Some say that Australia has an ageing population crisis, with 558,000 Australians now aged 85 years… and in 13 years that’s expected to hit 1 million.
And that means there will soon be billions, if not more, of dollars transferred to our younger generations.
The problem is, many of these heirs aren’t prepared, and a significant number of families will end up losing some of their inherited wealth due to misunderstandings or fights over assets.
Then there are the assets that no longer exist.
This is particularly a problem in today’s modern environment where there are more blended families.
And it’s tearing surviving family members apart, contributing to legal rows between siblings and step-siblings over anything from the family home to bank accounts, shares or even jewellery.
What’s happening is that assets that are due to be handed down in a will are being sold to look after the surviving parent.
Once the surviving parent passes, the inheritance is often only split between the natural children of that parent, leaving out step-children.
For property, the problem begins when the family home is left to a beneficiary, which is usually a natural child of the surviving parent, and it is sold before that person’s death in order to pay for things such as aged care.
It means that when that parent does eventually pass away and the estate is divided, the house no longer exists so cannot be given, divided or gifted as set out in the will.
And unsurprisingly, it makes would-be beneficiaries of the will very angry, leading to rows between family members about missing assets or money.
And it’s not just the sale to pay for aged care that can mean the assets cease to exist - they may have been stolen or even damaged by fire or flood in the time between when the will was written and the person who has the will dies.
The good news is, it doesn’t need to be this way.
Money and inheritances bring out the worst in people, even your own family.
So when it comes to avoiding a family feud over your inheritance, or lack of it, there are a few strategies that could help.
First, it’s vital to create a will and plan your estate.
Estate planning involves arranging your assets and circumstances in a way that ensures that after your death your beneficiaries receive the maximum benefit from your assets at a minimum cost in administration, taxes and heartache.
Good estate planning aims to anticipate and plan for financial and personal problems beneficiaries of your estate may face after your death.
It goes into the nitty gritty of everything from who gets what, to a medical directive and even homeownership structure and tax.
Then there are certain specific strategies you can implement which will make sure that the estate, asset or even money doesn’t get spent ahead of death and therefore disappear into thin air.
- Keep your will constantly updated
The first step to ward off any unnecessary family feuds is to constantly review and update your will as time goes on.
Things change, people separate or die and assets come and go - the latest version of the will should be the most up-to-date to ensure that all scenarios are covered and the beneficiaries are protected.
But sometimes that isn’t possible, in which case you should always ensure the will takes into account possible changes in assets or circumstances. You should discuss any required changes with family members and your estate lawyer as this can be used if a will has not been physically updated.
- Appoint an Enduring Power of Attorney
Many people write out a will and plan their estate without appointing an Enduring Power of Attorney.
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An Enduring Power of Attorney basically authorises someone to make legal and financial decisions for you when you're not able to do so yourself. A will only comes into being on death, not incapacity.
This is particularly vital when the person who made the initial will and planned the estate loses the capacity to make financial decisions or to change or update the will when something changes - such as when one parent dies or the house is sold.
Instead, an Enduring Power of Attorney will step in and make decisions on behalf of the individual.
- Be specific
Making a will is the best way to ensure your assets will be distributed according to your wishes.
And the more specific you can be about exactly what asset should go to who, the easier it will be to distribute down the line.
You should also give reasons for leaving out any family member and consider giving them something even if small.
In many States, the courts may have sympathy for an aggrieved relative who required a bequeath to maintain a level of lifestyle.
- Consider a percentage split instead
Another way to avoid future conflict is to allocate a percentage of your assets to a beneficiary, rather than specific items.
This is especially valuable when it comes to dividing large assets such as property between multiple people.
Specific gifts can still be accommodated.
- Consider a substitute
If you’re unsure if the asset you plan to hand down in your will actually exist when it comes to your death, you could think about listing a substitute gift.
For example, instead of leaving a portion of a property to a beneficiary, you could state that should the property sell before death, the beneficiary is entitled to their share of the sale price.
This avoids the scenario where a property is sold to pay for aged care or medical support, therefore no longer existing.
The rule differs in each state though so it's recommended you get local advice for your area.
- Review what happens when one parent dies
Another, more complex, way to mitigate conflict when assets are spent or go missing is to review and put a plan into place for when one parent dies.
A couple could co-own a property as tenants in common which means a surviving spouse can still live in the property but when it is sold, it is divided between beneficiaries.
Or when one parent dies, the surviving parent could buy another property to live in and sell the existing one, splitting the sale price between beneficiaries.
Unfortunately, there is no silver bullet for avoiding a family feud when it comes time to divide assets in a will after parents have died.
Emotions will be running high, and as I said before, money brings out the worst in people… add grief into the mix and there will likely be some dispute about something one family member isn’t happy with.
The key though is to use some of the above strategies to plan your will and estate effectively enough to ensure that when the time does come, things run as smoothly and as stress-free as possible for all involved.
It is also critical to have the correct type of will as this affects issues such as asset protection, family law court settlements, flexibility and tax. In many cases, the standard will is insufficient to give that peace of mind.