“Estate planning is an important and everlasting gift you can give your family”.
– Suze Orman, American author, financial advisor, motivational speaker, television host, and podcast host.
A powerful quote from a woman who knows her stuff. Estate planning is a wonderful gift to give our families and, properly prepared, is a gift that will keep on giving.
It’s important that everyone over eighteen has a sound and strategic estate plan, particularly women, because studies show women ‘live on average 4.1 years longer than men”. This means we are more likely to live longer than our spouses, and coupled with a 14% gender pay gap in Australia, we face unique challenges in terms of protecting our money, which will need to last longer for ourselves, and for our loved ones after we die.
Increasingly more women are working full time in paid employment, in our own businesses, and are often the family’s main breadwinner. We are increasingly becoming wealthy in our own right, and should be concerned about protecting our assets not only for ourselves during our lifetime, but also for our loved ones when we die.
What is estate planning?
Estate planning provides answers to these questions:
- Who will look after me if I can’t look after myself?
- How can I make sure my family are looked after financially when I die?
- Who will look after my young children if something happens to me?
- What will happen to my business if I am not able to run it?
By putting an estate plan into action early, we are giving ourselves the best possible chance of safeguarding our assets, receiving the right entitlements from our spouses when they pass, and ensuring our wealth is distributed in line with our wishes after death. It’s all about having the appropriate documents in place to ensure we (in the event of incapacity) and our loved ones (in the event of our death) are taken care of.
An estate plan is always best prepared with the help of professionals and involves more than simply having a Will prepared. It formalises how we wish to be cared for financially, personally, and medically if we are ever unable to make decisions for ourselves (temporarily or permanently).
An estate plan sets out our wishes for:
- The protection of our assets during our lifetime; and
- The distribution of our assets after we die.
This can prevent members of our family disputing the division of our assets after we die and assist them in making difficult decisions on our behalf.
Another benefit of estate planning with the guidance of professionals, is that we can eliminate or minimise the tax obligations of our estate and/or that of our beneficiaries which arise when our assets are distributed upon our death.
So, what, at minimum, do we need to have in place?
- A Will
- An Enduring Power of Attorney (for financial and personal (including health) matters)
- A Testamentary Trust (in certain circumstances)
- An up-to-date Binding Death Benefit Nomination for our superannuation
Without a Will, we have no say as to the distribution of our estate on death nor who takes control of managing our affairs. Dying without a Will means the distribution of our estate will be made using a legal formula to our relatives, which may not be what we want.
An Enduring Power of Attorney
We also need an Enduring Power of Attorney to appoint a trusted person(s) to manage our affairs if we cannot do so ourselves because of decision-making incapacity. We can choose someone now to make financial/legal decisions on our behalf such as banking, paying bills or even selling if our home if required, and to also make decisions about where we live, who visits us, what doctor we see and what medical treatment we receive.
A Testamentary Trust
Estate planning lawyers often get asked:
- What happens if I die and my husband remarries: how can I ensure my children are looked after and all my hard-earned wealth doesn’t go to my husband’s new wife or partner, especially after he dies?
- How can I ensure my children won’t be disinherited if my husband remarries after I die?
- What if I want my children to benefit from my hard-earned wealth but also want my spouse to reside in our family home after my death until he remarries or dies?
The thought of our spouse remarrying or becoming romantically involved, if we die first, during the years following our death is daunting to say the least. Similarly, the thought of our spouse dating or finding someone new to raise our children with is probably something we don’t even want to think about.
However, a study has found:
- Within 25 months after a spouses’ death, 61% of men (19% of women) have either remarried or re-partnered.
- The younger the surviving spouse is, the more likely they will re-marry or re-partner.
- Mentally and physically fit surviving spouses are more likely to re-marry or re-partner within 25 months of their spouses’ death.
If we want to:
- Protect our assets for our children but still provide for our surviving spouse (which we are morally obligated to do by law).
- Protect our assets being claimed by our children’s partners should they ever become involved in a relationship breakdown.
- Reduce potential conflict between our spouse and our children after we die.
- Reduce the likelihood of our spouses’ new wife/partner and their children clawing at our assets.
then having a Testamentary Trust in our Will is a great way to ensure asset protection as well as providing a flexible and tax advantageous estate plan.
