Helping your clients understand estate planning

Knowledge brings power and to many people it brings comfort. But the reality is, half of all Australian adults do not have a will and 34% want one but just “haven’t got around to it”.

We get regular health checks, save for our next family holiday and even plan our next career move but what happens to our loved ones when we die is not always at the forefront of our mind. 

For many of our clients, this is changing as they grapple with the uncertainty of the COVID-19 crisis. We’re navigating extraordinary times and whether you are a financial planner, accountant or lawyer, we all play an important role in supporting our clients.

It is common for people to be scared, hesitant and confused by the process involved with estate planning. However, planning and preparing early for the practicalities of death is the most important advice we can give.    

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To help in conversations with clients on all things estate planning, below are some common questions I receive.

My client has a will, they are covered, I don’t think they need to review? 

Wills need to be regularly reviewed to ensure they have been kept up to date with a client’s current circumstances and asset structure. Also, the will may be homemade – a will without advice is just like insurance without a proper understanding of a client’s needs – the advice is the critical part and unless a client had a thorough estate plan when their will was signed, it is unlikely to take into account their specific needs.

My client doesn’t have a complicated estate, why do they need a will?

There are rarely ‘simple’ or ‘standard’ estate plans. When it comes to modern families with different children and spouses, even if their assets are not significant, their circumstances make proper estate planning important. You have to think a few steps ahead with estate planning. Almost every client I see has some aspect of a blended family that they need to look at, whether it's for themselves or their children. You can't have a one-size solution, especially with blended families.

My client is young, shouldn’t we only worry about our transition to retirement clients for wills and powers of attorney?

You are (almost) never too young to need a will! Unfortunately, we never know when we will pass away and so it is important for clients to protect their wealth and their beneficiaries regardless of their age. The worst outcome for a client is to have structured their wealth appropriately in their lifetime only to have it be distributed in a way that they would not have wanted when they pass away. Having a will is not about clients being near death, it is about empowering all people with choice and control. 

My client has a will, how can they minimise the chance of it being challenged? 

By seeking professional advice. Problems can arise when people don’t have a conversation with someone like a lawyer on where possible objections could come from. Most legislation in Australia, although it does vary from state-to-state, will allow a will to be challenged by a deceased person’s spouse, de facto spouse, and a child. In some states, people who are dependent can also make challenges as well as people who are part of the same household. There are many ways a will can be contested but if you’ve had professional advice it is much more likely to achieve what you are setting out to achieve.

Should my client put reasons in their will to justify their decisions?

A one-line explanation in a will can make it easier for a potential challenger to undermine the intention of your client. While there’s no right or wrong way, calling out a specific reason in the will does still mean it can be refuted. For example, if a person outlines that the reason they’ve chosen not to include someone in their will is because “he hasn’t contacted me for 20 years”, could result in phone records being used to challenge this point. It becomes a complicated process. What can help is a letter to accompany the will, allowing a person to express why they’ve made certain decisions.

How can my client protect their will from family feuds? 

One of the most important decisions in estate planning is choosing an executor. Acting as executor is a hugely important role, one that can profoundly affect the lives of those named in a will, and it is important the right person is appointed to the job. Deciding who will take on this responsibility when drafting an estate plan is extremely important.

While most people tend to choose a family member or close friend, another option is a professional executor. An independent executor will not ‘choose sides’ in a conflict and will act in the best interests of the will-maker – and carry out the wishes expressed in a will – and not of themselves.

In what instance should my client consider a testamentary trust? 

A testamentary trust is a trust that is set up by a will. It appeals to those looking for asset protection, consideration of complexities of blended families, potentially protection in the case of a relationship breakdown and to assist minimising tax. It's for someone who wants to protect the estate for future generations. 

Around 80% of my clients have wills incorporating testamentary trusts, because people's lives are becoming more complicated and they're wanting to cover all those different scenarios. Essentially, the testamentary trust is more for the beneficiaries than the testators as they won't be around when it's being administered.

How can a superannuation benefit trusts help my client? 

With all the uncertainty around regulatory changes in the super system, super death benefits trusts can provide flexibility in the estate planning process for self-managed superannuation fund (SMSF) trustees and advisers. We often see SMSF professionals consider trusts as a way to work around the impact of the transfer balance cap rules on death benefits. Setting up a death benefit trust as part of the client’s will also gives estate executors more options to deal with future changes to super rules. SMSF professionals do need to be aware though of the limitations of such a trust, which is of benefit to the deceased’s dependents and can’t be created after the client’s death. 

Preparing for the practicalities of death 

Now is the time to be having these important conversations with clients as many put estate planning at the top of their to-do list during the COVID-19 pandemic. 

Crucially, it will empower your clients with the knowledge to make informed and confident decisions around their estate and end of life. It’s imperative everyone understands they can do simple things now to make sure their wishes are fulfilled, and loved ones are looked after.  

Anna Hacker is principal of Australian Unity Trustees Legal Services.