Estate planning: the crucial step too many Australians avoid

We make detailed plans for retirement, and spend our whole working lives building up superannuation, but what about our financial legacy to our loved ones?

It’s commonly overlooked, according to Hamish Landreth, director and head of financial services at Prosperity Advisers, who says Australians often neglect estate planning.

“It’s very common that estate planning is not up-to-date or not done at all, and I can understand why, because it can be a daunting task,” says Landreth.

Take a long view … some simple planning now can help secure your financial legacy. Credit: iStock

“It’s not the nicest thing to sit down and contemplate, but it’s really important.”

So, if you’re one of the many people who’s been avoiding estate planning, how can you get started and what do you need to know? Here’s a brief guide.

Start with the simple stuff

A great starting point for anyone ready to tackle estate planning, says Peter Hogg, general manager of guidance and advice at Aware Super, is simply getting a legally binding will in place.

“It’s a really important step, and up to 70 per cent of the Australian population don’t have a legally binding will,” says Hogg.

At the same time – or perhaps even before – it’s a good idea to have an honest conversation with family and friends about your wishes to ensure everyone’s on the same page.

That conversation can include talking about healthcare and aged care-related decisions, as well as your financial estate.

If your finances are relatively straightforward, you may be able to put plans in place yourself, although more complex scenarios can require the help of a solicitor.

“There’s a range of digital, reputable estate planning options available for consumers these days that are really low-cost in terms of setting up,” says Hogg.

“And particularly where you’ve got simple circumstances, that might be highly appropriate for you.”

Sort your super

The next step? Turn your focus to superannuation. “The other important thing to know – and this is a really simple thing you can do – is that your superannuation isn’t actually part of your estate,” says Hogg. “It’s a separate asset”.

By putting what’s called a binding nomination on your account, you can choose who you’d like to receive your remaining super after your death. Without that in place, after your death a trustee will step in and determine who’ll be the beneficiary of your super.

Hamish Landreth, director and head of financial services at Prosperity Advisers.Credit: Paul A. Broben

“That’s a basic thing you can do that doesn’t require complex legal advice – you just have to talk to your funds about how to set that up,” says Hogg.

But it’s something many Australians neglect to do – in fact, Hogg says, 67 per cent of Aware Super members haven’t fully set that up.

Your super fund should also be able to help you plan for the most tax-savvy way to pass on any remaining super. Because while our superannuation is tax-free after age 60, “that doesn’t necessarily mean that your superannuation is tax-free to your dependents post your death,” says Hogg.

“So, one of the things that we work with our members on is different ways we can manage that tax situation. But certainly, talk to your super fund about the tax within your super and what that might mean for your dependents, because that’s a really great way to start to plan ahead.”

Engage a professional

Other parts of estate planning can be more complex, and warrant bringing in a financial advisor.

“I would always recommend getting professional assistance for any legal matter, especially something as important as your estate plan,” says Landreth.

“But that said, it does get extra complex when you start coming across scenarios like blended families or second marriages, or sometimes unequal wealth between partners can add some complexity. Certainly, overseas assets, and also family rifts or estrangement, can be difficult to navigate as well.”

Importantly, a professional can also be an essential ally for your loved ones after your death, says Landreth.

“They know the family structure, they know the value of the assets and how they’re owned. They know where all the insurance policies are. They’ll be across the tax implications.

“If the estate plan is actually needed – if someone passes away – the financial advisor can bring all that knowledge to assisting the surviving partner or their children as they try to navigate the estate process.“

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.