Tag Archives: Women in Finance

All about Wills and Probate

By Robert Wright /May 25,2022/

Probate is the legal process that occurs when dealing with a loved one’s will after their death. It can be difficult to know what’s involved with the process and the questions to ask.

What is Probate?

Probate is the process that makes sure the instructions in a will can be followed. It involves proving and registering a will in the Supreme Court and, if successful, will result in a ‘grant of probate’.

What’s a grant of probate?

A grant of probate means the will is recognised as legally valid and enables the executor (the person dealing with the estate) to distribute assets to the beneficiaries named in the will. Most financial institutions require a grant of probate before they can release accounts and funds to anyone other than account holders.

What to do if a family member passes

When a family member passes away, if you’re the next of kin then you need to determine whether they made a will. If they haven’t, they are said to have died “intestate”.

In this situation, an application needs to be made to the court for “Letters of Administration” authorising a person to distribute the assets of the deceased family member’s estate, the law will set out how their estate can be distributed, if not, there’s no guarantee that your loved one’s wishes will be honoured.

What’s a will?

A will is a legal document that outlines what happens to a person’s possessions and assets when they die. However, a will isn’t legally binding on its own — there are steps that must be taken to make sure the will is valid, just as there are steps that family members can take if they want to contest the will.

At its most basic a will must be:

in writing
signed by the will maker
witnessed by at least two adults (a beneficiary should not witness a will. If they do, they may lose their entitlements under that will)
made by someone of testamentary capacity.

Ensuring a will is properly made and signed can be very complex and it is always a good idea to ensure a lawyer is involved.

What’s testamentary capacity?

Testamentary capacity means that someone’s in a fit state of mind to legally understand what they’re doing. If these things are all done, then the will can be used to help divide up the estate.

Life Insurance and probate

Provided you have a named beneficiary with your policy, your life insurance should be easily accessed by your loved ones when the time comes. Life Insurance should be paid directly to the beneficiary and avoid having to be distributed through the deceased’s will.

Having your life insurance beneficiaries up to date can help ensure your loved ones are taken care of financially if something were to happen to you.

What happens once probate or the court process are completed?

Once the court process, or probate, is completed and settled, there is then the process of the administration of an estate by the executor or administrator, after the grant of probate or letters of administration have been provided.

This process of administration is something that needs to happen when a family member passes away. This process starts when probate or letters of administration are granted, and finishes when the assets listed in the will are formally handed over to the executors of the estate and distributed.

An estate can be made up of many things, including:

Real estate
Shares
Loans
Income or capital allocated by the will maker
Cash investments
Personal property

But doesn’t usually include these items:

Jointly owned assets that are held as joint tenants – e.g. family home (If the owners are tenants in common, the deceased person’s portion can become part of the estate)
Super pensions or annuities (except when directed by the member to be paid to the estate)
Life Insurance where the benefit is paid directly to one or more nominated beneficiaries

Here’s what you need to get started with probate:

The current and original will
Original death certificate from the relevant state registry
The probate application
Income or capital allocated by the will maker; and/or
Lodgement fee

Probate runs through the court system in each state, and executors or administrators of the estate need to swear to the court that they’ll distribute the will as instructed. It is important to consider getting a lawyer who can help you with the probate process.

What happens if someone contests a will?

If a family member wants to contest a will because they feel that it isn’t fair or feel that something has been left out, they need to do it in the probate stage. If someone challenges the will then the court will hold off on granting probate until the contest is sorted.

As the law in this area is very complex and can be different depending on where you live, when dealing with a will and estate planning it is always recommended to talk to a lawyer to make sure that the whole process is managed correctly, and the deceased’s wishes are most likely to be fulfilled.

They can guide you through the process, ask questions you may not have considered, and recommend arrangements for a range of scenarios. They can help you prepare your own will, or manage the affairs of a family member.

It also ensures you are getting the right advice from a professional. Being prepared can really save you time and headaches down the line.

