Ask An Adviser - Which Should Come First - Financial Adviser Or Will?

Hi Kelsie,

Hello newborn and goodbye Sunday mornings... Kidding, congratulations on the newborn!

People are often prompted to write a will after the birth of a child. It’s important to consider what will happen if you and your partner aren't around to look after them.

There's nothing certain in life except death and taxes. Making arrangements for the ongoing care of your loved ones and your assets in the event of death or incapacity is not something you want to leave to chance.

Generally speaking, it is a good idea to involve a financial adviser in estate planning matters. Advisers are uniquely positioned to help clients as they:

1. Are deeply embedded in clients' financial lives
2. Know a lot about their clients - personally and financially
3. Understand a client's goals
4. Have a relationship with clients built on trust

Estate planning can be a team approach with various members of the ‘team’ contributing their knowledge to produce the result.

What is estate planning

Let me first clarify that estate planning is the process of planning and documenting wishes for the distribution of assets following death. Preparing a will is an important part in estate planning however, not the only consideration.

Effective estate planning requires the careful consideration of important and often complicated issues. An effective plan should consider the personal circumstances of both the will maker and those who will benefit under the will (beneficiaries). Issues beyond the will such as treatment of life insurance, superannuation and trust assets must also be considered.

It’s important to understand that estate planning deals not only with those assets owned by an individual personally but also the assets that are controlled by an individual.

Owned assets (estate assets)

A will deals only with those assets owned by a will maker. These are called estate assets.

Estate assets include:

-Real property
-Personal chattels
-Shares
-Cash investments
-Loans by will maker to the trustee of a trust
-Income or capital allocated to the will maker from a trust
-Interest in assets held as tenants in common

Controlled assets (non-estate assets)

Other assets may be controlled rather than owned by a will maker. These are referred to as non-estate assets

Non-estate assets:

-Jointly held assets that are held as joint tenants (real estate and investments)
-Unallocated assets owned by a family trust
-Superannuation
-Life insurance proceeds
-Account based pensions or annuities that have reversionary beneficiaries

The reason why it's important to distinguish between the two is because additional planning is required beyond the will to deal with the succession of non-estate assets.

What is the ‘planning’ part

Before preparing a will, the will maker should establish their objectives. These will differ from person to person. The following are examples:

-Providing for surviving dependants, such as spouse and children
-Minimisation of taxation liabilities
-Protection of estate for beneficiaries with special needs
-Protection of pension entitlements for beneficiaries
-Succession of non-estate assets
-Philanthropic objectives

Estate planning should take into account the specific needs of the beneficiaries of the will, including spendthrift beneficiaries and beneficiaries under a disability.

The will maker should consider broader issues relating to the circumstances of the beneficiaries. In particular, the will maker should consider a beneficiaries:

1. Eligibility for means tested pension
2. Exposure to risk that may result in insolvency
3. Taxation status
4. Ability to manage finances
5. Disabilities
6. Potential family law problems

Again, everyone’s position is unique and requires careful consideration, but a good adviser can help you with planning.

We have some resources and an estate planning checklist here to help you.

Will basics

A good solicitor will assist in the preparation of the will itself. Some things you may want to consider before seeing a solicitor include:

-Guardianship of children
-Your assets
-Cherished items
-Appointing an executor
-The beneficiaries
-Charitable giving
-Funeral instructions
-Your complex circumstances (if any)
-Powers of attorney (who can make decisions for you when you are unable to make decisions yourself)

Don't forget to regularly review and update your will. A planner who works with you in an ongoing capacity should guide and assist in this regard.

Some life events that can spur a review of a will:

1. Marriage/separation/divorce
2. Birth of children
3. Death of proposed beneficiary
4. Change in beneficiaries circumstances
5. Potential disputes between beneficiaries

Hope this helps and all the best with the little one.

Eden

While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.

Article by:

Eden Smith

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