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Estate planning for young families

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Young families need to ensure their children are cared for in the event they unexpectedly pass away.

No one wants to think about what would happen when they die or if they were to become seriously ill or have a major accident, especially families with young children. But it’s important to consider estate planning, should anything go wrong.

“The process of estate planning is not just about having a Will,” says Simon Singer, Managing Director at David Landa Stewart Lawyers .

“It also includes powers of attorney, enduring guardianship, death benefit nomination forms for your superannuation and a range of other documents and issues.

“An estate plan doesn’t just deal with the situation where you pass away, but it should also cover the situation where you are temporarily or permanently incapacitated because of an accident or an illness.”

Singer explains that if a person dies without a will their wishes don’t have to be considered.

“With a Will you have peace of mind and certainty that your estate will be dealt with in the way you want it to be dealt with, by the person you nominate to handle the job,” he says.

He adds that getting a Will drafted may end up being a lot cheaper than relying on the statutory process.

What young families need to consider

For young families with very young children, there are certain things that they specifically need to think about.

“Wills for younger families need to look at the short term – for instance they need to nominate guardians for minor children and ongoing management funds for young children,” Singer says.

“They also need to look at the long term – they need to cover their children for extended periods of time, as well as provide for future generations.

“They need to be robust enough to deal with changes in circumstances – for instance if another child is born or if one passes away.”

Young families tend to have large mortgages, so Singer explains that they need to consider how that debt will be paid off if either parent, or both parents, pass away.

“If someone has life insurance then they also need to consider who is the nominated beneficiary under the policy and how it is to be treated in the overall estate plan,” he adds.

Many young families may have non-traditional investment strategies, such as bitcoin or overseas assets, that aren’t always considered in a standard Will and therefore require special consideration.  

“Younger people may have accumulated substantial amounts of superannuation and if so, they need to consider who is nominated as the beneficiary of the super and how it may be used,” Singer says.

Finally, young families need to consider the different scenarios that could happen after their death and what control measures they want to put in place to ensure their estate is allocated as they wish.

That is where a testamentary trust comes in.

“Testamentary trusts are an important part of the estate plan for young families,” Singer highlights.

“If you are going to set aside funds for your children, you need to make sure they will be preserved for the longer term.

“The Will must nominate the trustee to manage the trust funds, the purpose of the trust and the beneficiaries of the trust.

“It needs to deal with how the trust is to be managed from distribution of the income to when the trust will be wound up.”

Families with pets should also think about who will take care of their pets when they pass away and possibly setting aside a sum of money to assist with the care of their pets.

Some individuals may have specific ideas in relation to their funeral and burial arrangements and if so, these should also be covered in the Will to ensure your executor is aware of them, and they are carried out. 

Finally, powers of attorney (someone who manages your affairs in the event of any incapacity) and an enduring guardian (someone to make medical decisions on your behalf) need to be considered.

The ‘extras’

There are side documents, that aren’t necessarily part of a Will but form an important part of the estate planning process and assist the executor in the administration of the estate.

The first is a letter to your children which can include your wishes as to where they should live, how they should be brought up, what schools they should attend, etc.  

The second is a letter of wishes to the person you have nominated as the trustee of a testamentary trust. This sets out further wishes as to how you wish the trust to be managed.

A third document might deal with non-traditional assets such as cryptocurrency, as well as overseas assets – how and where the assets are stored and how they can be accessed in the event of your death or incapacity.

Singer also recommends a Letter of Direction in relation to the management of online social media accounts – so that these accounts can be accessed, suspended or closed down.

A contact list, with contact details for those people named in the Will, as well as, professional advisors, medical consultants, insurance brokers etc, a list of assets and liabilities and a list of login codes for online bank accounts should all be kept with the estate planning documents.

If you suffer from any allergies or have any particular illnesses, then it is also useful to provide details of your medical practitioners, as well as a list of specific medications and allergies to inform your enduring guardian who will be making medical decisions on your behalf.

Directions in relation to organ donation and non-resuscitation should also be considered. 

Once you’ve got the Will and other estate planning documents, what comes next?

“You don’t have to notify anyone of your Will, but it’s a good idea,” Singer says.

He recommends notifying the key individuals within the Will to ensure they are willing and able to take on the commitments – the guardian for your children, the power of attorney and the enduring guardian.

Singer doesn’t usually recommend circulation of the Will, as it may cause confusion if the Will is later updated.

He recommends reviewingand updating your Will at least every five years, unless a significant change happens in your life.

Singer’s top five tips for young families starting the estate planning process:

  1. Consult a lawyer – everyone’s personal and financial circumstances are different so you need to be sure your estate planning documents are right for you and your family.  
  2. Consult with a financial planner if your assets are substantial – a financial planner can inform you on how much funds your family will need to cover their current lifestyle in the event of your death or incapacity. 
  3. Consult with an insurance broker - consider life insurance, permanent disability and trauma or income protection insurances etc, to provide necessary funds in the event of your death or incapacity.
  4. Don’t just consider a Will but consider all the other documents that go along with the Will – such as powers of attorney, enduring guardianships and other documents.
  5. Take a short term perspective (ie 5 years) as well as a longer term perspective.