Finance News

Personal succession planning for families with children

Many people believe that with a Will, your wealth will be passed properly to your family and your loved ones will be cared for. However, this is not always the case.

Personal succession planning represents more than just having a Will, especially for families with children.

Do I need a personal succession plan if I have children? 

At a minimum, every parent with children can have:
  • a current Will to distribute estate assets
  • guardianship arrangements for young children and teenagers
  • an Enduring Power of Attorney to cover situations where they’re unable to make financial decisions themselves, and
  • appropriate estate planning arrangements to distribute specific assets that are not covered by the Will (such as superannuation benefits, life insurance proceeds, assets held in family trust/s).
Considerations for parents with young children: 

If you and your partner were to pass away suddenly:
  • Who would be accountable for the care and financial future of your children?
  • Would you like your children to continue to attend the same school and receive the same level of education that you were planning to give them?
  • Would there be extra child care costs?
  • Would you like to nominate a guardian/s to assume your role?
  • Would the proposed guardian/s have adequate finances to care for your children?
  • Would you like your estate assets to be held on trust for your children and be provided to them at a certain age?
Considerations for parents with adult children: 

Here are few important questions that you may relate to if you have adult children:
  • Are any of your children married or in relationships? Do they get along with their partner or with their ‘in laws’?
  • Do you have vulnerable beneficiaries (such as beneficiaries dealing with separation/divorce, beneficiaries facing an addiction or have special needs)?
  • Do you have more than one child? If yes, how well do they get along?
  • Have any of your children received more financial assistance from you in the past than the others?
  • If you have a mix of dependent and non-dependent beneficiaries, have you considered the potential tax consequences of your estate distribution?
  • Is there anyone who may have a claim on your estate, who you do not wish to benefit from your death?
  • Are there any assets you wish to retain within the family bloodline?
Considerations for parents with blended families: 

In Australia during 2012/2013, step and blended families comprised approximately 6% of all families[1] with children under 18. The days where mum, dad and 2-3 blood children made up the average Australian family symbolise the past.

Many people in blended families - with their second or third spouse - want to ensure their children of an earlier marriage are provided for or ensure a former partner cannot access their Estate.

The following are a few important questions that you may relate to if you had a former relationship, have a blended family or live with step children:
  • Have you had a legally binding property settlement following the breakdown of former relationship/s?
  • Have you removed your former spouse as a joint owner where assets were purchased in joint names previously?
  • Do you have any financial responsibilities from any former relationships?
  • Have you updated all beneficiary nominations on investments and policies which name your former spouse as the beneficiary?
  • Do you have vulnerable beneficiaries (such as beneficiaries dealing with separation/divorce, beneficiaries facing an addiction or with special needs)?
  • In the event of your death, would you like to provide for your children from a previous and/or current relationship or provide for stepchildren?
  • Is there anyone who may have a claim on your estate, who you do not wish to benefit from your death (such as an ex-spouse or a vulnerable beneficiary)?
  • Would you like your estate assets to be held in trust for your children and be distributed to them at a certain age?
  • Are there any assets you wish to retain within the family bloodline?
Lacking an appropriate succession plan, may not permit you to have certainty that the correct assets will go to the right people at the appropriate time in the most tax effective way.

What are the benefits of personal succession planning when you have children?

Personal succession planning can:
  • Provide certainty by getting the right assets in the hands of the right people, at the right time
  • Enable you to provide for your loved ones while minimising tax payable by your nominated beneficiaries
  • Provide confidence that your children are taken care of
  • Offer assurance that your children from a previous and/or current marriage and/or your step children are taken care of
What are the consequences of NOT having a personal succession plan?

Don’t wait until it’s too late. Address your personal succession plan now.

If you die without updating your nomination and you have previously nominated your ex-spouse to be the executor and beneficiary of your Estate and/or the beneficiary of your superannuation or life insurance, then the proceeds from these policies may be distributed to your ex-spouse which may not reflect your wishes.

If you don’t have a will and pass away, intestacy legislation will decide how your estate assets are distributed to your surviving family members.

Also, if you’re badly injured in an accident or lose mental capacity, you have to ask yourself who will administer your affairs while you’re still alive but not capable to make your own choices?

Who can I contact to discuss my personal circumstances?

You can think about holding an initial consultation with a qualified financial adviser.  With assistance from your financial adviser and, where appropriate, legal and tax professionals, you can:
  • Make sure you’re making the right ownership choices when obtaining new assets or re-structuring your existing assets. For instance, your financial adviser can assist you in determining whether it’s best to invest in your name, your partner’s name, or jointly with your partner. Your financial adviser may recognise whether further tax and legal guidance is required to consider another arrangement such as a trust or company.
  • Decide if you have adequate means to achieve your estate planning objectives. Additional life insurance inside or outside of superannuation may be essential to provide your family with a lump sum payment or an income stream to repay debts, meet ongoing living expenses and cover your children’s future schooling costs.
  • Make a provision in your Will to allow for the creation of testamentary trust/s for minor children. The creation of testamentary trust in a Will can offer flexibility and can allow distribution of estate assets in a tax-effective way to beneficiaries including children from previous marriages, young children and teenagers. A reliable Trustee of your choice will make sure that distributions are made to such beneficiaries with their welfare in mind.
  • Make a provision in your Will to allow for establishment of testamentary trust/s for children. The founding of testamentary trusts in a Will can provide asset protection in the event of a relationship breakdown and/or bankruptcy.
  • Expanding a range of strategies to provide certainty, tax efficiency and/or asset protection. For instance, your financial adviser can give details on superannuation death benefit and life insurance beneficiary nomination options. By making suitable nominations now, your beneficiaries will be able to effectively and efficiently collect the death benefit.

[1] Australian Bureau of Statistics, Family Characteristics and Transitions 2012-2013, Families with children aged 0-17. Release date 26 February 2015.

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