Is this a growing problem with conflicts around blended families?
- Not Achieving Intergenerational Wealth Transfer Objectives
- Leaving Your Will Open to Legal Challenge
- Not Simplifying Complex Wills and Estates
- Dedicated Purposes in Estate Planning – clear direction of your intent
Many things can go wrong when preparing wills and setting out clear instructions for dispersing an estate. Ross Higgins from Austock Life highlights some of the big mistakes that he sees in his work with lawyers and financial planners.
“So what big mistakes are people making with their wills?
“What can upset the wishes of people when they die and lead to their wills being disputed?
“Is this a growing problem with blended families?
“I believe that contested wills and estate planning bungles are a big problem that some plain thinking and sensible planning can avoid,” said Ross Higgins, MD of Austock Life.
1.Not Achieving Intergenerational Wealth Transfer Objectives
Testamentary trusts are a common vehicle to pass on wealth and can also establish a level of control beyond one’s death. These are not straightforward structures and are usually created under a person’s will. A testamentary trust not only requires establishing the trust under your will and finding ‘willing’ trustees, but can be impracticable for smaller dollar bequests. As a form of trust they also require annual administration and tax reporting costs and can be inflexible and costly to unwind.
As an alternative, parents (and especially grandparents) can use modern insurance bonds to plan ahead with “peace-of-mind” about how, when and to whom their estate’s wealth (or part of it) will be distributed to the next generation.
Some modern imputation bonds have special design features for passing money cleanly to children and grandchildren – and with the following advantages:
- allow for multiple beneficiaries with different entitlements;
- be tailored for meeting small and large bequests;
- are low cost; and
- operate in a low maintenance “set and forget” and tax-effective environment.
2.Leaving Your Will Open to Legal Challenge
Legal challenges can arise due to disgruntled beneficiaries and others left out of the Will, or someone just being unhappy and wanting to overturn elements, such as a charitable bequest. This can cause costly, lengthy (and unhappy) legal disputation.
There is a simple and tested solution though:
“It is better to place the money out of reach of the Will and put it beyond challenge. Modern insurance bonds are increasingly being used for making protected bequests and can even be done as ‘secret/confidential bequests’. They can also be established for ‘set purposes’, which can be particularly useful to create inheritances for children and grandchildren.
“Because Insurance Bond Nominations can be set up as “excluded assets” from legal estates – therefore bequests made in this fashion can be put beyond Will disputes” said Mr Higgins.
“The other upshot of using Insurance Bond Nominations for non-estate bequests is that these can be made in secret because these types of inheritances are not subject to Probate procedures (and costs) and hence not brought within the public domain.”
3.Not Simplifying Complex Wills and Estates
An Insurance Bond Nomination being outside the deceased’s Will and legal estate (and possibly made in secret) opens strategies to use a Nomination in conjunction with a Will, or as an alternative estate planning arrangement.
For instance you can use a standard Will for certain beneficiaries, but separately establish Insurance Bond Nominations to provide for other beneficiaries. The Nomination could:
- provide for children of previous marriages or a new spouse’s children;
- solve potential conflicts and inequities between children and grandchildren that might be difficult to handle just under a Will; and
- privately (secretly) meet moral obligations to someone such as a good friend or trusted employee.
4. Dedicated Purposes in Estate Planning – clear direction of your intent
“We are now seeing a significant proportion of our new business (just over 40%) invested into ChildBuilder bonds – and many of these are established with a “stated intended purpose” for the child’s or grandchild’s expected use of the investment’s proceeds.
ChildBuilder’s most common ‘intended purposes’ that Austock Life is seeing include:
- first home deposits and funding the move out of home
- education funding and job qualifications
- or simply starting a family
“A special innovation with ChildBuilder is an extensive menu of ‘intended purposes’ that parents (or grandparents) can choose from when establishing a ChildBuilder Bond” said Mr Higgins.
Specifying an intended purpose for ChildBuilder works in much the same manner as someone expressing non-binding instructions in their Will for the particular use of a bequest.
What are non-estate assets?
- Jointly owned assets, such as the family home that automatically passes to a surviving spouse as joint owner
- Assets held through a family trust
- Life insurance policies – where a nomination of beneficiary is made
- Superannuation nomination benefits are also normally a non-estate asset
Contact
Ross Higgins
Austock Life
Managing Director
03 8601 2056 Or 0407567774
life@austocklife.com