It’s important we start having these conversations now, discussions about our hopes and dreams and wishes for our children and our spouse if we die first.
As Benjamin Franklin once said: “By failing to prepare, you are preparing to fail”.
Superannuation is often one of our largest assets, but it does not automatically form part of our estate. This includes any life insurance cover held within the fund. When we die, our superannuation is paid as a death benefit to our eligible dependents which include our spouse (including a de facto partner and a same sex partner), our children (including step and adopted children); a person financially dependent upon us at the time of our death, someone we were in an interdependent relationship with at the date of our death or our legal personal representative (executor).
By putting in place a Binding Death Benefit Nomination, we give a binding direction to our superannuation fund trustee as to who we want our benefits to be paid when we die. For that reason, it’s important we devote some thought as to who we want our superannuation to be distributed to when we pass away.
Separated or divorcing?
For those of us who have recently separated from our spouses, it’s so important we make an appropriate estate plan or update our current one.
I’m divorced: how does that affect my Will?
In Queensland if we have a Will and get divorced, any of that Wills’ provisions appointing our ex-spouse as an executor and/or guardian of our minor children are revoked. Any gifts made in favour of our ex-spouse are also revoked. Any other provisions generally remain valid, but we should certainly not wait to update our Will particularly if any provisions are made in favour of say an ex-in-law.
It’s important to note that only divorce revokes provisions in favour of an ex-spouse. Separation does not.
I’m separated but not divorced yet: does that affect my Will?
Separation doesn’t revoke any provisions in our Will made in favour of our ex.
If we have a current Will gifting everything to our ex, they’re entitled to everything if we die: they’re still legally our spouse.
We have to wait 12 months from the date of separation until we can divorce, but we shouldn’t wait until then to change our Will or make one.
I’m separated but don’t have a Will
This is just as bad. If we’re still legally married when we die, Queensland’s intestacy rules provide that our ex will get our entire estate (where there’s no children) or a huge chunk of it (where there’s children).
I’m in a de facto relationship: What happens if I separate?
It was only very recently that Queensland’s succession legislation stated that provisions in a Will appointing an ex de facto spouse as executor and/or guardian, and any gifts made in favour of them, are revoked at the end of a de facto relationship.
The divorce process and estate planning
Women are often affected more than men when it comes time to sort out their joint finances when divorcing. A recent study showed 56% of married women leave decision-making for major financial planning and investments to their husbands. This leads to women often finding themselves in financial overwhelm when they get divorced.
It comes as no surprise that women’s emotions are often significantly heightened during a divorce, and there are so many things to cross off their to-do-list, but it’s vital they focus on their changing financial situation, particularly where children are involved, and plan ahead. Some mistakes women make at this challenging time include:
- Not reviewing their Will
- Not reviewing their estate plan for their minor children
- Not planning for all their assets (i.e. superannuation)
- Not including trusts in their estate plan
- Not formalising their financial settlement
- Not planning at all
- Not seeking help from professionals
Without professional help, many of us overlook these important aspects of planning during the divorce process.
I have a business, who will run it if something happens to me?
Are you a sole trader or a company? Do you run your business via a family trust…does it have individual trustees or a corporate trustee?
These are extremely important questions. If something were to happen to us, who can legally take over and run our businesses? If you own a company, it will depend on the constitution provisions. If your business operates via a trust, it will depend on the trust deed’s provisions. Sometimes what is provided for in these documents is not what we might want so it is important we find out if we can vary the documents to ensure the appropriate succession of our business and/or make the necessary provisions in our Will and Enduring Power of Attorney.
Again, this requires the assistance of professionals.
It’s very important that women have strategic and sound estate plans in place guided by professionals and that it’s done early: if we don’t and something happens to us, it will be too late.
“There’s nothing fun about stuff like estate planning, getting mammograms, or talking to a guy about long term disability insurance, but do it anyway. Trust me, the stress of not having done the above is prematurely aging.” – Jen Lancaster, American author whose titles have appeared on The New York Times Best Seller list.
 Suze Orman, https://www.suzeorman.com/