Monday, April 24, 2017

They're 18, they’re beautiful and they're no longer ‘yours’


One regularly asked question in estate planning is ‘do my kids need estate planning documents?’.

The one word answer is – absolutely.

The more detailed answer to provide some context is as follows:
  1. Assuming a person otherwise has mental capacity, they are entitled to implement estate planning documents on reaching the age of majority (i.e. 18 years). 
  2. The main exception to this rule is that a married person may implement estate planning documents, even if they have not reached the age of majority. 
  3. If a person has reached the age of majority, but does not have estate planning documents in place, an array of complications can arise. 
  4. If the person dies, then their estate will be administered in accordance with the intestacy rules (previous posts have looked at various aspects of these rules, for example see How do the intestacy rules work? and What happens to assets in the estate if a person dies without a will?.
  5. Invariably, the intestacy rules trigger a ‘triple whammy’ – significantly more costs, significant time delays and often a distribution that does not reflect the wishes of the deceased. 
  6. Where a young adult loses capacity, the adverse consequences for the family can in some cases be even more traumatic than a person dying intestate. 
  7. In particular, without an enduring power of attorney, it is essentially a government department that has the default right to make the decisions on behalf of the incapacitated person. 
  8. While there is a statutory process that allows interested parties (for example, parents of the young adult) to have themselves appointed, this again invariably causes a ‘triple whammy’ of increased costs, increased delays and the risk that the preferred people are not in fact appointed. 
Unfortunately, we have seen a myriad of horror stories involving young adults without any estate planning arrangements in place, for example:
  1. A 21-year-old who died with over $1 million in assets. These assets were as a result of being a member of multiple superannuation funds that she had joined working in a range of casual positions during university. Each fund had automatic insurance, regardless of the member balance, that totalled over $1 million. 50% of these entitlements went to the lady’s estranged father whom she had not even spoken to for over 15 years. 
  2. A 19-year-old man who had been gifted over $300,000 by his parents to help acquire his own unit. On his death the unit passed to a lady who claimed to be his de facto, but whom the parents had never in fact met. 
  3. An 18-year-old man who was left stranded in an incapacitated state in Spain following an accident at the ‘running of the bulls’. As his parents were not appointed as his enduring attorney, they had no legal authority recognised by the Spanish authorities. 
As a separate comment - the popularity of recent posts leveraging pop references has been used again, with a song, the most popular version arguably recorded by Beatle’s drummer Ringo Starr ‘You’re sixteen, you’re beautiful and you’re mine’ - see https://www.youtube.com/watch?v=8ainB6qnWBI

Finally, many of the themes in this post will be featured in our upcoming half and full day Estate Planning Roadshow being held in Brisbane, Sydney, Melbourne, Adelaide and Perth.

Download the brochure here.

Watch the promo video below.



Image courtesy of Shutterstock