Carol Brady has died (part 3) – A Worked Example

This is the third post in a series titled 4 Things the Brady Bunch Can Teach Us About Estate Planning.

  1. Marriage invalidates a will
  2. Partners do not always contribute equally to the family asset pool;
  3. Parents often want to make uneven provision for the various children;
  4. People normally want their new partner to have a roof over their head for life (or at least while they remain single and independent!)

Let’s look at an example:

  • Mike (44 divorced) marries Carol (39 – widowed) they recently married after Carol had a baby girl (Cindy) with Mike;
  • Mike’s eldest (Greg) and Carol’s eldest  (Marcia) live independently;
  • The middle children (Peter, Bobby and Jan) live with them and are going to school;
  • Mike & Carol each own a house but they plan to sell both and build a new home soon;
  • Typically Mike’s super is reasonable but Carol has very little;
  • Sadly Cindy was born with Down Syndrome and requires a lot of care and will for the rest of her life;
  • Greg Brady is not fond of Carol and her family feeling that she is somewhat of a gold digger.

Some of the Issues to clarify:

  • Did Mike & Carol have current wills and were they invalidated by the marriage.  It is common for a divorcee to have a new will prepared but widows and widowers often forget the issue.  In any event unless the new will contemplates the marriage then it would normally be invalid;
  • How will the new house be owned, Join Tenants or Tenant In Common – deciding now before  building is cheaper and easier.  Mike and Carol may want to leave their share of the house to their children with a life interest to ensure their spouse has somewhere to live.
  • What about superannuation nominations?  Binding or otherwise.
  • Who should hold Powers of Attorney and Guardianship? Who should be backup?  If distrust is an issue then perhaps Carol and Greg can act for Mike while Mike & Marcia could act for Carol
  • Do Mike or Carol want to isolate money for their respective children in the new wills?  
  • Perhaps a Testamentary Trust is warranted (quite likely) – who will run this trust?  There is some logic in making a separate trust for each family unit, that way Mike’s children can “look after each other” as can Carol’s in the event of death. Who should be executor of Mike’s will? Carol? Greg or both? Can they get along?
  • It might be wise to include language to permit any trusts to be split if the children don’t get along – be wary of forcing this as there are tax consequences!
  • Are there age restrictions on when beneficiaries can gain control of the trust or receive capital?  25 is a common age;
  • Which people within the family possess the skills to manage assets in trust form?  Can they be relied upon to act in everyone’s best interest?  Often distrust can be an issue here.
  • What about Cindy – who will care for her?  If she receives too large an inheritance this may impact on any Centrelink entitlement she and her carer have in the future meaning she is worse off, as are her siblings.  Leaving nothing to Cindy can also displease Centrelink.
  • Does a Special Disability Trust (SDT) make sense for Cindy?  How much should be left to a SDT in the will?  SDT restrictions mean that these funds should only be used for her housing and protection.  Only $11,500pa can be used for discretionary (or “fun”) purposes.  Given that Cindy will almost certainly qualify for housing and personal care benefits under the NDIS does a SDT make sense at all? Will the other children be disadvantaged and Cindy lose some or all of her entitlements from Centrelink and NDIS?

There are so many issues to explore here and the above is by no means an exhaustive list.  The point is that the client has some deep thinking to do and the Estate Planning Adviser is the right person to take them through their options and the consequences.  

Identifying these things with your clients will elevate your status as an adviser whereas failing to do so runs the risk that someone else will do it and you will be the poorer advice cousin.

The Estate Planning For Life service guides the adviser through these issues and help shape the conversation with the clients providing a pathway to the deeper client engagement.

To find out more about what EPFL can do for you and your clients click this link.

Good advice puts people first!

Loading Facebook Comments ...