a parent living overseas. This brings the complexity of overseas assets and beneficiaries into play.

It’s interesting that the average age of making a will is 47. But it makes sense. At that stage, people’s parents are probably in their 70s or early 80s, and how their inheritance may be dispersed is most likely fast becoming a major issue on the children’s mind.

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Yes, it’s a minefield, but here are some practical tips. For starters, don’t be too quick to spread word of the death. All too often, when somebody dies, their family rushes to tell the bank. They get a terrible shock when the account is frozen and there’s no money to pay for the funeral.

Many retirees’ main income is an account-based pension from superannuation. It’s a similarly big mistake to tell the super fund immediately about the death. If you do this their pension will be stopped immediately, which is highly likely to leave any survivor with a cash flow shortage that may easily take nine months to resolve.

Another major misunderstanding concerns powers of attorney. Originally, a power of attorney lapsed when the donor, the person who gave it, lost capacity. But a power of attorney is usually most needed when someone has lost capacity. So enduring powers of attorney (EPAs) were developed.

A common misconception is that an “enduring” power of attorney endures after the death of the donor, but this is quite wrong. The moment the donor dies, the EPA’s authority is over and the executor’s has begun. Yet often a surviving partner gets a terrible shock when they discover this.

Wills, Death & Taxes Made Simple by Noel Whittaker.

Estate planning aims to give all involved clarity and certainty that loss of a loved one will not plunge them into chaos and financial difficulties. It’s well worth spending some time on it to take care of those you leave behind.

Wills, Death & Taxes Made Simple is an invaluable tool for leaving a legacy of financial freedom. It’s available in most bookshops or at www.noelwhittaker.com.au

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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