Why an estate plan is more than just a will

We’re sure you have heard of an estate plan before. Often, people think it is just another term for a will.

This is a common misconception and it is important to understand what an estate plan entails so you can protect your accumulated wealth and ensure your loved ones are looked after and their wellbeing and comfort is taken into account.

A will takes effect upon death and essentially spells out how you want your assets to be shared, who will look after family members, both young and old who are unable to care for themselves, any donations to charities you support or instructions about your funeral and burial arrangements.

An estate plan includes your will but takes effect at the time it is signed. It includes powers of attorney who will manage your affairs in the event you become incapacitated, reviewing and confirming your binding nominations in your superannuation and life insurance policies, records of trusts and company documentation.

But why go to all the trouble?

Take Bill and Alice for example. They were married 40 years and their only child, Alan, was married to Anne and they had two children. Bill and Alice organised their wills, which left their estate to each other and then Alan. In the event Alan passed before them, the estate was to be passed on to their granddaughters.

When both Bill and Alice passed, the estate was left to Alan. However, five years later, Alan tragically passed in a car accident. His estate, as well as the inheritance he was given by his parents, was to be left for his wife Anne.

So, at this stage, Anne was the sole heir to Bill and Alice’s estate. A few years on, she remarried a man with children from a previous relationship. She made a simple will leaving everything, including Bill and Alice’s estate, to her new husband.

Despite the best of intentions by Bill, Alice and Alan, their estate was now under Anne’s control. Unless Anne changes her will to include her and Alan’s daughters, the estate will completely bypass the original owners’ intentions to leave it to their grandchildren. It may end up with her new husband, or even his children.

Sadly, this outcome is quite common. We see it far too often and that’s why we want to stress that a will isn’t always enough. To ensure maximum protection for your family and assets, you need to put the right structures in place.

There are two things you should do:

  • Keep your will valid and up to date as your legal rights change, specifically if you marry, divorce or separate; have children or grandchildren; if your spouse or beneficiaries die; or if you have a significant change in financial circumstances.
  • Create an estate plan that clearly nominates how you want your assets distributed, including any trusts and superannuation, identifies people you trust as powers of attorney, and is based on clear legal advice.

If you’re still unclear on the differences between the two documents, or if you’d like to seek advice regarding your own estate plan, get in contact with our friendly staff today.

Bridges Financial Services Pty Limited (Bridges). ABN 60 003 474 977. ASX Participant. AFSL No 240837. This is general advice only and does not take into account your objectives, financial situation and needs. Before acting on this advice, you should consult a financial planner.