Overcoming Estate Planning Misconceptions

Benjamin Franklin once wisely wrote that “in this world nothing can be said to be certain, except death and taxes” – and for those working in the estate planning space, we know that if you’re not careful, the first matter can often lead to the second.

Alarmingly, more than half of the adult population of Australia have not executed a will. In my experience, there are two powerful factors discouraging people from seeking a will;

  1. Accepting that you need a will requires you to accept the finite nature of life – which as humans we are loath to do.
  2. Wills are associated with lawyers – and lawyers means fees.

However, the reasons not to do a will can be outweighed by the benefits if you allow yourself to start those tough conversations. To help address the stigma surrounding estate planning, let’s address a couple of common misconceptions and how The Hopkins Group can help.

Misconception 1:  ‘I don’t need to do any estate planning – I will just go get a will’

We hear this a lot and it’s often the main barrier that clients throw up in response to the suggestion of organising an estate plan. The reality is that an estate plan and a will are entirely different – in fact a will is just one small component of an estate plan.

When we sit down with clients to discuss their estate plan, we have a comprehensive discussion that includes;

  • A will
  • Enduring powers of attorney
  • Appointment of guardians for dependents
  • Financial powers of attorney
  • Medical powers of attorney
  • Superannuation death benefit nominations
  • Life insurance death benefit nominations
  • Powers of appointment for any applicable family trust
  • Drafting of testamentary trusts into a will (where appropriate)
  • Tax minimisation strategies
  • Asset protection

An appropriate estate plan must be ordered, secure and flexible to reduce the likelihood for potential litigation and to ensure that our clients and their beneficiaries are placed in the best possible position. The Hopkins Group holds your hand through this process from start to finish.

Misconception 2: ‘I don’t have many assets, so I don’t need to make an estate plan’

This is common amongst younger clients, and it also tends to explain the statistical trend of more people having wills past the age of 60.

In some cases, it may even be true that a will is not advisable; but to be honest, I am yet to see one. Let me provide an example:

Jim and Pam are a young couple. They have recently married and have just had their first child, Michael. They are confident that with their net asset position that they do not need a will. They present their asset position as follow:

Asset Owner Net Value
Primary residence Joint $50,000 (net of mortgage)
Super Jim $65,000
Super Pam $40,000
Total      $155,000                     

However, what they don’t realise is that Jim has life insurance of $350,000 inside his superannuation policy. Pam also has life insurance she is unaware of worth $300,000. If Jim and Pam were to tragically pass away together, they would leave a joint sum of $805,000.

In this scenario, if Jim and Pam had completed a binding death benefit nomination which favoured their Legal Personal Representative this sum would be dealt with in their will. Furthermore, if they had executed a will that established a testamentary trust for Michael and invested 100% of their assets into this trust, only to be accessed at the age of 18. By the time Michael reaches 18, he will benefit from a full 18 years of compounding interest on their initial lump sum.

Even with a modest asset position, it is important to sort out your affairs.

Everyone works hard for their money, so there is no reason to not work just as hard to ensure that your wealth is distributed in accordance with your wishes upon death.

At The Hopkins Group, we’ve developed our estate planning service to break down the stigma and simplify the whole process for our clients – making it more efficient and less confrontational to create peace of mind.

It’s not an easy topic to think about, but establishing an estate plan is the best way to control the flow of your wealth should the unthinkable happen. If you’d like to learn more, please give us a call on 1300 726 082 to speak with one of our advisers today.

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Disclaimer: The information contained herein is general in nature and does not take into account individual situations, needs or goals. It should not be relied upon and persons should satisfy themselves through independent means that any decisions based on this material are appropriate. We recommend that you consult with your adviser who will be able to make a recommendation based on your specific circumstances.

 

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