Will It Be Or Will It Not?
I’ve written a lot of articles trying to bring focus to events and incidents that might occur and disrupt your future. Whether it be to your practice, to you personally or within your family.
Having highlighted possible scenarios and potential risks I’ve then gone on to prescribe some form of insurance, savings or investment that will provide good financial outcome. Many readers have followed up on various articles and we have helped them construct risk protection plans and investment strategies. You might think that is the end of the matter because if an event was to occur there are contingencies in place.
However, it’s not only important to plan for, and mitigate, the financial outcome of an event but equally as important to plan for after the event. You might well ask what does that mean? Well, in the event of death your life insurance policies will pay a lump sum to the policy owners - spouse, Trust, estate (self), company, lender (bank), business partner - whoever has been designated the policy owner.
In some instances what happens next is determined by the recipient. For example, if the policy owner was your lender and the total borrowings have been repaid then the mortgage will be discharged. If it is your spouse or Trust then they will have full control of the future use of the policy proceeds. If you own your own life policy then the payout will now form part of your estate. This is where planning for after the event comes in to play - have you established a will? Regardless of life insurance a will is important as it will determine what happens to all of your estate and who will benefit from your accumulated assets and what you expect to happen post death.
Without a will you are deemed to have died intestate and there is legislation that determines the distribution of your assets and timeliness for doing so.
If you haven’t already got a will here’s a check list of things you might want to consider:
- Funeral Instructions - this would include whether you want to be buried or cremated. It can also include where and when and how. The details can be as brief or as detailed as you like.
- Future Children - is there the possibility that you might have children after establishing the will? In this case accommodation for more children needs to be addressed.
- Guardianship - if you have children and both parents died who would be their guardian.
- Marital Status - recognising that people may have been married more than once and possible blended families. Also, take into account if there is already a Property Sharing Agreement in place.
- Disposal of Assets - who is to receive specific assets? If there is debt on the asset does the estate settle the debt or is the debt the responsibility of the recipient.
- Money Gifts - if leaving money to individuals is there age criteria. For example, children not to receive their inheritance before the age of 21.
- Life Time Interest - commonly used where couples in a second marriage who have a joint home but want to leave their share to children from an earlier relationship. The surviving spouse would be entitled to live in the home until his or her death and at that time when the property is sold the proceeds would revert to the children.
- Debt Forgiveness - if owed debt by others (including family) is the estate to continue to seek collection or is it forgiven?
- Testamentary Promises - if you have made a commitment to reward someone, via your will, for services they have provided to you in life then it needs to be recorded.
- Future Investments - if there are assets or proceeds to be paid out at some future date (restricted access for children for example) you can put conditions on the type of investments that can be held e.g all in term deposits or a mix of equites etc.
As you can see, there are many aspects that are
covered by a will and planning for after the event is
equally as important as planning for an event. If you
don’t make the type of decisions outlined above then
others will do so on your behalf as set out in
From a business perspective a Partnership Agreement is equally as important. While the insurance policy will provide the proceeds to allow for the transfer of ownership of a business it will only occur smoothly if there is an up to date Partnership Agreement that compels the surviving partner to buy and compels the deceased estate to sell.
Remember insurance is only the funding mechanism to allow for the planning that has taken place to proceed. When reviewing your insurances make sure you review the instructions and mechanisms are in place to match your expectations, whether that be your will or Partnership Agreement.