Estate planning doesn’t have to be a complex process. In fact, it’s usually fairly straight forward. However, there are some common pitfalls you should avoid.
1. Not doing it
The most common mistake is not creating an Estate Plan. Let's face it: our mortality is not something we like to dwell on. But by not planning for the inevitable you may end up exposing your loved ones to needless stress and financial hardship.
If you die without a valid Will, known as dying intestate, your assets will be distributed according to a formula set by the State Government, not according to your wishes.
Even if you have a Will, it will rarely cover the entirety of your estate. A full, up-to-date, legally valid Estate Plan is the only way to ensure your wealth is distributed how you want.
2. Confusing a Will with an Estate Plan
Whilst a Will covers how you would like your assets to be distributed, an Estate Plan includes a Will, and can address areas such as:
- Jointly held property
- Superannuation funds
- Proceeds of life insurance policies
- Power of attorney
- Guardianship of children
- Assets held in trust
- Company assets
3. Not updating your Estate Plan
As your life changes; so should your Estate Plan. Divorce, remarriage, family and asset changes can all affect the distribution of your assets. We recommend your Estate Plan is reviewed whenever your circumstances change, or at least every three years.
4. Choosing the wrong people
During the Estate planning process you may consider nominating a close friend or family member as your Powers of Attorney or Executor. However there are some important points to consider:
- Will they be driven by your wishes or by their emotions?
- Can they shoulder the burden during their time of grief?
- Do they have the skills to deal with the complexities of the process?
Choosing a trustee company to be your Power of Attorney (financial) or Executor of your estate can avoid these problems.
5. Forgetting tax planning
Don't assume that all your assets can be transferred to beneficiaries without being subjected to capital gains tax. Many can, but there are notable exceptions. Expert Estate planning can help in avoiding tax pitfalls.