Creating an estate plan involves much more than signing a Will and storing it somewhere safe. A complete estate plan considers your assets, personal circumstances and what should happen if you lose the ability to make decisions yourself.
Many people misunderstand how Wills, superannuation, jointly owned assets and other estate planning documents work. These misconceptions can create problems for your loved ones after your death or during periods of incapacity.
In this article, we explore common estate planning myths and explain what you should consider when preparing your estate plan.
This information is general only. You should obtain professional advice from estate lawyers about your individual circumstances before taking action.
Common estate planning myths explained
| Myth | Reality |
|---|---|
| I have a Will, so I have an estate plan | A Will is important, but a complete estate plan may also include documents for incapacity, superannuation and asset ownership. |
| Only wealthy people need an estate plan | Everyone can benefit from planning how their assets and decisions will be managed. |
| My Will controls everything I own | Some assets, such as jointly owned property and superannuation, may not automatically follow your Will. |
| I only need to update my Will once | You should review your Will when your personal or financial circumstances change. |
Myth 1: I have a Will, so I already have an estate plan
A Will provides instructions about how your assets should be distributed after your death. However, a Will does not cover every aspect of estate planning.
A complete estate plan may also include documents that appoint trusted people to manage your affairs if you become unable to do so.
For example, a Will does not:
- appoint someone to manage your financial and property affairs while you are alive;
- appoint someone to make health and lifestyle decisions if you lose capacity; or
- provide instructions for unexpected situations involving incapacity.
Tip: Consider what would happen if you could no longer manage your own affairs. Speak with your lawyer about appointing an attorney or guardian as part of your estate plan.
Myth 2: Only wealthy people need an estate plan
Estate planning is not only for people with significant wealth. Anyone with assets, family relationships or future plans can benefit from having an estate plan.
An estate plan can help you:
- choose who manages your assets after your death;
- decide who receives your property;
- protect the value of your assets for beneficiaries; and
- prepare for illness or incapacity.
Your assets may include your home, savings, investments, superannuation and personal belongings.
Tip: Review what you own now and what you expect to acquire in the future. Consider who you want to benefit and how you can structure your estate effectively.
Myth 3: I can leave jointly owned property to anyone I choose
Many people assume their Will controls all property they own. However, this is not always the case.
Jointly owned assets may pass automatically to the surviving owner through the right of survivorship. This can happen even if your Will states a different intention.
For example, jointly owned real estate often transfers directly to the surviving owner after one owner dies.
This arrangement may suit many couples. However, it may not always reflect your wishes, particularly where property involves other family members, non-family members or business entities.
Tip: Review how your assets are owned, including property, bank accounts and investments. Your lawyer can help you understand whether the ownership structure reflects your estate planning goals.
Myth 4: My superannuation is automatically dealt with in my Will
Superannuation does not always form part of your estate or follow the instructions in your Will.
Superannuation death benefits are generally paid according to superannuation fund rules, legislation and any valid Binding Death Benefit Nomination (BDBN).
A valid BDBN may allow you to direct your superannuation death benefits to specific beneficiaries, including your legal personal representative in some circumstances.
You can find further information about superannuation death benefits through the Australian Taxation Office.
Tip: Review your superannuation nominations regularly. Speak with your lawyer about preparing a valid BDBN and considering potential tax consequences.
Myth 5: If I die without a Will, my assets go to the Government
If you die without a valid Will, you die intestate. Your assets will then be distributed according to intestacy laws in your state or territory.
These laws provide a set order of beneficiaries, usually starting with close family members.
However, intestacy rules may not reflect your personal wishes or family circumstances.
Further information about intestacy and estate administration in NSW is available through NSW Trustee and Guardian.
Tip: Do not rely on intestacy laws to decide who receives your assets. A Will allows you to clearly nominate your executor and chosen beneficiaries.
Myth 6: I only need to update my Will after major life events
You should review your Will regularly, even if your circumstances have not changed.
Major life events that may require a Will review include:
- having children;
- marriage or separation;
- divorce;
- purchasing or selling significant assets; and
- changes to your financial circumstances.
You should also be careful when leaving specific assets as gifts in your Will.
For example, if you leave a particular vehicle, property or valuable item to someone but sell that asset during your lifetime, the gift may no longer be available.
Well-drafted Wills usually provide flexibility to account for changes in assets and future generations.
Tip: Consider reviewing your Will each year, such as when you complete your tax return. If your circumstances change significantly, contact your lawyer to determine whether updates are required.
Frequently asked questions about estate planning
What documents are included in an estate plan?
An estate plan may include a Will, power of attorney, appointment of enduring guardian, superannuation nominations and strategies relating to asset ownership.
Do I need an estate plan if I do not own property?
Yes. Estate planning can help manage personal decisions, superannuation, savings and future assets.
How often should I review my estate plan?
You should review your estate plan regularly and after major personal or financial changes.
Conclusion: Why estate planning matters
A complete estate plan helps ensure your wishes are followed and provides clarity for your loved ones.
Preparing an estate plan requires careful consideration of your assets, family circumstances and future needs.
If you need advice about Wills, estate planning or protecting your assets, contact us on (02) 9818 2888 or email [email protected].