A Failure to Plan-Who pays? - Tony Crilly

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Tony Crilly

A Checklist for Planners

I saw a great article in the weekend Australian regarding the steps to proper estate planning and just had to make a few comments.

It raised the issue about making mistakes in a will costing your family money in the administration of the estate. The photo depicted the last Robert Holmes a Court and his wife Janet, in happier times. Of course we all know that the famous lawyer turned entrepreneur, died without a will. The family in this case managed the process well and restructured the corporate group by consent. It could have been vastly different if one of them disagreed with the process.

Take the Saragossi Family famous for the G James Glass empire. When one son died, the dispute over the estate value was long and bitter.

The reference to a number of cases is to a "considerable emotional and financial cost" in resolving intestate estates or poorly drafted wills.

So what should the average punter do to protect against these problems?

The answers are well known and can be summarized in a few steps.

Never die without a valid will
Update the will regularly to reflect your circumstances
Have the will and associated documents well drafted
Ensure the documents are properly witnessed and preserved
Include all people that must be considered to prevent claims
Appoint proper guardians of your children
Appoint controlling individuals to non-estate or trust assets
Sign a binding nomination for your super and renew each three years
Hold insurance policies for the right amount in the right name
Calculate estate liabilities and ensure adequate funding is in place for tax and other expenses
Set out clear directions for the executors and trustees for the estate administration and beyond during the life of the estate trust.

So that sounds simple enough but why are so many people not getting it right?

Quite simply it is part of the human condition to procrastinate over these issues. Death is a taboo subject in our society and too few take a commercial risk approach to the matter.

I always say it is about control whether that be of your business assets, your estate administration or realizing the hopes for your family if you are not around to make your wishes clear.

When clients have the real risks explained to them in relation to such things as super, they start to take a keener interest in the outcome. People all to often assume that the money wil fall the right way after they die or the wil they made 20 years ago wil do te job.

When the different risks of estate litigation, effect of bankruptcy of a beneficiary and the total discretion of a super trustee are highlighted, they start to appreciate the complexity of the mater.

It is just so very common to see people that have no understanding about the operation of a family trust. Mostly it is just a "tax reduction" method suggested by the accountant "years ago". When you explain exactly how the trust relies on the discretion of the appointor and that it is never going to form part of their estate they son realize the importance to get it right.

In fact, the most common dilemma is who to appoint as the controlling individual of a trust in which substantial assets are held. This is more so the case in "blended families" where the feelings of benevolence towards a child of a prior marriage might not be duplicated by the new life partner.

Another common mistake is to assume that the discretion of the superannuation trustee will be exercised directly in favor of the spouse. What if the dependant child or ex spouse makes a claim?

What happens in a self managed super fund if only one person controls it after you die and decides not to split the members account balance as directed or intended?

What is a property was intended to be the continuing principal residence of a new spouse and the executors wish to sell the estate asset because it is only in the name of the deceased?

What if only the new de facto partner or one child controls the family trust? The entire capital of the trust can end up being transferred to just one beneficiary. Not a good way to encourage Christmas cheer amongst the rest of the family.

Failure to prepare an effective overall estate plan is likely to cause deed division in a family group and more often than not lead to some type of court action. The costs of tat dispute are most likely to diminish the capital often estate, so I the end there may be no winners.

It is unfortunate at that point for the survivors to have to realize the effect of a simple failure to plan by the will maker. People often mistake the costs of preparing a proper estate plan as " expensive" when in reality it pales into insignificance in terms of the costs the estate and al parties will incur unraveling a dispute when they die.

So don't do a Brett Whitely or a Holmes a Court and get yourself a good sound advisor!

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