Tag Archives: Family

Why insurance is important: real benefits for you and your family

By Robert Wright /June 11,2021/

Insurance plays a central role in providing financial security for you and your family when it’s needed most.

You insure your car and your home. But nothing is more important than your life and your ability to make a living. So it makes good sense to insure your greatest asset – you!

As we move through life, find a partner, raise a family, and maybe start a business, the importance of insurance in a long term plan increases. That’s because insurance is all about providing a financial safety net that helps you to take care of yourself and those you love when you need it the most.

5 reasons why insurance matters

Why is insurance important? Let’s look at five key reasons.

1.  Protection for you and your family

Your family depend on your financial support to enjoy a decent standard of living, which is why insurance is especially important once you start a family. It means the people who matter most in your life may be protected from financial hardship if the unexpected happens.

2.  Reduce stress during difficult times

None of us know what lies around the corner. Unforeseen tragedies such as illness, injury or permanent disability, even death – can leave you and your family facing tremendous emotional stress, and even grief. With insurance in place, you or your family’s financial stress will be reduced, and you can focus on recovery and rebuilding your lives.

3.  To enjoy financial security

No matter what your financial position is today, an unexpected event can see it all unravel very quickly. Insurance offers a payout so that if there is an unforeseen event you and your family can hopefully continue to move forward.

4.  Peace of mind

No amount of money can replace your health and wellbeing – or the role you play in your family. But you can at least have peace of mind knowing that if anything happened to you, your family’s financial security is assisted by insurance.

5.  A legacy to leave behind

A lump sum death benefit can secure the financial future for your children and protect their  standard of living.

Case Study

Tony and Karen – Young Family

The following scenario is illustrative only to demonstrate the importance of insurance and is not based on an actual event.

Tony (34) and Karen (33) recently upgraded to a new home to allow their twin boys Nicholas and Rocky (aged 4) more room to play.  This also meant taking on a bigger mortgage on one income, as Karen is a homemaker.  To protect the family, Tony decided to take out Income Protection Insurance.

During a simple Saturday afternoon game of backyard cricket with the twins, Tony tripped and broke his leg.  What appeared to be a simple break was more complicated than initially realised and Tony required several reconstructive operations followed by physiotherapy.

It meant Tony was out of the workforce for over six months, and while his employer was sympathetic, Tony only had two weeks of sick leave owing to him.

Thankfully, Tony’s Income Protection insurance meant he received a stream of payments equal to 80% of his regular wage (including super). The couple needed to tighten their belts a little until Tony was back on his feet but they were able to keep up with their home loan repayments, which would not otherwise have been possible without their Income Protection cover.

Source: BT

Show your finances some self-love

By Robert Wright /April 16,2021/

Show your finances some self-love

Are you guilty of changing your spending habits when you’re in a relationship? Do you have a financial plan, or are you relying on a partner to take care of you in retirement? Whatever your situation, there’s never been a better time to step up and take charge of your finances.

Your relationship status can have a big impact on your finances. From spending and managing your money, to the types of investments and purchases you make, romantic partners are a big influence.

Some of life’s biggest financial decisions are made together with a partner. Moving in together, buying a house and having children are all big triggers for differences in your spending habits to crop up.

Whatever your relationship status, the most important thing is to make sure your finances are sound for you. This is especially true for women, who face extra hurdles to financial freedom. On average, women retire with 47 per cent less super than men, so it pays to have a clear financial plan.

When spending habits don’t align

Do you splash your cash on everything you desire, while your partner steadily saves for a rainy day? Or vice versa? When spending habits don’t align, it can cause tension in a relationship. One study found that finances were a contributing factor in 42 per cent of divorces and separations.

Lying about your spending might feel tempting when you and your partner have different attitudes to money. But it’s likely to lead to a loss of trust, and eventually relationship breakdown. Financial infidelity is on the rise however, with one-in-three adults admitting to hiding purchases, bank accounts, bills, or cash from their partner.

How to get on the same page

The best way to get in front of these issues is to talk about your finances early on. Having open and honest conversations about your attitudes to money, your financial goals and what you expect from each other will help build a strong foundation for your relationship and your finances.

