3 tasks to make your family’s life easier
Knock these tasks over in a weekend to offer yourself and your family peace of mind.
Thinking about what happens when you die is uncomfortable and the last thing we want to do is administration. However, taking some small, practical steps will mean that you will spare your family stress and uncertainty if something happens to you. The last thing we want to leave behind is confusion or conflict.
Morningstar research finds that in our later years, one of our top financial goals is to leave behind an inheritance. Investors spend decades building up their assets to provide a better life for themselves and once that is taken care of shift their focus to their loved ones. It is important to have the right structures in place should the expected, or unexpected happen. Preparing for any eventuality will give you peace of mind.
Here are three tasks you can do over a weekend to make your family’s life easier.
1. Set an appointment with an Estate Planning lawyer to get your will, POA and EPOA established or updated
I’ve written before on the importance of a will, Power of Attorney and Enduring Power of Attorney. These are needed documents that protect your assets, and yourself, before and after death.
Here’s a rundown of the purpose of the three documents:
Will: A will is a legal document that sets out your intentions for your assets upon your death. Without one, the decisions may be made through the legal system, which may differ greatly to your wishes. It can cause significant delays to your family being able to access your assets, which can cause stress and financial anxiety upon your passing.
Power of Attorney: A POA is a legal document that gives an individual the ability to manage another’s financial matters if they are not able to manage them themselves. An example of this would be if you are living overseas and you are unable to deal with bank and financial matters, so you appoint a sibling to do so on your behalf. Another example would be if an older parent is less mobile and their child goes to the bank to conduct their financial matters.
Enduring Power of Attorney: An Enduring Power of Attorney allows another individual to make financial decisions on behalf of them even when they have lost capacity. It is extremely important that an Enduring Power of Attorney is appointed before a person loses capacity. It cannot be appointed after. This is why forward planning is necessary.
If you do not have these legal documents for protection and an issue arises there is added complexity. If none of the POA documents are drawn up there is nobody that can legally make decisions on your behalf if you are incapacitated. In NSW, a family member or support worker will need to make an application to NSW Civil and Administrative Tribunal (NCAT) to appoint a financial administrator.
This forum can also be used if there is a contest against an individual abusing the power that they get from the legal documents.
These documents are useful during some of the most turbulent and stressful times in life. It is likely that the person that is making decisions on your behalf is a loved one, who will also be going through a similarly tough time. These may help to relieve some of the burden and stress.
Updating these documents is just as important as creating them. Life changes. Relationships may change, your family may grow and your priorities may evolve over decades. A regular review will ensure that your current wishes are reflected and honoured if something happens to you.
What you can do this weekend: Set an appointment with your estate planning lawyer. Even if the process is not completed, putting it in your calendar ensures that you have steps in place to have it finalised.
2. Submit or update your Nomination of Beneficiary form to your superfund
For many of us Australians, superannuation is the largest or second-largest financial asset we’ll ever have. However, many people don’t realise that your superannuation isn’t immediately included as part of your estate. If you have not made your wishes clear to your superfund, the trustee of your superfund will usually decide where it goes.
Enter a Nomination of Beneficiary form. Submitting this form with legally valid nominations tells your superfund where your funds, and any insurances attached, should be distributed.
There are two main types of nominations for superannuation – binding and non-binding.
Binding nominations are a legally valid nomination to a valid dependant. Binding nominations can be lapsing, or non-lapsing. Non-lapsing is valid until death, but lapsing is the most common, and means that it expires every three years, and this is done because there’s room for circumstances to change.
For example, you might make a nomination for a spouse. Twenty years later you might have children, you might be remarried, you might be divorced – there’s a range of possibilities over the decades that you have super. A lapsing nomination expires to account for that. Once it does lapse, if it’s not renewed it turns into a non-binding nomination. This is a strong suggestion as to where a death benefit should be paid. The trustees of the superannuation fund will take current circumstances into account.
Then, there’s reversionary beneficiaries. Distribution of estates can be a messy, complicated and a drawn-out drawn affair. Reversionary beneficiaries are important if there is a loved one that is financially dependent (or interdependent) on the income stream coming from a pension account. Upon death, a reversionary beneficiary will receive the income stream payments without delay. This is instead of the decision going to the superannuation trustees and requiring more paperwork (and time).
Like with the rest of your estate, under how the assets in your superfund fit into your financial picture. If you have someone who is reliant on an income stream, if you want it to be distributed in a different way to your will. Ensure that your nomination reflects your wishes. Your family could face delays or an outcome that varies from your wishes.
What you can do this weekend: Download the form from your super fund website and fill it out, following the instructions exactly. Ensure it is legally binding by understanding who is a valid nomination. You are able to find this through the Australian Taxation Office (ATO) website.
3. Put together a time to have a conversation about your intentions/decisions
Legal documents are needed to protect yourself and your assets. Unfortunately, over 50% of wills are contested in Australia. I’ve written on the best way to make your will as airtight as possible. Often, families are left making assumptions about what their loved one ‘would have wanted’. This uncertainty can leave resentment and irreparably harm relationships.
Having a conversation to make your intentions known while you are still around can leave space for questions or concerns you haven’t considered. Although the final decision is yours, you are able to explain why you have made the decisions you have.
This conversation doesn’t need to be a daunting and dramatic experience. Having the conversation with all of your family at once can help with ensuring that the same message is delivered, with no contests after the fact. If this is not something that you want to do, start with one person and build to a larger group from there.
I can understand that this may be a conversation you want to avoid. As someone who has sat in on a mediation process where a will was contested, I can adamantly say that this is the easier option that will leave more relationships intact.
What you can do this weekend: If you have a comprehensive estate plan set up that reflects your wishes, set up a time to have a conversation with your family. My colleague Danielle Labotka from Morningstar’s Behavioural Science team has written on how to approach this conversation.
Final thoughts
Set up or update your Will, Power of Attorney and Enduring Power of Attorney. Ensure your Nomination of Beneficiaries is updated with super – one of your largest assets. Lastly, have an open and honest conversation with your family about your intentions.
Thinking about death and unexpected illness is difficult, but a large part of this is leaving behind loved ones. Small practical steps will remove a burden from your family in an extremely difficult time in their lives.
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