It's Your Death, Make The Most Of It

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“A man’s dying is more the survivors’ affair than his own.” – Thomas Mann

“The beginnings and endings of all human undertakings are untidy.” – John Galsworthy


While these quotations from Mann and Galsworthy are usually correct, it doesn’t have to be that way. Surely an important part of anyone’s life is deciding what happens to their assets when they die. It never ceases to amaze me how little thought people put into estate planning and creating a lasting legacy.

It’s bad enough that an estimated 45 per cent of Australians do not have a valid will, and most have not made a binding death nomination for their superannuation. But how many people put even a fraction of the time into deciding what should happen with their money as they do in accumulating it in the first place?

Neat clichés like ‘the dead don’t care’ do not resonate with me – but perhaps that is just the forward planner in me and I may be an outlier.

Putting aside your religious beliefs, let’s assume you have departed this world and you are looking down from the heavens on the distribution of your hard-earned money to your loved ones. As Shakespeare wrote in Hamlet, “What dreams may come, when we have shuffled off this mortal coil, must give us pause.”

The children are squabbling over whether to sell the family home, there’s a stepson you hardly knew claiming his rights, and your spouse has met a new partner with five screaming kids from a previous marriage.

Your sister says you told her you would always support your siblings, and there are family members in your old house grabbing your stuff while they can.

You think you’re in heaven and you’ve gone to hell!

 


 

Address the basics

In thinking about estate planning, I believe it is essential that the following basics are covered while you are alive and have your marbles intact:

Make sure your wishes are clear, unambiguous and in writing. Written instructions usually mean a will, but in addition to this I like to have a one to two page ‘plain English’ summary (that your solicitor should tick for consistency with the will) to ensure there is no misunderstanding.

Ensure you cater for all situations, such as if you die, your partner dies, you both die together, providing for the children’s needs if they are under 18 (such as who will look after them and whether they should be paid).

‘Complete the package’ and ensure you have an Enduring Power of Attorney (for money/finance decisions) and Enduring Guardian (for health decisions) appointed as well as having a documented Advance Care Plan (dealing with resuscitation, organ donation, and where you wish to be cared for when the time for natural dying comes).

Ideally, discuss your intentions with your family, so they have a chance to contribute and understand before you are no longer there to influence.

Develop a strategy that ensures your estate is well-managed by people you trust who know what to do with wealth.

Beyond these basics, I want to focus on the possibility of both creating a multi-generational legacy and enjoying giving while you’re alive.

Create a fund for future generations

It’s natural to care for your own children and grandchildren who you know and cherish while you are alive. But what about their children? What can you do to that might also benefit future generations of your descendants?

If your resources are sufficient, one idea is to establish a trust that has the purpose of meeting particular costs of your direct descendants (being your children, your children’s children, their children and so on). The costs that come to mind are what I think of as ‘must have safety-net costs’ such as medical insurance, trauma insurance, school education and tertiary education. Plan for only 50% of these so the recipient has ‘skin in the game’.

Imagine the satisfaction of knowing that whatever happens to the family finances, your great grandchild can be confident of a good education and decent health. Who knows what the future brings, as many a family fortune has been destroyed by poor investing or wasteful spending. With Australia facing decades of increasing budget deficits, both health and education expenditure will be targets. We may head more down the US path of user pays and denial of services. While it is hard to estimate what future school, university and hospital costs may be, it’s highly likely to be much higher than today.

The trust should have independent trustees and avail itself of investing expertise, so the money lasts as long as possible into future lifetimes (and who knows, future descendants themselves may end up having the means to contribute to the trust so that it lasts longer). In practical terms, any descendant wishing to have such costs met would apply to the trustees. You could even insist that any recipient must first complete a basic course in financial literacy before they are eligible to participate in the trust.

Imagine the day your daughter’s grandchild graduates from university to become a doctor and makes a toast to you (long past!) for helping to make the event possible through vision and generosity.

Help your children while you’re alive

If you started having children at 30 and you live until you’re 90, chances are your children will be retired when they inherit your estate. If they’ve done well already, they probably don’t even need the money, and all you are doing is giving more money to an already financially secure person.

If you live in the crazy property markets of the east coast of Australia, and your children are of a mind that they would like to live in a similar location when they leave home (and perhaps be near you), then it is likely that they will struggle to buy their first home. So assuming your own financial needs are met, what better way to help your children than to assist them with their first purchase. Consider gifting the deposit or some type of interest free loan so the capital can one day be recycled again or protected in situations of divorce.

Leave an enduring gift to society

Buffett once said in his letter to the Gates Foundation: 'I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing.'  I am a big fan of this quote.

Again, if your resources are sufficient, once you have provided for your family, to me there is no better way to leave an enduring gift to society than to set up a Private Ancillary Fund or establish an account with a Public Ancillary Fund.  Any money put into such vehicles is fully tax deductible.  The money is invested within the ancillary fund (which is a tax free environment) and from there a minimum of around 5% of your account balance must be donated to charity. Your investment in the fund can last for many years, spinning off a never-ending stream of donations for charity.

[I’ll declare an interest here, as I am the founder and Chairman of Australian Philanthropic Services, a not-for-profit organisation that specialises in setting up and administering such vehicles.]

It was not until I reached the age of around 50 that the thought of mortality really entered into my thinking. Perhaps this was from watching my own parents age (and one of them recently passing away). That realisation comes with greater attention to how I can help people while I am alive and after I cross that great try line in the sky!

Chris Cuffe is co-founder of Cuffelinks, and one of New Matilda's valued advertisers. This article is a reprint from their special 100th edition. Chris is also Portfolio Manager of the charitable trust Third Link Growth Fund; Chairman of Unisuper and Chairman of Australian Philanthropic Services. The views expressed are his own and they are not personal financial advice.

New Matilda

New Matilda is independent journalism at its finest. The site has been publishing intelligent coverage of Australian and international politics, media and culture since 2004.

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