Confessions of an Estate Planner: Part 1 The Estate Planning Conundrum

Part 1 - The Estate Planning Conundrum

Retirement Planning (planning for your life after work) and Estate Planning (planning for the lives of others after your death) involve a mysterious web of rules, regulations and taxes overlayed on the family dynamic. 

Confusing to most and industries within themselves (where seemingly everyone not only the taxman is putting their hand in your pocket along the way and where you get different advice depending on the advisor and where everyone is telling you they know more than the others). 

There are conundrums and risks at every turn whether planning to live comfortably during your winter years or providing for your loved ones when you have departed.

Getting your plan wrong can have disastrous consequences in this life and for your family in the generations to come.

Getting it right can buy you something priceless. Peace of mind.

If you are looking for a clear way forward the words that follow may be helpful. 

Behind despair hope is patiently waiting.

Hopefully this confessional will help people:-

• gain a better understanding of the advice they receive
• make an informed decision to rely (or not) on that advice;
• assess whether or not they are getting value for money;
• make informed decisions about when and what they do in their planning (and see through the Estate Planning spin in its varying forms).

It is a confessional as I have been witness to too many bad things.  I need to clear the air, get it off my chest so to speak and tell the world. I am going to feel better once I have done this. 

I will attempt to provide a reality check and the right information on Enduring Powers of Attorney, Advance Health Directives, Estate Planning, Testamentary Trusts, Wills, Probate, Family Trusts, Family Law, protecting an Inheritance, Asset Protection, Estate Disputes, Estate Litigation, contesting Wills, Administration of Deceased Estates, Superannuation Death Benefits, SMSFs, Binding Death Benefit Directions & Nominations, Pensions, the Financial Planning Industry (including finding the right advisors) and the like. 

There is a lot of ground to cover and the confessions will come in instalments.  There is too much to digest all at once.

So let's start at the end - where we are now in 2016.

Information Overload – Wikieverything

If you hadn’t noticed you are in the Information Age and you are probably suffering from an affliction known as “Information Overload”.  The development of the internet, personal computers and mobile devices over the last 25 years has affected our daily lives.  And it just used to be newspapers, magazines, radio and television and if you were lucky enough an old fashioned shoe phone.  Anything you would like to know is available via any good or bad search engine and we are marketed to today like never before in ways never even dreamed of. 

And as video killed the radio star Google has killed the old pub quiz.

There is more information available now than has ever been before and perhaps it is true that we now know more and more about less and less.  And everything about nothing. 

You are excused if you feel that everything is cluttered and confused. You should be.

Someone said to me recently “I cannot possibly be wrong and you cannot possibly be right.” It made me think how much more everyone knows and everyday people seem to be experts on, and in, well, just about everything. The ignorant (and in this context I mean those who have the gift of being able to ignore the off chance that they might be wrong or might not know something) are buoyed by the masses and masses of information available to them by simply clicking on a computer or phone. 

You can also be your own investment advisor. There is a whole DIY Investment Industry waiting for you online.

Take any topic or any vocation.  Once upon a time if you were feeling unwell you would go to your local family doctor.  My parents are busy people in retirement and I cannot help but notice how many times I have heard them say “No… I can’t do that… I’ve got to go to the specialist”.    Take a look at any medical school website to see the various disciplines of medicine that are studied – the first one I chose listed ”Addiction Medicine, Anaesthesia, Anatomy and Histology, Biomedical Science, Brain and Mind Science, Clinical Ophthalmology….” and I had  only have got to the “C”s.

Nowadays, the accumulation of knowledge is such that doctors must specialize in an array of micro-disciplines.  Intense specialization and the explosion of information have transformed modern scholarship and innovation across all disciplines... From the Arts to Zoology.

This, naturally enough, extends to the law and particularly the law relating to death and taxes.  Benjamin Franklin once postured “Nothing is certain except death and taxes.” Death and taxes certainly do remain certain but in our modern complex world it is becoming increasingly more uncertain how to plan for them (and there are competing tensions and what maybe great tax planning is usually not great death planning).

“Death must be so beautiful. To lie in the soft brown earth, with the grasses waving above one’s head, and listen to silence. To have no yesterday, and no tomorrow. To forget time, to forgive life, to be at peace.”  -  Oscar Wilde

 Life – That Slow Unfolding Car Crash

People are living longer and are suffering from mental illnesses not known of when they were younger (and it just used to be Alzheimer’s).  They also have to invent ways of keeping themselves interested and active many years past their use by date i.e. their retirement from the workforce.  They are wealthier too. 

Anxiety disorders, stress related illnesses, depression, attention deficit disorders, prescription and non prescription drugs (and it just used to be alcohol and marijuana and garden variety human frailty) are now readily offered as the reason for behaviour that cannot be explained.  The behaviour was probably always there but as there now seems to be a label and a drug to cure the problem for everything the incidence of these things is more prevalent.  “I knew I was sick”.   Whatever happened to just plain crazy! Or just plain spiteful, greedy, stupid, weak or pathetic or the most understandable “I just made a mistake” you may wonder. 

Living longer also allows more of life’s vagaries go to work.  Physical and mental illness, relationship breakdown, loss of employment, gambling addiction, alcohol and drug addiction, bankruptcy, being robbed by a trusted investment adviser or business partner, death of a loved one, re-partnering and the blending of families and the effect of those events on the mechanics of wider family harmony make for some hard decisions and interesting times………And the work of a succession lawyer very interesting indeed for every case is different and every family has a different focus, twist or turn.

I think you will agree that Tolstoy was on the money when he wrote: "All happy families are alike; each unhappy family is unhappy in its own way".  One thing I have come to appreciate over the years is that "everyone has a problem".  Now some problems may be more complicated or dire but show me someone who doesn't have something they constantly worry about.

