MGI Perth

Isn't it funny how you're never too busy to do the things you like? And on the flip side, you're always too busy to do the things you don't want to do.

From our experience in estate planning, almost every client admits to delaying the preparation of their Will. Here are the seven costliest mistakes you might make by failing to carefully consider your estate planning.

1. Not having a Will

The legislation governing the distribution of your intestate estate may see the wrong people obtaining its benefits.

The value of the estate may be reduced unnecessarily through the imposition of additional income and capital gains tax and stamp duty. Different beneficiaries are taxed differently on different parts of your estate. Has this been properly considered?

2. Having an invalid Will

Have you updated your Will since marrying of divorcing? If not, it has been rendered invalid and you will die intestate.

Has it been signed, dated and witnessed correctly?

3. A poor choice of executor may be akin to "putting a vampire in charge of a blood bank"

Whether through ill-intent or ignorance, your executor may not give full effect to your wishes. It is imperative that you have fully considered the implications of who will control your estate.

4. Unnecessarily exposing your Will to challenge

It is not possible to guarantee your Will won't be challenged. Understanding who may challenge is important.

Your spouse, children, parents and grandchildren are obvious potential beneficiaries you may wish to include or exclude from your Will. Former spouses and other who believe that they are dependent upon you are less obvious and should be considered. A challenge to your Will may not succeed but can be costly, upsetting to those involved and simply lengthen the time taken to finalise the estate.

Making provision for someone you feel is less deserving of your assets may assist in defeating a challenge more so than simply appearing to ignore them in your planning. Nor can you deny their entitlement should they successfully challenge the Will.

5. Failing to properly dispose of all your assets

A residuary clause may be useful so that any assets not specifically disposed of are directed to beneficiaries you would wish to receive those assets. Otherwise, these assets may be disposed of to the wrong people as though you died without a Will.

6. Treating assets held in trusts and companies as your own. Not using Super options.

Your Will can't dispose of these assets. They are not yours! You need to deal with whom takes control of those entities.

Who might the trustee of your superannuation fund pay your account to upon death? Payment may be made in ways other than how you would wish. A binding death benefit nomination may assist here when properly considered.

7. Failing to plan for business succession

Do you wish to be in business with your partner's estate? If not, how do you fund the purchase of their equity without putting the business itself at risk? How much are you willing to pay for that equity? Is it as much as they wish to receive for it? Probably not, in all likelihood.

What happens if partners disagree to the extent they can no longer be in business together? The lawyers are an expensive option at this stage.

A well considered document detailing what happens and at what price on the occurence of certain events, takes a lot of stress out of dealing with others when things may be traumatic or not quite so friendly.

If you have any questions related to anything you've read in this article, or about estate planning in general, please contact Alex Davis, Financial Planning Director on 08 9463 2463 or email alex.davis@mgiperth.com.au