Source: TAL

Volatility Bites: How Retirees can manage Jumpy Markets

By Robert Wright /May 25,2022/

The 2020 COVID-19 share sell off and recent equity market volatility shows just how quickly share prices can move.

Volatility can have different meanings for different investors, those with a long-term horizon can be less concerned, knowing they have time on their side. But what about retirees? How can they manage the mental challenge of watching their hard-earned capital shrink before their eyes? And do it without becoming so conservative they have to downgrade their lifestyle?

It’s a pertinent question right now because higher inflation, rising interest rates and the Russian invasion of Ukraine are making markets nervous.

Perpetual Private’s Associate Partner, Daniel Elias says volatility is more tangible for retirees. “The numbers on your portfolio spreadsheet aren’t theoretical – they pay your bills. Because that capital is so important, the challenge for retirees is reining in the fear and anxiety that can lead them to irrational decisions.”

In the years around retirement, the risk that a market downturn occurs right before you retire, or soon after, is called sequencing risk. To manage sequencing risk, having a diversified portfolio of assets can help dampen the effect on your portfolio when markets fall.

That’s when things go V-shaped

When COVID-19 lockdowns first hit in March 2020, markets fell, quickly and sharply. As people stayed at home and started upgrading their Netflix accounts, economists and analysts were arguing about the shape of a potential recovery.

Would markets fall even further, then bump along the bottom before gradually rising again (U-shaped)? Or stay down for years (the dreaded L-shape)?

Ultimately, we surfed a dramatic V-shaped recovery. Writing in January 2022, Mano Mohankumar from superannuation researcher Chant West said, “Since the market low-point at March 2020, growth funds have surged an astonishing 31%, which now sees them sitting 16% higher than the pre-COVID-19 crisis peak.”

Investors who looked through the dramatic market falls associated with COVID-19 were rewarded for sticking to their strategy. But many who reacted emotionally paid a price.

In May 2021, the McKell Institute estimate that those who redeemed via the Early Release of Super scheme at the nadir of the COVID-19 crisis gave up nearly five billion dollars in lost returns during the markets’ rebound.

Remaining rational in times of crisis is a difficult challenge for all investors, but ensuring you listen to the financial advice and don’t react with emotions is the key to not making the wrong decision during times of market stress.

Ask yourself – how much risk is right for you?

The key to investment selection and portfolio management is optimising ‘risk efficiency’ by choosing the right mix of assets to give you the maximum return for the level of risk you’re able to absorb.

Before making any changes to your investment strategy, ask yourself, “Am I still comfortable with the level of risk I originally implemented in my portfolio.”

Understanding your risk tolerance will help you find the right mix of assets that will have enough risk to grow your portfolio, but not so much that you can’t sleep at night or you are led to sell at the wrong time.

As you approach retirement, you have fewer years of earnings to save and invest and may need to draw down on your savings. This shorter time horizon limits the ability to overcome a market downturn. As a result, the amount of investment risk in your portfolio matters.

Diversification – your best defence

The other great weapon retirees can wield against market volatility is diversification. Whilst the volatility in January and February 2022 was felt in the majority of retiree portfolios, losses would have been lower than the broader equity market because many retiree portfolios are diversified across other asset classes including bonds, credit assets, property and increasingly, alternative assets.

Diversification helps to smooth returns across different economic conditions. This is because of the low or negative correlation between certain asset classes, so if one asset class falls in value in response to an economic or geopolitical event, another might rise.

Bonds can also play an excellent role in protection against equity market risk in times of market volatility and help to minimise sequencing risk.

There are alternatives

In times of ultra-low interest rates and share market volatility, alternative assets can add another source of income and an additional layer of diversification to an investor’s portfolio.

Alternatives include things like private equity, venture capital, opportunistic property and private debt. They can add returns to clients’ portfolios but must be considered in context of each retiree’s overall investment goals, portfolio size, time horizon and their appetite and tolerance for risk.

