This short six part case study series examines some highly important issues parents must consider if they want their Will to plan for the best and worst their spouse and children will likely be forced to deal with unnecessarily.
Case Study Series One
Dying To Get Her Message Across
Sometimes dealing with the loss of a spouse can be too much to bear. For John Standard his excessive drinking cost him his life. As with his wife Sally, John lost his life behind the wheel of his car, and like Sally, John had not updated his simple Will for a modern estate planning Will - one that is specifically drafted to protect beneficiaries and maximize inheritances. Leaving children under 18 years of age, John’s simple Will is totally inadequate to deal with this unthinkable, but all too possible scenario. For John and Sally’s children, their parents’ aversion to professional financial advice has produced a reality that will severely affect their future.
John and Sally Standard had very typical circumstances – the type of simple circumstances that would have certainly benefited from proper estate planning advice and documentation.
John 47, public servant on $110k per year.
Sally 44, part-time physio on $60k per year.
Married 16 years - no previous marriages.
Kids - Toby 12, Alex 10 and Alice 6.
Family home held jointly, with $350k owing.
Spent $100k on renovations, current value est. $800k.
Sally inherited $50k of BHP shares from her aunt.
John has a 20% share in a holiday shack, approx. value $60k.
John $105k super, Sally $60k super, nominating beneficiaries.
Issue 4: Child Beneficiaries
At the time of John’s death, Toby is 20 and at university, Alex is 18 and just finished high school, while Alice is only 13.
Issue 4a: Qualifying Age
A major issue stemming from John’s simple Will is that it allows for beneficiaries to inherit at 18 years of age! This is hardly a suitable age for someone so young to have complete control of a large sum of money. Under a modern estate planning Will, parents are able to nominate a more suitable ‘qualifying age’ (i.e. 25yrs) that a beneficiary must attain to take full control of their inheritance. Setting a qualifying age is a simple and effective strategy to protect young beneficiaries from making immature choices with their inheritance i.e. blowing the money of a superfast sports car.
For instance, under a modern estate planning Will, John’s eldest child Toby (20yrs) is over 18 years of age, but is under the qualifying age nominated by John. Toby would have access to his inheritance to cover his living, housing, medical and education expenses. However Toby would not have full personal control of his inheritance, which would be administered on his behalf (and for Toby’s benefit only) by John’s nominated executor up until Toby reaches the qualifying age set by John’s modern Will. Had John and Sally sought professional advice they would have been aware of this issue.
Issue 4b: Special Needs Fund
Due to the differences in the children’s ages, there is the distinct possibility that Alice could miss out on opportunities or funding already provided to Toby and Alex for extra-curricular activities such as overseas school trips, special education or sporting expenses, or if Alice has need for extra or special help because of ill health, physical or mental handicap or other ‘special’ need. Unfortunately, under John’s simple inexpensive Will, no provisions are made to ensure that Alice is not disadvantaged in this way.
Had John and Sally spoken to a professional adviser, they would have been advised about the importance of having a modern estate planning Will which provides for the establishment of a ‘special needs fund’ that can even up any inequality between orphaned children under the nominated qualifying age. Under a modern estate planning Will, wide powers would have been given to the executor(s) of John’s estate as to how the special need fund is applied, with the clause limiting application of the fund to only benefit John’s children under the qualifying age. When all children reach the qualifying age, any remaining monies held in the fund are distributed equally between all surviving children. Another prudent safety net provided by a modern estate planning Will to protect child beneficiaries.
CASE STUDY 1.4
From 'Dying To Get Her Message Across'