It’s quite likely that you won’t be in the same financial situation as your partner, so talk through things like your:

• Income
• Expenses
• Assets and investments
• Any debts or loan repayments you may have
• Your individual and shared financial goals – and how you’ll reach them.

Being honest from the outset also means not overspending to impress a potential partner. Splitting bills 50/50 can be a good way to keep the relationship equal and ensure both parties feel empowered. Just keep in mind that one partner may have less disposable income than the other, or more expenses to cover. Tailor your spending so that you both feel comfortable and can meet your other financial obligations.

Dealing with debt

It’s likely that you’ll need to borrow money at some stage of life. In fact, nearly two-thirds of working Australians have some form of consumer debt outside of a home loan.

If you’re in a relationship, be careful about taking out credit cards or loans in both your names. Understand that if you do, you’re both responsible for repaying the debt. In many cases, if the lender can’t recover the loan from one party, they’re entitled to recover it from the other. Any default on your payments will affect both your credit scores.

If your partner has a large debt, or is unable to access credit for any reason, don’t offer to obtain credit on their behalf. Never personally guarantee someone else’s debt or take on any loans or credit cards to help clear their debt.

There may be other ways you can support your partner while they’re repaying the debt, such as contributing more to household bills and expenses for a time. Encourage them to repay the debt themselves and keep them accountable. You want to see clear progress towards paying off the debt, as it shows their money management skills – and that they take the issue as seriously as you do.

Source: Money and Life

The A-Z of Inheritance

By Robert Wright /February 18,2021/

Inheritance is an emotional subject on every level. The people leaving an inheritance generally do it with pride and love. The people receiving an inheritance often receive it with gratitude – and sorrow. But while emotional, it’s also a financial transfer that comes with a whole range of legal, financial planning and admin issues attached.

For many people inheritance is painful and protracted. It can lead to family disputes and disappointment. In this article, we look at both the financial and emotional aspects of inheritance and at how some forethought can make the process easier for everyone.

The Process: Leaving a Paper Trail

Moving wealth from one generation to the next does not happen quickly. Let’s think about why that is and why some intelligent forward planning is required. 

Consider your own finances – all the bank and investment accounts, loans, credit cards, tax, super and insurances that make up your financial life. Think of all the documents, passwords, websites and email chains they create. Then hand them to someone who isn’t financially trained and hasn’t dealt with them every day like you have. Hand them to someone who’s emotionally drained by your passing – and then has to deal with the whole series of complex legal processes we outline below.

Get a grip on assets and liabilities

Before any inheritance gets distributed, the executor (the person you’ve appointed in your will to administer your estate) needs a deep and documented understanding of your financial position; what you own and what you owe. It’s complex and detailed work, but it needs to be done so a Statement of Assets and Liabilities can be submitted to the Supreme Court.

Probate – all about a valid will

After the assets and liabilities have been accounted for, the executor of your will needs to apply for Probate. The word tells its own story – it comes from the Latin probare: “to prove”.

It means a Court must certify that the will they’re working with is the valid one. Usually, the executor needs to advertise their intention to apply for probate in a newspaper or via the court website. They also need to give creditors time to lodge a claim against the estate.

Death and Taxes

Once Probate has been granted your executor must make sure outstanding taxes are paid and a date of death tax return and other tax returns are lodged. They also need to work through any other tax complexities, including family trusts, to ensure assets are passed on in compliance with tax law.

This is one area where a financial adviser or accountant – or both – can be invaluable. If you’re preparing your estate plan, their help can make sure you pass on assets to those you care about in the most-tax-effective fashion.

And if you’re receiving an inheritance, expert financial advice can help you manage the tax decisions more effectively.

Tax management is important. Australia doesn’t have death duties and most assets you inherit don’t get captured by Capital Gain Tax (CGT) when they transfer into your ownership. But CGT does apply when you sell those assets or, potentially, if you inherit residential property that has been used for investment purposes. Expert advice can help you manage these complexities.

Rings passed down for generations

Unless a claim is lodged against the estate (and it can’t be paid or negotiated away) the next step is for cash legacies, bequests and personal items – including jewellery – to be distributed. Individuals often use their will to make bequests to charitable organisations – these are identified and treated separately to the rest of the estate. 

