How to prepare your finances for the worst

If you died unexpectedly or lost the ability to communicate, would your final wishes be honoured? It’s a question most of us would frankly rather avoid.

A properly planned estate can bring enormous peace of mind – and protect your loved ones from what can often be a long, deeply uncertain ordeal with no guaranteed outcome.

Updating your will is an important start, but it’s not the complete picture. You will also need to consider your full financial situation – and what will happen to your super after death.

By asking yourself the following questions, you can make things as easy as possible for your executor (the person carrying out your wishes) and beneficiaries (those receiving something in your will).

1. Do I have a clear, up-to-date, easy-to-find will?

Making a will is easier than ever. You can buy a pack at your local Australia Post or newsagent. There are even services that can help you create it online.

It’s important to see your will as an ever-changing document: something to quickly update whenever your financial or lifestyle situation changes, whether you move house or simply switch bank accounts.

Clarity is essential. Rather than simply providing names of your executor and beneficiaries, it helps to offer dates of birth and current addresses. Word your wishes as clearly and unambiguously as possible.

Make sure your nominated executor knows where your will is, and that it’s bundled in a clear location together with all other important financial documents (such as information on your bank accounts, assets, investments and debts).

If you don’t have a will, or if it cannot be found, Australian law has some safeguards in place. In most cases it will be distributed to family members, but it won’t necessarily reflect specific wishes. It can also be a very expensive and upsetting process for your loved ones.

2. Have I given my executor everything they would need?

Your executor will need a full, clear picture of your finances and assets. Consider what they might need to know and the challenges they might face when paying off debts and seeing out your wishes.

In addition to your will, it will help to leave a list covering the details and locations of your:

• Super fund
• Bank accounts
• Any professional advisors you see (lawyers, financial advisers)
• Insurance details (including any held with your super fund)
• Investment accounts
• Property deeds
• Share certificates
• Vehicles
• Personal belongings of note (such as jewellery and collectibles)
• Beneficiaries (names and contact details)
• Funeral arrangements

3. Have I spoken with my super fund?

Your super can play an instrumental role in looking after your loved ones, which makes it essential to prepare for the unexpected.

The best way is to nominate a beneficiary (either a dependent or your executor). You can name somebody as either a binding nomination or a non-binding nomination, and it’s an important distinction.

A non-binding nomination acts as a guideline, not a rule. Your super fund will have your wishes on record but are not required to act upon them.

A binding nomination means your super fund is legally bound to act exactly according to your wishes. You can choose to leave it to one or more beneficiaries, or to your executor, who can allocate it in accordance with your will.

This nomination will need to be renewed every three years, and if not reviewed it turns into a non-binding nomination. Most super funds will inform you when it’s due to expire.

If you are currently drawing down on your super balance as a retirement income stream, your regular payments can in many cases continue to go to a reversionary beneficiary. This is usually a spouse or a dependent child.

A reversionary beneficiary can continue to receive your super via regular scheduled payments, providing them with consistency and peace of mind. Your remaining super will stay invested, meaning your fund can continue to work for you and earn more for those you love.

If the dependent chooses not to receive an income stream, or doesn’t meet the criteria to be a reversionary beneficiary, they can instead receive your super as a lump sum.

Either way, only a binding nomination through your super fund – supported by clear, unambiguous instructions in your will – can give you the maximum peace of mind.

How much will you need to retire? Will your retirement savings be able to look after a loved one if the worst happens? Find out how you can grow your income in retirement with an Industry SuperFund income stream.