Somebody once said that in life only two things are certain: death and taxes. None of us likes to think about getting old or falling ill, but making provision for the worst can save a lot of worry and money for those left behind.
And yet, planning their will is something a lot of Australians avoid thinking about. The NSW Trustee and Guardian indicates that 45 percent of Australians don’t have a will, which can cause a legal nightmare for those left behind if you happen to die unexpectedly.
A will is a legal document that clearly sets out who is to inherit your assets after your death. If you die without a will, the government divides your assets according to a formula – this may not reflect your wishes.
“The great advantage of a will is that it eases the burden on the people you leave behind because it leaves certainty as to what your intentions were and what the legal outcomes will be,” says financial advisor Brad Fox, who is national president of the Association of Financial Advisers.
There are several questions that may be left unanswered in the absence of a will. For example, what happens to your superannuation fund?
“Money in super doesn’t automatically fall under the will because it’s not part of your estate,” Fox says. “The trustee of the fund has the discretion to pay the money where they see fit. This can be a lengthy process of up to a year.”
Superannuation trustees are required to pay your super to your “legal personal representative”, or to any or all of your dependents. Your dependents may include your spouse (whether by marriage or de facto), your children (biological, adopted or step children), your parents, siblings, or anyone who has ever financially relied on you.
There is also the question of what happens to your debts – most importantly, your mortgage. “The supplier of the debt can appeal to the estate for payment, and they usually win,” Fox says.
“Most people are co-borrowers on a mortgage so the bank can call on the remaining party to pay the debt, in some cases immediately. This is particularly relevant in business where one business partner dies. Because it’s a substantial change to the original mortgage terms, the bank can immediately recall the loan.”
Mortgage and death insurance are also available to ensure your family or business partners are not left stranded in the event of your death. In the end, the most important lesson is to be prepared – even for unpleasant events.