Eqeus

Estate Planning for the Modern Family

By John Hollyman16 Oct 2015

What was once a simple nuclear family unit of mum, dad and the kids has evolved to include ex-spouses, second spouses (even third and fourth ones), defacto partners, stepchildren and other dependants. The fictitious Pritchett family in American sitcom Modern Family is certainly complex, so let’s hope that Jay, the wealthy patriarch, has his financial house in order.

Not only does he have an ex-wife (DeDe), a new wife (Gloria), children of his own by his first marriage (Claire and Mitchell), but he also has an adopted son (Manny), grandchildren (Haley, Alex and Luke) and an adopted granddaughter (Lily) – not to mention two sons-in-law (Phil and Cam).

But what would happen if Jay were to suddenly pass away? Would Gloria inherit his wealth?  What would happen if she then passed away leaving the wealth to her son Manny who is suddenly back in the custody of her ex-husband? Would Claire and Mitchell have any claim to Jay’s fortune and what about their respective family members? Would Cam be recognised as Mitchell’s partner and would Lily have the same rights as Jay’s bloodline descendants? And what about DeDe, after all she was the first wife, could she claim?

The fact is, art does mimic life and today’s families can be complex.

Specialist financial planning is required so that those you love (and those you don’t) are properly dealt with by your estate. It’s called estate planning and it is so much more than just drawing up a will.

Your will only deals with the assets it has jurisdiction over. Estate planning for your other assets – including your superannuation, assets held as joint tenants and family trusts which are outside the control of your will – are managed in accordance with your wishes and requirements, whether you are dead…or not.

Let’s say, Jay Pritchett didn’t die. Instead, he survived a huge knock to the head that rendered him senseless for the rest of his days. Without an estate plan that includes a power of attorney there is no one, other than a court-appointed representative, who is legally allowed to make decisions about Jay and the assets he controls.

But if Jay does have a power of attorney, who would it be? If Gloria survives him, would she be the most appropriate person to make his business decisions or would that task be better suited to his son Mitchell, the lawyer?

There are other matters to attend to as well, including guardianship. Who will look after Manny if Gloria suffered incapacitation as well and Manny’s father is nowhere to be found?

Estate planning involves working through all the technical, practical and emotional elements that help an individual to plan for and/or distribute their assets, preserve and ultimately transmit their wealth to their choice of beneficiaries in death or incapacitation.

A financial planner with special interests in estate planning can guide you through the entire process and coordinate with your legal practitioner so that your estate plan is as well considered and integrated with your other financial matters, such as risk management, investment strategies, superannuation and retirement planning. Estate planning is an integral component of getting your financial house in order.


The overall goal of estate planning is to ensure the right funds are received by the right people, at the right time. However, modern estate planning takes this one step further and aims to prevent ‘shrinkage’ in order to maximise the estate and take into consideration all structures. Shrinkage is caused by many factors, such as inefficient administration, too much tax being paid or unexpected claims. The driving factor behind estate planning is that wealth be preserved and transferred as efficiently as possible to the next generation.

Having a simple will where all wealth is transferred to the beneficiaries in their own name can be cost effective but that’s where the benefits stop. Considering asset protection, to preserve the family’s wealth, can prove to be a worthwhile exercise. A will which sets up structures that gives the beneficiaries control of the wealth while protecting the assets (in so much as possible) from family provision claims, creditors and from mismanagement as well as providing tax planning opportunities may cost more initially, but will pay for itself many times over in the long run.

When minor children are involved, having a will enables the will-maker to appoint a guardian for their child.  If they don’t make this decision and something happens then the courts will decide who will look after the children.  Structured wills can enable the guardian (who is often also the substitute executor) to control the funds in the estate to provide for the child in a tax effective and controlled manner for such things as maintenance, education and well-being.  The child will get control of the capital at a predetermined age – this is the age at which the parents believe the child will be responsible enough to manage their own affairs.

While keeping things simple may be preferable, working with a specialist estate-planning solicitor to add well-considered directives to a will can add immense value for the beneficiaries of an estate. In this way, all the assets a person controls can be safeguarded in the event of death and, equally importantly, incapacitation.

At Eqeus, an integral component of getting your financial house in order is to address the area of estate planning.  We often find that the people we meet have not really considered this area. Whilst they may have life insurance they have not fully considered the way in which the life insurance proceeds will get to the right people, at the right time.  This is just one of the areas that are identified and measures taken to address any shortcomings when we help get your financial house in order.  Whilst it is unlikely this is the main reason that people come to see us, when we go through our discovery process and identify what’s truly important as well as the fact that this aspect of their financial affairs has never been addressed, then helping our clients get their estate planning in order is a logical and highly valued step.

Gareth Colgan is a financial planner at Eqeus Financial Advisers, a member of Fortnum Private Wealth.

About

John Hollyman

John’s clients say it is his attention to their story, his ability to lead their journey to discovering wealth and his fundamental desire to get things done that sets him apart from others in his field, while his peers quote trustworthiness, clear strategic thinking and thoroughness that goes above and beyond expectations.

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