Investors must clearly understand the risks associated with investing in alternative assets as they can have long lock up periods, and are less liquid than more traditional assets, meaning they can’t be sold as quickly and converted into cash.

Building a resilient portfolio

Volatility will persist while the world adjusts to a changing economic and geopolitical order. That could mean a wider range of returns – but not necessarily a poorer real-life outcome if you stick to a robust, diversified strategy that’s attuned to your needs.

Remaining diversified across asset classes can help ensure you have the optimal blend of assets in your portfolio to weather a variety of market conditions. When it comes to ensuring you don’t let your emotions influence your investment decisions, your financial adviser can really help.

Source: Perpetual

Five ways you can start to bridge the super gender gap today

By Robert Wright /February 18,2022/

In terms of gender equality, we’ve come a long way over the past few decades. Australian homes and workplaces are very different places than they were in previous generations.

But there’s still a long way to go. When it comes to superannuation there isn’t a level playing field for Australian men and women.

Before we look at the gender super gap it’s worth looking at the gender pay gap. In May 2021, women working full-time earned $1,575.50 a week on average while men earned $1,837.00 – a gap of $261.50 or 14.2%

Not only do women tend to be paid less, they’re usually the main caregivers, with a staggering 93.5% of all primary carer leave taken by women. In 2018-19, among parents of children aged five and under, only 64.2% of women were in the labour force, compared with 94.6% of men.

And women can suffer long-term financial effects from starting a family. Women with a child aged two or younger in 2001 experienced an average 77.5% reduction in earnings over the next 15 years, compared with those without children. Men with young children on the other hand faced no significant earnings penalty.

This all adds up to a significant shortfall in retirement savings. The average super balance for a 60-year-old Australian man is $198,482, compared with $165,986 for a woman.

The Federal Government’s Retirement Income Review sums it up: “On average, compared with men, women have lower wages, are more likely to work part-time, take more career breaks, and experience worse financial impacts from divorce. These factors contribute to the gender gap in superannuation balances at retirement.

Different strokes for different folks

Of course, we’re all different and everyone’s situation is Getting your retirement plans back on track unique. There are many households in which the woman earns more and the man takes on the bulk of the domestic responsibilities. And many Australians are happily single or childfree.

But the facts speak for themselves. On average, Australian women tend to earn less, spend more time out of the workforce raising a family and have less retirement savings as a result.

So whatever your personal circumstances – single or partnered, kids or no kids – you could be faced with a challenge when it comes to generating enough income to enjoy a comfortable retirement, particularly if you dipped into your savings to get you through COVID as part of the Federal Government’s early release of super scheme in 2020.

Getting your retirement plans back on track

But all is not lost… here are five ways women – and men – can start to rebuild their super balance.

Search for lost super. You may have a few old super accounts from previous jobs. Now’s the time to find them – and even look at bringing them together into one account if that’s right for you.
Personal contributions. Lockdown has been tough on everyone. And if you’re suffering the financial impact of continuing restrictions, super is probably the last thing on your mind. But if like many of us you’ve given in to the occasional bit of indulgence to help you through – with spending on home improvements, online gambling and food delivery soaring during the pandemic– then there might be ways to save a bit extra. If you’re able to curb your spending a little, even a small contribution to super could make all the difference.
Salary sacrifice. It might not sound too appealing but in the case of super, sacrificing can help you get ahead. Most Aussies will pay less tax on these super contributions than on their income, as well as enjoying the benefits of super’s tax-friendly environment on earnings and eventual withdrawals.
Spouse contributions. If your partner earns more, they could make a contribution to your super fund and claim a tax offset of up to $540, if eligible.
Low income super tax offset. If you earn $37,000 or less a year – like many women who work part time while looking after their children – and your employer makes super contributions on your behalf, the government may refund the tax paid on these contributions back into your super account, up to $500 per year.

