The recent COVID-19 health pandemic has highlighted for many of us how vulnerable our parents are and the importance of making sure their wills and other important estate planning documents are up to date. The importance of regularly reviewing your estate planning documents is frequently underestimated.

When estate plans are prepared you allow for a certain number of probable scenarios. However, due to the complexity of each component, they require regular review.

The following are examples of the reasons that you should regularly review your estate plan and why you should make sure your parent’s estate plan is up to date:

  1. Death
    If one of your parents dies this generally requires a review of their estate plan and its objectives. If only one parent now remains, thoughts often turn to considerations such as gifting assets to children, planning to minimise taxes on superannuation death benefits and aged care planning.
  2. Divorce
    Your will is automatically revoked when you are divorced. Planning, therefore, needs to be undertaken immediately you decide to separate from your partner. Changes required include preparing a new will and changing superannuation beneficiary nominations. You should not wait until you are divorced to instigate these changes. Also, you may wish to undertake a review of your insurance requirements to make sure your children are provided for in the event that you have a serious accident or illness.
  3. Children getting older
    Whilst your children are young and still at school, estate planning for them involves making sure you have enough assets to provide for their education and that the funds are held securely in a tax and asset protective manner. As your children get older, strategies must consider their own developing family relationships, the independence they require, and how your estate plan can be modified to cater for these changes.
  4. Children joining the family farm
    In a typical farming situation, one or two children may decide that they wish to carry on the family tradition of farming. This announcement usually requires estate plans to be completely overhauled. Where once all assets were to be distributed equally between all children, a revision might include leaving farming assets to the farming children and non-farming assets to the non-farming children. Equalisation measures are usually required to provide fairness and insurance is frequently used. A renewed focus is also applied to long-term succession planning at this stage.
  5. New business
    Where a new business or farm is purchased, consideration needs to be given to which entity, person, or persons should own the business or farm. Also how it will be financed and ultimately how it fits within the overall estate plan. All these factors must be considered before purchasing the business or it could be costly to change ownership at a later stage.
  6. Superannuation
    Your superannuation death benefits are tax-free when paid to your dependants. However, once your children are over the age of 18 and are no longer your financial dependants, superannuation death benefits may be taxable upon payment. New strategies are required to minimise the tax if your superannuation death benefits are paid to financially independent children.
  7. Moving to a retirement home or aged care facility
    Planning for aged care and the later years of your life frequently require adjustment and consideration of your estate plan. Family agreement and consensus are required to maximise your position and consider the best strategies for your family.
  8. Succession Planning
    A decision to hand over control of the family business to a child requires planning and update of estate planning documents. These should all be executed at the same time and communicated with all family members, so that transparency, family harmony, and unity is maintained.
  9. Buy Sell Agreements
    A Buy-Sell Agreement is essential when you own a business with another independent party. Recent changes in legislation involving the taxation treatment of insurance policies held for the purposes of a buy-sell agreement, require a review of all buy-sell agreements to make sure that your equity in your businesses is preserved for your family.

Summary

There are many components in an estate plan and they are constantly changing.

Your estate plan is the foundation upon which your retirement plan is prepared and decisions are made, and therefore a regular review is vital to keep it up to date.

A regular review of your estate plan will assist you in:

  • Maintaining family unity;
  • Communicating your family story to the next generation;
  • Transferring family wealth and family values;
  • Avoiding costly estate planning disputes;
  • Proactively managing estate planning taxes; and
  • Protecting your equity in business partnerships

To give you the best possible chance of achieving your estate planning objectives, treat estate planning as a journey and not a destination with regular reviews and adjustment of your will and other estate planning documents.

For further tips on why you should review and update your estate plan, download the attached ebook “Why you need a Real Life Estate Plan” or listen to the “Real Life Financial Planner”, Geoff Ivanac on our retirement podcast, “Real Life Retirement Radio”.

 

General Advice Warning: Any advice on this site is general advice only and does not take into account the objectives, financial situation or needs of any particular person. It does not represent legal, tax, or personal advice and should not be relied on as such. You should obtain financial advice relevant to your circumstances before making any decisions.