Avoid costly estate planning mistakes
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Anna Hacker is a senior manager of estate planning with Equity Trustees.
There are some easily avoidable mistakes made in estate planning, which unfortunately can result in a very different outcome to what the testator wanted.
Probably the most common mistake I see is to do with superannuation, where people attempt to directly distribute superannuation assets through a will.
In most cases, superannuation funds cannot be "left" to someone in a will, unless prior arrangements have been made for superannuation to become part of the estate by making a valid binding death benefit nomination naming the legal personal representative as beneficiary.
If no binding nomination has been made, either to the legal representative or to another beneficiary, the super fund's trustees can decide how the assets are distributed, which may not result in the outcome the testator wanted.
In addition, it's worth keeping in mind that while binding nominations can be amended at any time, they are not automatically cancelled out by events such as divorce. Therefore, a new binding nomination must be made to ensure that, for example, an ex-spouse doesn't inherit the superannuation savings.
Another area where superannuation can cause complications in estate planning is insurance.
Forgetting about the insurance policy of a super account is another common mistake. The person nominated as the beneficiary of the super fund will usually receive the insurance funds, which may mean a significant amount of money.
This may result in unintended inequalities among beneficiaries of an estate. For example, a person may decide they want to leave the family home to one child in their will, and their superannuation savings to another child by nominating them as their beneficiary, as these two amounts are equal.
But the second child also receives the insurance payout, which may be as much again as the superannuation funds.