Source: AMP

5 steps to better financial goals

By Robert Wright /December 02,2021/

Everyone has financial goals. Maybe you want to pay off your mortgage early, stop relying on your credit cards, or go on an amazing overseas holiday (once we’re allowed to travel again). Or you might want to set up good money habits, like investing regularly or look at ways to grow your super. Whatever you want to achieve, it’s possible – as long as you approach your goals with the right mindset.

There’s a lot of science behind what happens to your brain when you set goals. It can trigger new behaviours, increase your motivation and attention, and improve your self-confidence. What’s more, when you set goals that are ambitious, challenging and highly important to you, you’re much more likely to perform in a way that helps you achieve them.

So, in other words, the best way to set yourself up for success is to make sure you choose the right financial goals and support them with a solid plan. Here are five steps that will help you get started.

Step 1: Identify and write down your goals

Goals are meaningless if they’re just vague ideas in your mind. That’s why new year resolutions always fail. Writing them down will help you focus on what you want. To make you even more accountable, share your goals with someone and update them on your progress.

A 2015 study by psychologist Dr Gail Matthews showed that 76% of people who wrote down their goals and shared their progress were able to successfully achieve them, compared to a 42% success rate for people who didn’t write down or involve other people in their goals.

Make a list of all the things you want to achieve financially and then prioritise them in order of their importance to you and your loved ones. You’ll find that two or three goals will stand out – they’re the ones to focus on.

Step 2: Make them specific, measurable and realistic

Now that you’ve decided on your goals, you need to expand on them so you know what you’re working towards. The best goals are specific, measurable and realistic. Set yourself a challenge, but don’t make your goals impossible to achieve.

For example, consider this common financial goal:

I want to pay off my mortgage earlier.

That’s a great goal. But it doesn’t mean much if you don’t put parameters around it. Here’s a better example:

I’m going to pay off my mortgage by December 2028. I will do this by paying an extra $500 each month on top of my minimum payment.

This goal is much more specific, with a set deadline and regular actions you need to perform.

Step 3: Have a plan

Work out the actions you need to take to achieve your goals. Do you need to earn more? Spend less? Refinance your loan so you’re paying lower interest? Cut back on some non-essentials?

Let’s revisit our earlier goal. We know we can achieve it by paying an extra $500 each month. But where is that money coming from, and what will you do with those extra payments? This needs to be part of your plan. For example:

I’m going to pay off my mortgage by December 2028. I will do this by paying an extra $500 each month on top of my minimum payment and keeping that money in a mortgage offset account to reduce the amount of interest I pay. To ensure I have this money available each month, I will work to a monthly budget that minimises any unnecessary spending and I will increase my income by working two hours of overtime each week.

Everyone’s plan will be unique. The key is to make it relevant to your lifestyle to give yourself every chance of success. It’s also a good idea to allow for the occasional slip up in your plan. No-one is perfect.

Step 4: Track your progress

Big, long-term financial goals are great, but it’s easy to become overwhelmed by them. Breaking down bigger goals into smaller steps can help you track your progress and celebrate your success along the way.

If you have a goal with a five-year deadline, break it down into five one-year goals. Or even monthly goals. That way you’ll know how you’re going and whether you need to make any adjustments to your behaviour. Reward yourself when you reach certain milestones – this can help keep you motivated and avoid splurging.

Step 5: Revisit and refine your goals regularly

No matter how determined you are to reach your financial goals, things may get in the way. You may have unexpected major expenses, or your priorities may change. That’s okay. Once you have the right behaviours and mindset of working towards a financial goal, you can adjust the goalposts whenever you need to. The process is far more important than the outcome.

Along with tracking your progress and celebrating your small wins, revisit your larger financial goals regularly, Are they still your top priorities, and does your plan need to be updated? If you have a financial adviser, they can help you with this and let you know if you’re overreaching or if you could be striving for more.

What financial goals do you want to work towards?

Source: Colonial First State