In addition to legal advice, when people draw Wills, they often obtain detailed financial advice. This is especially the case where assets are substantial and involve such things as Testamentary Trusts, Insurance Bonds, Self-Managed Superannuation Funds and Companies. These entities are usually set up for a good reason and often require ongoing management:
Life Insurance Policies
Often in situations where one adult child receives a particular benefit from a parent, the other child or children can receive their benefits through life insurance policies taken out before death.
Situations have occurred where, prior to the death of the parent, the children decide that the life insurance policy is an unnecessary expense and cancel it.
Quite often the insurance is essential to the conduct of the estate and, when the parent dies, one child receives an asset with no benefit payout to the other(s). This can lead to unnecessary consequences such as family maintenance claims seeking better provision out of the estate for the children that have missed out. The lesson is, before altering structures that have been set up by parents, obtain sound financial and legal advice.
Self-Managed Superannuation Funds
There are other situations where beneficiaries under a Will have interfered with financial and legal structures creating a disadvantage for beneficiaries. For example, where a party inherits a parent’s Self-Managed Superannuation Fund and sells or redeems one of the assets, the fund can become non-compliant. You cannot treat fund assets like personal property. Self-Managed Superannuation Funds are audited and funds can risk taxation penalties if they are not dealt with correctly.
The above two examples have strong lessons in that:
- Lawyers and Financial Advisors should encourage those with assets to educate their families about testamentary intentions.
- Recipients should be appropriately equipped with financial and legal advice so that they understand why the estate planning has been done in the way it has.
So before any redemptions are made, get sound financial and legal advice.