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A mother's will

 

July 2015

When Sarah made a simple Will before her second marriage, she thought her children would be looked after.
Unfortunately one thing was missing.

 

 

 

 

Women statistically live longer than men, and as a result they typically inherit property and financial holdings when a partner dies. But Sarah’s story shows us that life doesn’t always go to plan.

For generations women have been outliving their male partners. The trend continues today, with Australian women having a life expectancy of 84 years compared to 80 for men.1

As a result, women are more likely to inherit their partner’s assets.

Of course, life doesn’t always follow statistics. And putting too little emphasis on an estate plan could result in unintended consequences for your family if you pass away before your partner.

An estate plan outlines how you would like to distribute your assets, including your financial holdings and property, when you die.

Sarah and Tom

Sarah and Tom’s story, which is based on real events, illustrates the complexities of relationships today and how important a thorough estate plan can be.

Sarah and Tom met while travelling overseas and got engaged about 12 months later. They had both been married previously, and both had children from their previous relationships.

Sarah was clear in her mind that even though she was marrying Tom, she wanted her assets to go to her adult children when she passed away.

With that intention, she created a simple will that passed all her wealth to her children, with the exception of any assets she held jointly with Tom – which would pass to him as the sole survivor.

What Sarah didn’t realise was that her substantial super balance (which made up the majority of her estate) would not necessarily pass in accordance with her will.

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What happened?

When Sarah passed away a few years later, Tom, who had assumed he would be the beneficiary of her superannuation, submitted a case to the superannuation trustee. His case outlined that Sarah had intended to pass all of her superannuation to him, and he requested that the trustee use its discretion to see that wish carried out.

The trustee agreed with Tom’s request and as a result Sarah’s children were left with very little by way of assets – despite knowing that their mother had intended to provide for them.

Distressed at the trustee’s decision, Sarah’s children lodged an appeal to the Superannuation Complains Tribunal. Following the appeal the children received 20 per cent of Sarah’s super, with the remaining 80 per cent going to Tom. This outcome differed significantly from Sarah’s intended goals.

What could have been done differently?

Adding a binding nomination on her superannuation would have changed this situation dramatically and ensured that Sarah’s children received the funds she had intended for them.

A binding nomination enables you to nominate exactly where you want your superannuation to go, and in what proportions. It also means the trustee cannot use its discretion when allocating a superannuation benefit.

Keeping your estate plan up-to-date

Professional estate planning is a crucial advice tool to use if your life is a little complex - and for most people today this is the case.

Whether that complexity arises from owning a business, a new relationship, an inheritance or substantial assets, estate planners can help you navigate a maze of regulations to ensure your intentions are meet when you pass away.

A comprehensive estate plan should document what will happen to all of the estate’s assets if something happens to you. Importantly, it should also consider the tax consequences of who the assets are going to.

For example, superannuation benefits are generally tax-free in the hands of a spouse or dependent child, but they may be taxable in the hands of an adult child – which could significantly erode the size of the benefit.

The best way to avoid any future complications is to seek professional advice regularly, and particularly as your life or marital status changes. It’s an important step for all women to stay in control of your assets and your legacy.

 

To discuss what this insight could mean for you, talk to your ANZ Private Banker directly, or contact us below.

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1. Gender Indicators, Australia, Feb 2015 – Australian Bureau of Statistics http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/4125.0~Feb%202015~Main%20Features~Health~2321

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