As you will all well know, as time goes on there is more opportunity for your troublesome offspring to become more (and more) troublesome.  

There is also more opportunity for ourselves to do things we may not have done when were younger. 

And there are things that happened that we just cannot explain. 

And then there is Entropy (that slow sloping gradual decline into disorder) going about its work.

"The gap between youth and old age, that big sea we cross, is the story of our life, and all our stories - of love, work, power, family, health, - fit within it.  We all make our adjustments to that slow unfolding car crash as best we can.”  -  Paul Kelly

The Full Details are Extremely Complex

There are more and more complicated bonds, cash deposits, securities, financial products, shares (Australian and International), managed funds, self managed super funds, industry based super funds, public sector super funds, commercial super funds, retirement savings accounts, aged pensions, veterans affairs pensions, transition to retirement pensions, account based pensions, annuities, lifetime pensions, life expectancy pensions, fixed term pensions, master trusts, retail master trusts, wraps, financial plans, small APRA funds…I refuse to go on and on and on. 

All of these are held out as foolproof retirement plans, promoted and marketed to death (pun intended) by accountants, financial planners, stock brokers, employers, state and federal governments, industry groups and banks (most of whom are on generous commission arrangements).

Overlay the financial products with the social security means tests and pension rules and you would be excused if you suddenly fell ill with one of the new mental illnesses on offer. 

Without trying to depress you too much toss into the blender Federal Government Tax and Superannuation rules and regulations.  You may be in line for an Australia Day Medal or perhaps even a Knighthood if you can explain to anyone down at the pub what concessional contributions, non concessional contributions, preserved benefits, restricted non preserved benefits, unrestricted non-preserved benefits in 25 words or less.  You can get a tax deduction for this but if you do you will be taxed when you retire but you take this pension there will be no tax but if you take that one and make it non reversionary...so how could you not be confused (or end up with some horrible indigestion after having a sip of this cocktail). 

And successive Governments consistently tinker with the rules. 

I could not help myself and I searched Wikipedia for “Australian Superannuation”.  It was no surprise at the conclusion of a short blurb on tax to read “The full details are extremely complex.”

What would I know?

I am a partner with the law firm Connolly Suthers having commenced employment here as an Articled Law Clerk in 1982.   Commerce, law and society have changed a lot during since 1982.  I completed a Diploma in Superannuation Management in 1998 and have been practising in the Self Managed Superannuation Fund area since then. 

Since 2003 I have been a Queensland Law Society Accredited Specialist in Succession Law.  I have been a member of the Society of Trust and Estate Practitioners since 2011.

On a daily basis I deal with real cases for real people caught up in all sorts of very expensive legal wrangles and tangles regarding Enduring Powers of Attorneys, Family Trusts, Wills, Probate, Testamentary Trusts, Estates, SMSFs and Superannuation.  I have been exposed to a lot of things and people (behaving badly) that most find hard to believe.  Pure slimy greed does bring the worst out in people.  It also helps them find new and wonderfully technical ways of bringing pressure to bear on others to achieve their own money driven goals.

If you think the medical world is complicated and specialised then welcome to the world of the law.  Well intentioned tax planning, retirement planning and asset protection strategies sometimes do not result in great death planning. 

It is true that what is good for this is not necessarily good for that.  In planning for anything concessions and compromises need to be made in the pursuit of essential goals. 

If you do not know what your goals are (or what risks you are taking) you are nowhere.  There is nothing wrong in taking risks but it is only sensible that you should know you are taking them (on every front). 

In developing any Estate Plan the first inquiry must be "what are my goals?" and "what risks (financial and other) am I prepared to take in trying to achieve them?"

Lawyers Guns and Money

Long, drawn out, frightfully expensive, crippling and soul sapping estate legal fights are spawned in a variety of ways:-

• they were always going to happen – they are unavoidable due to the dynamics and personalities involved and no amount of planning will change a thing;
• un-qualified bad luck – wrong place, wrong time, wrong family, wrong generation;
• time bombs ticking away – they are there in the detail and no one knows;
• will-makers not knowing or overestimating the true value of their assets and not knowing or underestimating the true value of their actual liabilities as well as the expectations of their beneficiaries.

By and large most of the cases fall into the last two categories and can usually be fixed long before a problem arises at minimal cost.

Leaving your loved ones some estate litigation as an inheritance can cause rifts and problems for many generations of your family into the future.  At the very least they make family get-togethers rather awkward.

Estate litigation is often difficult to resolve as personal issues or ‘matters of principle’ tend to cloud normal commercial considerations.

“The one great principle of the English law is, to make business for itself. There is no other principle distinctly, certainly, and consistently maintained through all its narrow turnings. Viewed by this light it becomes a coherent scheme, and not the monstrous maze the laity are apt to think it. Let them but once clearly perceive that its grand principle is to make business for itself at their expense, and surely they will cease to grumble.”  -  Charles Dickens (Bleak House)

In other words there is a hungry legal system waiting for your family.  Do you want them to be the one who introduces them to each other?

There are many reasons simply having a simple will in these modern times is usually not enough.  I will provide examples of the types of things that I have encountered and will get into the nitty gritty in due course. 

Part 2 will deal with the Advisors (and the Federal Government’s response to the findings of its Financial System Inquiry).  The topics covered will include:-

• getting to know who you are dealing with;
• finding out what they are legally able to offer you;
• finding out what they are qualified (through education training and relevant experience) to properly offer you;
• establishing that you have been fully apprised of all risks you have taken and are intending to take.

To read Part 2 please click here.