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Newly in control

 

August 2015

When her marriage broke down, Maria received a substantial settlement that allowed her to build a new life with her two children.
What she needed next was professional advice on how to protect it.

 

 

 

 

Getting separated from your spouse isn’t just a time to rebuild your life. It’s a time to review your will and estate plan to make sure your wealth is protected.

As anyone who’s lived through a divorce or separation knows, untangling your life from someone you’ve shared a home with can be an emotional and complicated process.

While people naturally focus on making sure the family’s assets are split equitably, one of the things that’s often overlooked is the impact a separation has on your will and estate plan.

The outcome of this is that many people are moving on with their lives without updating their beneficiaries – meaning their former partner may inherit their assets if they pass away.

The following case study illustrates such a scenario, and shows you what could have been done to avoid it.

Maria and Tony

Maria and Tony were married at 19 after falling in love at high school. Both intelligent and business-minded, they opened their first gourmet grocery store in Melbourne in their early 20s. By their late 30s they had two children, Joe and Meredith, and owned a chain of stores across the country.

While the business continued to be successful, Maria and Tony’s personal relationship deteriorated. When the couple decided to get separated after 20 years of marriage, Tony paid Maria $4 million to buy out her share of the business.This money enabled her to create a new home with their children, then aged 14 and 12.

Now that she was solely responsible for her finances, Maria worried about what would happen to her wealth, and her children, if she passed away suddenly. As the couple weren’t officially divorced, Tony was still the beneficiary named in her will, but she didn’t want him to inherit her estate. She also felt trapped because her children were still much too young to inherit large sums of money.

This feeling of isolation was a major cause of stress for Maria. Not knowing who to turn to, she never got around to updating her will.

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What happened?

Two years after she and Tony separated, Maria passed away in a car accident. Because Maria hadn’t updated her will, or finalised the divorce proceedings, her entire estate went to Tony.

Tony took custody of Joe and Meredith, but he did not put any of Maria’s money away for their future use or education. Instead, much of the money went into the business.

Tony remarried and bought a larger house with his second wife. As a result, most of Maria’s assets are now tied up in the business and property Tony owns with his new wife, meaning there’s no guarantee they will stay in Maria’s bloodline.

What could have been done differently?

Maria could have explained to an estate planning lawyer that she wanted her children to inherit all of her wealth if she passed away, but also to ensure they had professional help to manage the money if they were still young when they received it.

To achieve this, Maria could have:

  • appointed an independent executor to administer her estate
  • set up a discretionary testamentary trust that would hold the majority of the children’s inheritances in trust until they were 25, and
  • stipulated in her will that her children would be involved in the administration of their inheritance from age 21, before taking full control at 25.

This arrangement could have ensured Joe and Meredith would benefit from Maria’s estate as she had intended. It could have also given them valuable experience managing money, so they were more financially responsible when they received their inheritance.

Life-changing advice

A life-changing moment often requires wisdom from financial experts to protect your family and assets. With the right advice, you can get the peace of mind and confidence you need to get on with the next phase of your life.

 

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

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Source: *National Endowment for Financial Education study.

ANZ Private Bankers are representatives of Australia and New Zealand Banking Group Limited ABN 11 005 357 522 (ANZ), the holder of Australian Financial Services Licence number 234527. This document ("document") is distributed to you by ANZ and may not be reproduced, distributed or published by any recipient for any purpose.

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