Page 14 - Advice Matters - FWP May 24

The potential estate complexities

of dying without a will

Having a legally valid will can go a long way to avoiding disputes over the division
of your assets.

What did the artist Picasso, musicians Bob Marley and Aretha nominated beneficiaries after your death, should be a key step
Franklin, and billionaire entrepreneur Howard Hughes have in in the inheritance planning process.
common? Dying without a will (intestate) will invariably create
If you’re thinking they had amassed large fortunes before their complications, because your estate will be passed over to the
deaths, you would be correct. But another key fact is that they state or territory in which you live to administer.
all died without a valid will. This can result in your assets not being distributed to your
Picasso died in 1973 with an estate, including an extensive surviving family members in the way you would have preferred.
collection of artworks, later appraised at US$250 million. The Residential real estate and superannuation, which combined
eccentric Hughes passed away in 1976, leaving an estimated make up more than three quarters of total household assets, are
US$1.5 billion. His fortune was eventually split between the largest components of most financial legacies.
hundreds of people after years of legal battles.
Federal Treasury estimates that assuming there’s no change in
The estates of the musicians were lower, but still sizeable: Marley how most retirees draw down their superannuation balances,
(US$30 million) and Franklin (US$18 million). superannuation death benefit payouts will increase from around
In each case, their estates needed to be settled in court after $17 billion to just under $130 billion by 2059.
challenges by family members, former spouses, and other parties. Ensuring that any super you have left over at the time of your
The importance of inheritance planning death is distributed according to your wishes requires you to
complete a binding death benefit nomination form provided by
Inheritance planning, unlike business succession planning, is an
area that’s rarely discussed at the family level. your super fund.
It’s important to be aware of any potential tax implications. For
Most families regard subjects such as death and the future
division of wealth as unpleasant, and potentially sensitive when example, while superannuation distributed to a surviving spouse
multiple heirs are involved. or dependent children as a lump sum is generally tax free, non-
dependents (including adult children) may be required to pay tax
But there’s a lot to be said for having open discussions within on amounts they receive.
your family about the intended treatment of assets and future
inheritances. That comes down to how much of your super is made up from
pre-tax and after-tax contributions.
Beyond accumulating wealth over time, one of the most
important aspects of estate planning is determining in a legally Capital gains tax does not apply if someone inherits direct
valid will how you intend to have your accumulated wealth shares or other financial securities, but tax may apply if they
distributed after your death. later dispose of them.
Any unapplied capital losses that could be used to offset capital
Dying without a will can potentially be treacherous, and costly,
if your intended beneficiaries need to contest how your assets gains tax cannot be transferred to beneficiaries.
are divided. Estate planning can be complex. Consulting a licensed financial
adviser to help you and your intended beneficiaries map out
And consider that the next 20 to 30 years will see the biggest
transfer of family assets in history as many members of the so- an inheritance framework that also identifies issues such as
called “Baby Boomer” generation (people born just after the potential tax liabilities is a prudent step.
end of World War II through to 1964) die, in most cases with the
intention of leaving their accumulated wealth to their children Source: https://www.vanguard.com.au/personal/learn/smart-
and other heirs. investing/life-events/dying-without-a-will
htps://www.imf.org/en/Publications/WEO/Issues/2022/10/11/world-
Assets will include homes, investment properties, unspent economic-outlook-october-2022
superannuation money, direct shares, life insurance payouts,
and a wide range of other financial and non-financial assets.
Why you need a will
Creating a valid will, and specifically documenting how you
want your assets to be managed and divided between your

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MAY 2024