These days, it's fair to assume that most people know you should have an estate plan and will so your assets are divided among your beneficiaries the way that you wish.
Many of us take the time to set up our will and use other legal instruments to manage their estate distribution, but what happens if things change in your family?
Blended families are common these days and divorce and remarriage are an everyday fact of life. With ex-husbands and wives often around, along with step-children and offspring from second marriages, complications can easily occur.
So what will happen to your estate if your family is complex or if the family dynamics change down the track? A poorly structured plan can lead to unwanted or vexatious claims being made by disgruntled parties.
A minefield of possibilities
Some of the situations that may cast a shadow over your estate planning:
- If you have remarried, you may want to provide for children from your first marriage, but will your estate also be subject to unwelcome claims from an ex-partner or their relatives?
- What if the children you leave your inheritance to end up going through divorces themselves in future? Have you accounted for claims that their estranged partners may make?
- What if your surviving spouse remarries and starts another family? Will you want to include or exclude members of that family from accessing your assets?
- Then there is the ever-increasing incidence of de-facto and same sex relationships. Who is entitled to what in these situations and are there claims from left field that could potentially arise in the future?
To deal with such questions your estate plan needs to not only take account of your current family situation, but must also cater for various scenarios that may emerge as the family situation evolves.
Don’t take anything for granted
The key to estate planning that is ‘future proof’ is to expect the unexpected and never make assumptions. Just because family relationships may be rosy now, it doesn’t mean that the wheels won’t fall off in the future. Even if you think certain relatives from a previous marriage are already well off and unlikely to challenge the distribution of your assets, it doesn’t mean they won’t make a claim on your estate.
Consider pre-emptive action
Thinking through potential scenarios and obtaining professional advice over how claims can be minimised is a vital part of managing the situation. One tactic that can sometimes assist in limiting challenges being made to your estate is to leave something to potential challengers as a way of discouraging them from making unwanted claims.
It may even be useful to draw up memorandums that explain the reasoning behind your decisions on certain estate distributions, as a way of dissuading potential claimants.
Getting full value from your legal adviser
It may be uncomfortable to share some of the oddities and peculiarities of your family dynamics to a professional who is not personally involved, but this can be essential if you want them to give you their most valuable and effective advice. They need to understand the naked truth of your family situation and you should be open to letting them scrutinise your perceptions, so that they can be as frank and fearless as possible. In the end, this will help create a more robust estate plan and it will be your chosen beneficiaries who will ultimately benefit.
And, if your circumstances change – death of a spouse, divorce, remarriage, additional children – consider revisiting your will or undertake estate planning to ensure these new situations are accounted for.
Covering all the bases
With the help of a good legal adviser and the use of the legal instruments available to you, you can construct a durable estate plan that can cater for all kinds of eventualities.
At the top of the list is the prudent selection of an executor. This is particularly critical in the case of blended families. Accountability and objectivity are paramount qualities that they must embody. One approach that may work in some situations is the appointment of more than one person as executor. This can limit the risk of a sole executor being swayed by future changes in family situation.
Another option is to appoint a more objective person to the role of executor, such as one of your professional advisers. The downside of this can be an increase in costs that may arise, so you need to make a judgement call on this and decide if the benefits outweigh the potential costs.
Good legal advice can also assist in recommending instruments, such as testamentary trusts, discretionary trusts, binding death benefit nominations on super. These can facilitate a smooth and fair transition of assets and prudent management that prevents your wishes being subverted after the estate distribution has taken place.
What are your tips for setting up a future-proof estate plan? Share your experience below.