Distributing the estate

Once all legacies and bequests have been managed correctly, the balance of the estate (typically large assets like property, equity in businesses and investment holdings like shares) are distributed in accordance with the will or subsequent directions from a court. Sometimes this is not a final process – particularly if there are minor children involved. In these situations, the administration of the estate can be ongoing (which adds to complexity and costs).

As you can see, taking an inheritance from the reading of the will to the distribution of assets has already involved accounting, advertising and two layers of Court documentation. This all takes time – and that’s assuming there are no family disputes or arguments with the tax man or the deceased’s creditors.

The Emotions

We mentioned managing the process. Now we need to talk about managing your emotions. If all parties do that – the person leaving the inheritance and the person receiving it – the result can be better for all concerned. So, let’s look at the emotions involved in leaving an inheritance and the paths they can take us down.

Grief

In the aftermath of a loved one’s death, it can be hard to manage complex tasks, particularly if those tasks stir more emotion – like family disputes. Preparing for that challenge – perhaps by ensuring the executor has some financial skills, or is trusted by all parties, or is independent – can reduce the stresses placed on a grieving family.

Impatience

A simple look at the list above explains why patience is required in an inheritance situation. Understanding the probable time frame – which can vary depending on the complexity of the estate, but can often be a minimum of 12 months before an estate is settled – can make all the difference.

As we saw earlier, good advice can be crucial to setting up an estate plan that provides the maximum benefit for those you leave behind. It can be just as useful for the inheritors of an estate.

Reticence

According to research by Perpetual, some 53% of parents have not discussed their will and legacy with their children. More striking still, 80% of Australians who believe they will inherit something haven’t discussed that inheritance with their parents.

That lack of communication is at the heart of many fraught inheritance experiences. But to ensure that the transfer of wealth from one generation to the next happens with the minimum of complexity, cost and angst, all those involved need to be clear about their intentions – and their feelings.

Source: Perpetual

Get your affairs sorted with an estate plan

By Robert Wright /February 04,2021/

It’s an uncomfortable truth, knowing that one day we will pass away. No-one likes to think about the distress it will cause their loved ones or what kind of burden they’ll be left with. That’s why death is often considered a taboo topic of conversation, along with money and politics.

When you pass away, hospitals and funeral directors will ask a lot of questions that your family may not have the answers to. If you’re prepared and organised, you can provide them with many of the answers in advance. We know sharing your funeral wishes and end-of-life admin with your family isn’t the most uplifting topic of conversation. But it can make the process of passing away far less stressful to the ones you leave behind.

Six ways to get organised

Getting organised early can eliminate some of the difficult conversations your family may have to deal with later. Here are six things you can do now:

Have a Will and ensure it’s up to date. Surprisingly, just over half of Australians don’t have a Will.

• Consider an Advance Care Directive. It’s a way to say what healthcare treatments you would like to have or refuse if you’re ever in a position where you’re seriously ill and unable to make decisions about your treatment.
• If aligned with your wishes, join the organ donor register.
• Check that the beneficiaries nominated in your super and insurance are still current.
• Keep the records for all your bank accounts, investments, and assets in one place so it’s easier for someone to sort through them and find relevant information.
• Put easy-to-access money aside to pay for your funeral or buy a funeral bond, since it takes a long time to process your estate. Funerals are estimated to cost between $4,000 and $15,000

Talking to specialists

Sometimes extra planning and financial advice is needed to ensure that your assets are passed into the right hands in the most efficient and tax-effective way.

It’s important that your Will is clear, complete and not open to legal challenge. Estate planning advice may be required in cases of divorce, remarriage and blended families to protect the interests of vulnerable family members and to ensure that your wishes are carried out.

Talk to your financial adviser about these things. They can also suggest anything you may not have thought of.

Getting the conversation going

Sharing your preferences provides those you leave behind with the comfort and certainty of knowing they are carrying out your wishes. It might make for an awkward conversation, but it’s better to discuss things over a family dinner than in an emergency room.

Here are a few topics you might want to discuss:

• Who do you want to be the guardian of your children?
• Who will take care of your pets?
• If you have an extended stay in hospital, do you have a preference about which hospital you want to go to?
• What type of funeral do you want? Would you prefer a cremation or a burial? Do you have any preferences for the venue, flowers, music or readings?
• What are your preferences for your valuable or significant belongings?

Source: Colonial First State