Getting the bad news part of this article over and done with, we had a customer recently who passed away. Unfortunately, they didn’t have a clear will in place which, caused unnecessary complications for the family. Now, thankfully, they had significant financial resources so the family was well provided for – this isn’t of course always the case.
Now we’re not Lawyers or Risk Advisors – Estate & Risk Planning isn’t what we do. However, as accountants we’re generally at the centre of people’s financial world. This means we’ve got a good handle on what does (and doesn’t need to be covered). Often, we end up joining the dots between the lawyer, broker, and what the actual position in the Financial Statements is.
Here’s a few things we like to see:
Open discussions with family members
In an ideal world, your family members (and potentially staff) know what happens if you were to become incapacitated.
Do you want family members involved with your business? Do you want them to steer clear? How is the business to keep paying your spouse? How long would your business income continue if you weren’t there? Should the business be sold to your staff, and if so do they have the management capability to run it without you?
These are all questions that can be answered now if people have open conversations with each other about what happens if the unexpected arises. If the conversations don’t take place, a bunch of guess work goes on, with no one really knowing what you really wanted.
Up to date Wills
There’s nothing worse than seeing a will that leaves everything to an ex-husband or ex-wife because it hasn’t been updated. There’s also a range of wills out there which “forget” to include a new child, or ignore the new property they’ve purchased. Otherwise, they grant guardianship of a child to the a brother that they had a falling out with last Christmas…
Up to date wills mean that everything (is usually) thought of, saving legal costs and (more importantly) a lot of heartache for your family.
Powers of Attorneys
Powers of Attorney give other people the ability to manage your affairs if you’re in capacitated, or the ability to manage your healthcare.
Businesses generally fail if there’s no one able to pay wages, make decisions or to fill the breach if you’re incapacitated. Powers of Attorney go some way towards solving this.
If your incapacitation means your family need to sell the business, they’re likely to get more for it if you’ve got it managed properly. Powers of Attorney help make sure someone has the legal authority to manage it correctly.
Properly managed Trusts
Poorly managed Trusts can be open to challenge by both creditors and anyone challenging your estate. Managing them properly is the key to making sure they’re effective when relied on. Properly managed Trusts should:
- Be reviewed at least annually for any changes
- Have minutes kept of Trustee minutes
- Have an independent Trustee
- Have active gifting plans in place
A clear understanding of retirement plans
Knowing how much you need to retire on, and having a framework to make the retirement decision in also important. Without that understanding, spouses can have different expectations, accountants can end up mistiming the exit strategy on your business, and future investments can be put in inappropriate places.
Appropriate risk cover
There’s no way to sugar-coat this, but any decent estate planning needs to cover what happens if you die before you’ve had a chance to build your wealth. Without that wealth, your family’s expectations may not be met, meaning they’re left in a (potentially) tight spot. This is where risk cover comes in, making sure all bases are covered if anything were to happen to you.
The next step on your Estate & Risk planning is to get a copy of our upcoming Workbook to guide you through the process. If you’d like a copy, let us know and we’ll send it through as soon as it’s available.