Beware The Traps In Estate Planning
Recently there have been some significant Family Court decisions that could have a big impact on the way you plan your estate for your old age.
At the centre of the issue was what happens when elderly couples have their own home but one of them has to go into a nursing home.
In this particular Family Court case, both spouses were on their second marriage and both had children from previous marriages. The husband wanted to stay in their home but the wife needed nursing home care.
The wifes children wanted to sell the house to meet the cost of her nursing homes accommodation bond, an amount that can be $300,000 or more.
Normally the court doesnt decide property orders unless the couple has separated. The husband argued that, even though they were forcibly separated for medical reasons, they were still very much a married couple. He visited his wife three times a week, continued to provide for her and had put $40,000 into an account for her use.
But the Family Court ruled it did have the power to make property orders in this situation. This meant the court could order the house be sold and it would decide how the money was distributed.
In this particular case the house wasnt immediately sold as the $40,000 in the wifes account met the nursing homes requirements for a while.
But the decision does raise the possibility that assets a couple intend to go to their own children could end up with the children of just one spouse.
Because the property order was made before death, it would pre-empt relevant provisions in a will or family trust.
The case shows the need to consider these sorts of possibilities when you draw up an estate plan. A family needs to consider what should happen if one of them suddenly needs expensive full time care such as a nursing home accommodation bond.
Estate planning goes beyond the drafting of a will. It includes an assessment of assets, an assessment of likely taxes, advice regarding the possibility of claims against the estate by third parties and the protection of assets.
The plan needs to be regularly updated to include changes in marital status, new family members, growth or loss in assets, changes to levels of superannuation, insurance policies and tax levels and the establishment of discretionary trusts.
Above all, you can save a lot of pain and anguish by sitting down and sorting these things out long before it comes to the crunch.