What You Must Know About Leaving Assets to Your Family

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Are you fearful about your own mortality? Do you think you don’t have enough assets to need an estate plan? Do you think that things will change so much before your death that you can delay making a plan?

85.8% of seniors say they plan to pass down a financial legacy for the younger generations in their family. Yet people make a lot of excuses for planning the inevitable. Planning your estate is critical and studies show that at least 45% of Australians do not have a valid will.

Collating your assets

Be it with your partner or a solicitor, it’s impossible to have a detailed conversation about bequeathing assets before you’ve itemised what you’ve got to give. In many houses, one person takes the financial reins meaning one may be less informed of assets than the other.

Make a list of each of your investments, retirement, and savings accounts, as well as all property and goods like arts and collectables. Things you can bring into your will include:

  • Real estate, land, and buildings.
  • Cash (including money in checking/savings accounts).
  • Intangible personal property such as stocks, bonds, and business ownership.
  • Intellectual property such as royalties, patents, and copyrights.
  • Unproductive property such as cars, artwork, jewellery and furniture.
  • Sentimental items you want particular people to have.

Things you can’t bring into your will are things like:

  • Property held in joint tenancy (owned equally by two parties) such as a house you own with your spouse.
  • Trusts, retirement plans or insurance properties that clearly state a beneficiary.
  • Stocks or bonds that are set to transfer to another party upon death.
  • Digital assets such as online media companies, social media, email and image sharing.

Deciding who will benefit

Making a list of who you want to benefit from your estate probably won’t take that long. You can include your partner or spouse, children, friends, family members, or even charities. These people (or charities) are known as your beneficiaries.

Deciding how much goes to each of your beneficiaries is usually the harder part. If you are leaving assets to your children and distributing unevenly, you need to consider how is that compensated for?

Generally speaking, distributing assets evenly is the easiest way to minimise fighting. It’s not always practical though, as every situation is different. Perhaps you made a generous gift to one child to purchase their first home or complete an advanced degree? Maybe you have one child in a high-earning family while the other could really do with the financial help?

Everyone’s default when planning to leave assets to their children is to be fair, but fair isn’t always an equal split.

If you’re having difficulty agreeing on a plan for the division, consider speaking with your beneficiaries directly about what fair looks like to them. Speaking to them doesn’t mean you have to abide by their wishes but their input could help you in your planning.

Once agreed, hire an estate planning lawyer to draft your will.

Legacies you can leave

Broadly speaking, there are five types of legacy you can leave. Examples of these legacies include:

  • A pecuniary bequest allows you to leave a fixed sum of money eg. “I leave $10,000 to my son” 
  • A reversionary bequest allows you to specify what happens if the person you leave it to dies eg. “I leave my share of my house to my wife if she survives me, but if she does not survive me then it will pass to my daughter” 
  • A residuary bequest allows you to leave a percentage of whatever your estate is worth after any debts, costs, liabilities, legacies, and tax have been paid eg. “I leave half of my estate to my brother”
  • A specific bequest allows you to leave a specific item of which you own eg. “I leave my jewellery to my granddaughter” 
  • A trust bequest allows you to say who you would like to benefit from your property immediately after your death and then who you would like to benefit from your property once the first person you have chosen to benefit immediately after your death has died. 

Leaving assets out of marriage

If you’ve got a life partner but no marriage, civil union or domestic partnership certificate, estate planning is a must. Without it, neither of you will inherit from each other and neither of you will have a say in the other’s end-of-life medical care.

One way to protect your shared assets is to ensure your big-ticket items, such as houses and cars, are owned together in joint tenancy with rights of survivorship. That way, if one of you dies, the survivor automatically owns 100% of the property. To do this you’ll need to put both your names on the asset’s official title document – for example, your car’s certificate of title or the deed to your house.

If you’d prefer not to share ownership of all your assets or you want to share superannuation accounts you’ll need other ways to make sure your assets get to your partner following your death.

Valuable assets – bank, investment and retirement accounts – may not pass through your will, so ask for a beneficiary designation form from the bank or account custodian. Use this form to name the person you want to inherit the funds. If you change your mind later, you can simply request another form and fill out a different person’s name.

Why you can’t afford to put off drafting a will

You might not consider yourself rich, but no matter where you believe you stand on the socio-economic ladder you will always need a will. Much more than a transfer of an inventory of assets, your will is a legal document that allows you to:

  • Choose who will receive your assets after you die.
  • Avoid family squabbles about your estate.
  • Choose who will be responsible for managing your estate (i.e. your executor).
  • Provide for children from a previous relationship.
  • Provide for a de facto or same-sex partner who may not automatically be entitled to your estate.
  • Exclude a beneficiary who would otherwise get part of your estate.
  • Leave a charitable gift.
  • Take care of the needs of disabled loved ones.
  • Avoid needless taxes.
  • Take control of your own decision-making and publicly declare your values and wishes.
  • Tell your executor what you want for your funeral.
  • Make decisions about organ donation and medical research.
  • Deal with the vexed issues of former partners/spouses and blended families.