Wills and succession planning specialist Rod Cunich shares how to protect what matters most to you – and what happens when it’s not done right.
Whether through accident, disease or death, the day will come when you can no longer personally provide for the financial, health and emotional wellbeing of those you love. These issues are too important to leave to chance. Fortunately, you can plan for that time and put structures in place to help secure their future.
This process, called succession planning, is also sometimes referred to as ‘estate planning’. A well-structured succession plan can give you great peace of mind that your loved ones will be provided for as you intended.
Preparing a will is an integral part of any succession plan as it determines how your assets are to be divided in the event of your death. This may include physical belongings such as cash, clothes, jewellery, cars and the family home, as well as investments such as your superannuation or share portfolio. But there are many other factors to consider. These may include the protection of inheritances, should beneficiaries face a failed marriage, remarriage, bankruptcy, loss of mental incapacity, drug or gambling dependency, spending problems or family disputes. It might also include the minimisation of the tax burden for your beneficiaries once they take ownership of your property as well as deciding upon guardians to care for your children if they are still minors when you pass away.
Succession planning however is not all about planning for when you pass away and the preparation of a will. It’s also about the here and now. To protect you, your family and your property you should take into account problems that you, or they, may face during your lifetime. Such problems may be a failed marriage, remarriage, bankruptcy, physical incapacity or the loss of mental capacity.
With the advice of a succession planning lawyer you can put legal safeguards in place to prepare for these and other life contingencies to ensure you and your loved ones will be provided for. Doing this provides security and certainty, not just for you, but for those you care about most.
The legal components of succession planning are only part of your broader succession planning strategy. A well thought-out plan should include legal documents that are coordinated with your retirement, investment and wealth accumulation strategies.
When there are several parties involved in your succession planning, including a number of professional advisors and family members with differing interests and objectives, it can be easy for waters to become muddied. Careful structuring and preparation of your plan and its proper documentation ensures each stage will be followed accurately in the years to come, minimising future disputes, and ensuring that all parties are on the same page. A succession planning lawyer can develop an integrated succession plan for you by working cooperatively with your accountant, financial planner and insurance adviser.
Whatever you do, don’t be penny wise and pound foolish. Spending time and money now on the right legal advice will save you and your family in the future.
The following short stories are based on real life events and the lessons to be learnt are all too real – and demonstrate what could go wrong if you don’t receive the right advice.
The mother, her son and her lover
Dan is an only child. His mother, Mary, was a 70-year old widow who had accumulated a large estate throughout her lifetime largely through running a family business she had owned and controlled since Dan’s father died. Dan had worked for 23 years in the family business and he stood in line to inherit the business and all of Mary’s wealth.
Mary became re-acquainted with Joe, an old family friend. They were both looking for companionship in their later years.
After a short time Joe moved into Mary’s home and they started living together as a couple. Two years later Mary passed away without a will. In the absence of a will, the intestacy laws govern who benefits from her estate.
Under these intestacy laws, being Mary’s de facto, Joe will now inherit the first $350,000 of the estate, all Mary’s personal effects and 50% of the remainder of the estate. Dan is left with only 50% of the remainder of the estate and the very real risk that the business will have to be sold to finance Joe’s inheritance. He now faces an uncertain future.
A father and three sons
Harry is a self-made man. He has worked hard and accumulated modest wealth which is now invested. His wife died after their third son was born and he raised them as a sole parent. The older two boys obtained university qualifications and both work overseas.
Bill, Harry’s youngest child, wasn’t academically inclined and left school early eventually making a living for himself as a commission salesman. His brothers were always concerned that Bill was a bit of a rogue who could not be trusted, but his father adored his youngest and wouldn’t accept he could do any wrong.
As he aged, Harry lost a lot of physical mobility and he began to show signs of early-onset Alzheimer’s. Bill took his father in and arranged to be appointed Harry’s attorney under a Power of Attorney. Bill also got Harry to appoint him as his guardian to make welfare and health decisions for Harry if he couldn’t. This all occurred without Bill advising his brothers.
Becoming concerned about their inability to speak to their father and suspicious about the excuses Bill had been making about this, the older brothers returned home to discover that Harry now had advanced Alzheimer’s, Bill had squandered Harry’s wealth using the Power of Attorney and, as Harry’s guardian, Bill had placed Harry in a sub-standard nursing home.
It’s unlikely the money can be recovered from Bill as he has no assets and it has been largely squandered. The two older sons are now looking at funding better care for their father out of their own resources.
Situations experienced by Dan and Harry’s older sons can be prevented with specialist legal advice and a watertight succession plan.
Rod Cunich is the National Practice Group Leader for Succession Planning at Slater & Gordon and has over 30 years’ experience in the field. To talk to Rod or any one of our specialist succession planning lawyers, you can call 1800 555 777.