by Peter Marsh

Across almost three decades of working as an accountant, I’ve come to realise there’s nothing clients are less diligent about than their will and estate planning.

It’s normally the very last aspect of their finances they get in order. And usually, it’s only because they’ve been pestered into submission by some sort of professional service provider!

I understand the reluctance. Wills and estate planning involve death, and death is simply something we defer talking and thinking about for as long as we possibly can.

The sad reality is, the families of so many people suffer because estates are either drawn up incorrectly, not drawn up at all, or left unattended and finish years out of date.

Dividing up the “spoils” – who gets what and when – might seem quite straightforward, but you’d be amazed at what can go wrong.

I had a client a couple of years ago who was not married but lived with his son and defacto wife. (His “wife” encouraged me to tell their story, in the hope that others might learn from their horrid mistake).

In brief, it went like this.

  • Bloke (let’s call him Jack) has a house and son, prior to getting together with the wife (let’s call her Jill). Loan is about half the value of the house by the time they get together.
  • While they are together they pay off Jack’s private home loan jointly.
  • The couple buy an investment property (in both names as joint tenants), borrowing 100% of the funds, and using the house as equity for the loan.
  • Jack and Jill split up.
  • Jack (very emotional at the time) draws up his will without professional advice, leaving house to his son.
  • Investment Property is held by Jack and Jill as “joint tenants” so it will automatically go to Jill.
  • Property market crashes – the debt on the investment property now far exceeds its market value.
  • Jack and Jill get back together, but there’s no alteration to the will.
  • Jack dies suddenly, leaving Jill as the sole carer of the child (aged 10 at the time).
  • Jill’s only asset now is 100% of the investment property, valued well below the debt level and linked to a house she doesn’t even own, even though she helped pay the loan off. She’s traumatised by the loss of her partner. She’s unable to make the loan repayments, she loses her job, suffers depression, and her life spirals out of control.
  • Additionally, due to the conditions outlined in the estate, she has no jurisdiction over her defacto son. As he‘s still a minor, an independent trustee is appointed to manage his affairs.
  • Her only option is to take her son to court to challenge the estate, resulting in further personal anguish and large legal fees.

It all sounds too bad to be true, but that’s how it unfolded.

The learnings.

  • Get in early. Get your will and estate sorted with professional advice from your accountant and lawyer.
  • Keep emotions to a minimum. You may strongly believe in a matter of principle. That belief might also be impractical. A level of flexibility is important.
  • Finally, you never know what’s just around the corner. Keep your will and estate up to date. Changes in circumstances occur regularly. These should be reflected in the formal allocation of your assets.

Call to action.

Do something – while you can do it on your own terms!