Heartache that could have been avoided


Case Study

Michael & Tanya were separated with two beautiful children (aged 19 and 14 years old).  Despite being separated they still had a very healthy friendship and were both committed to helping each other out and worked well in bringing up their children.  The eldest child was in the 3rd year of his plumbing apprenticeship and lived with two mates in the next town whilst the 14 year old lived with Tanya.

Tanya worked part time and lived in their primary residence whilst Michael was living in the couple’s investment property only a few blocks away.  Michael was very fit and jogged regularly, however after a morning run he suffered a major heart attack and to the complete shock of everyone passed away.  Unfortunately, there was no Estate Planning in place – Michael and Tanya had discussed the issue many times but had never got around to actually putting any steps in place.

Michael’s superannuation fund carried with it a life insurance policy so, including his superannuation account the total payment was around $800,000.  This was contested by Michael’s family (who still held Tanya responsible for the separation) and after 10 months the trustee of the fund determined that they would pay the benefit direct to the two children equally.  As the eldest child was a non-dependent his pay out was burdened with a significant tax bill of around $90,000.

Further to all of this, as the two houses were owned by Michael and Tanya as joint tenants the ownership of both properties reverted to Tanya on death automatically.

All in all, no one was happy with the overall outcome and this only added to the personal stress and heartache that everyone was suffering as a result of Michael’s sudden passing.  So much of this could have been avoided with some advice and planning.

What Could Have Been Done?
Binding Death Benefit Nominations (BDBN) – if a BDBN had been in place Michael could have specified who would receive the funds from his superannuation payment.  A super trustee is obliged to follow the instructions of the BDBN so the trustee would not be required to make a determination but rather just follow the instructions.

Life Insurance – the life insurance policy could have been established outside of super and the payment be directed to the benefit of the eldest son.  In turn this would have given Michael the ability to direct a greater proportion of his superannuation benefit to his 14 year old.  This would have meant that the $800,000 would have been taxed at a much lower rate as payments from a life insurance policy held outside of super and payments to a financial dependent from a superannuation fund are both tax free payments.

Property Ownership – the properties could both have been held as “Tenants-in-Common” rather than “Joint Tenants”.  Michael’s share of each property would then have formed part of his estate and a valid Will could have been prepared to define who would be entitled to the benefit attached to each property.

Moral of the Story
Whilst everyone agrees that good Estate Planning is important far too many people don’t get around to sorting out their estate planning.  Yes, it takes time, effort and some quality advice and the preferred combination is to have your lawyer, financial planner and accountant all aware of your intentions.

Michael & Tanya’s situation is real and could have been avoided – if you are one of the many Australian’s who haven’t addressed their Estate Planning needs, don’t become a Case Study.  Commit to completing this task and then take it one step at a time.  Like anything worth doing, there will be times when the task seems too daunting but, when you get through those challenges, you can sleep safe in the knowledge that you have showed true care and commitment to the most important people in your life.

If you would like to learn more about how you can make sure your family is protected, register your interest for our FREE “Is your retirement plan measuring up?” seminar, where we will discuss this topic and more.

When: Thursday 16th February 2017
Where: Sunbury Football Club
Time: 7.30am
Cost: FREE
Register your interest NOW

General advice disclaimer – General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product

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