When it comes to preparing for the future, many Australians neglect one of the most important components of financial security—creating a will. In fact, statistics show that nearly half of Australians don’t have a will in place. Without a will, your assets could be distributed according to a set of default rules rather than your specific wishes, potentially leading to confusion, family disputes, or unwanted tax implications.
But creating a will isn’t just about ticking off a box. It’s about making a plan that ensures your loved ones are provided for and your assets are protected. However, estate planning isn’t as straightforward as it may seem.
Superannuation, for example, doesn’t automatically form part of your will, and there’s more to consider than just writing down your final wishes. Let’s explore some of the key aspects of estate planning that every Australian should consider.
Superannuation: Not Just Part of the Will
One common misconception is that superannuation forms part of a person’s estate and is distributed according to their will. However, this isn’t the case. Superannuation is typically held in a trust and managed by the super fund provider. While you can nominate a beneficiary for your super, it doesn’t automatically go through the will unless specific instructions are in place.
There are two primary ways to direct who receives your super: binding and non-binding nominations. A binding nomination ensures that your super is distributed according to your wishes, while a non-binding nomination leaves the decision to the discretion of your fund trustee. It’s crucial to review your superannuation nominations regularly, especially after significant life changes such as marriage, divorce, or the birth of children.
Tax Implications of Superannuation on Death
Many Australians don’t realise that the tax treatment of superannuation after death is quite different from other assets. The tax rate applied to your superannuation balance when it is paid out to your beneficiaries depends on several factors, including who the beneficiaries are and whether your superannuation is classified as a “taxed” or “untaxed” fund.
Super for Dependants: When your superannuation is paid out to dependants (such as your spouse, children under 18, or financial dependants), it is typically tax-free. However, for non-dependants (like adult children or friends), the superannuation payout could be subject to taxes. Non-dependants may face a tax of up to 17% on the taxable portion of the superannuation balance.
Taxed vs. Untaxed Funds: If your super is in a taxed fund (the majority of funds in Australia), the tax rate applied to your superannuation balance upon your death is usually lower. However, if your super is in an untaxed fund, the tax rate on the payout can be higher, potentially making it more costly for your beneficiaries.
As part of your estate planning, it’s important to understand the tax implications that apply to your super and how best to manage them. This might involve structuring your superannuation nominations or reviewing the types of super funds you hold to minimise tax burdens for your beneficiaries.
Simplicity vs. Complexity: Finding the Right Balance
When it comes to estate planning, simplicity often seems appealing. It’s tempting to think that a simple will is all that’s needed. However, a straightforward approach can sometimes lead to unintended consequences, especially in complex family situations or if you have significant assets or businesses. On the other hand, overly complex plans that try to micromanage every detail can be equally problematic, leading to confusion, disputes, and unnecessary costs.
A good estate plan strikes a balance between simplicity and complexity. It should clearly outline your wishes and the distribution of your assets, but it should also be flexible enough to accommodate future changes and contingencies. The key is to work with professionals—like an estate planner, lawyer, or financial adviser—who can ensure that your plan is structured in a way that suits your personal and family circumstances.
“Ruling From the Grave” – Avoiding Overcontrol
Estate planning isn’t just about distributing your wealth upon your death; it’s also about understanding what’s appropriate for your loved ones. One common mistake people make is attempting to micromanage their beneficiaries from beyond the grave. While you may want to protect your children or grandchildren from squandering their inheritance, overly restrictive conditions can create tension or resentment.
For example, imposing strict conditions on when and how your beneficiaries can access their inheritance can lead to complications down the road. “Ruling from the grave” by placing extreme restrictions or expectations on your heirs can limit their ability to make decisions in their own best interests. While it’s important to protect your loved ones, it’s also crucial to trust them to make sound decisions and allow them the freedom to manage their inheritance according to their circumstances.
Factoring Pre-Death Gifts into Your Estate Plan
As you think about your estate planning, it’s essential to consider not just what you want to leave behind, but also how you can help your children or other beneficiaries during your lifetime. Pre-death gifts—those made while you’re still alive—can play an important role in an estate plan.
Giving gifts during your lifetime can help reduce the value of your estate, potentially lowering the tax burden on your beneficiaries. Additionally, it allows you to see the impact of your generosity. However, it’s important to factor these gifts into your will to ensure that everything is accounted for.
For example, if you have already provided a significant financial gift to one child, you may want to adjust your will to reflect this, ensuring that your estate is distributed fairly among all your children. This helps avoid disputes and ensures that all beneficiaries feel equally treated, even if one received more assistance during your lifetime.
The Importance of Reviewing Your Estate Plan Regularly
Your will is not a “set it and forget it” document. Life changes, and so should your estate plan. People are more inclined to review their insurances than their wills. Major life events such as marriage, divorce, the birth of a child, or the acquisition of significant assets should trigger a review of your estate plan. Regularly updating your will ensures that it remains in line with your current wishes and circumstances.
Why Estate Planning Shouldn’t Be Left to the Last Minute
Delaying estate planning can lead to complications that may be difficult to resolve later. Without a will, your estate could be divided according to a formula dictated by the government, which might not reflect your true intentions. Moreover, the absence of a comprehensive plan can result in costly probate proceedings, additional taxes, or financial strain on your loved ones.
Estate planning is essential to ensure your assets are distributed according to your wishes and your loved ones are cared for after you’re gone. At TAG Financial Services, we can help you navigate the complexities of estate planning, from creating a will to structuring your superannuation, minimising taxes, and ensuring your legacy is protected.
Our team is dedicated to providing tailored advice and practical solutions to safeguard what matters most to you. Let us support you in protecting your wealth and ensuring your wishes are honoured, both now and in the future. Start planning today with TAG Financial Services to secure your family’s financial future.
If you have any questions about Estate Planning or your future, please do not hesitate to contact us at team@tagfinancial.com.au or 03 9886 0800.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2025. Please do not reproduce without the expressed written consent of the author.