Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 144

Death and taxes on your own terms

Benjamin Franklin’s statement that nothing in life is certain but death and taxes remains relevant after 200 years. As a result of an ageing population and increasing household wealth for older generations, Australia faces the largest intergenerational wealth transfer in history in the coming decades. This has significant policy implications, but at a personal level, raises many challenges also. How do we prepare for the inevitable, and do the best for our loved ones?

Facing one’s mortality is rarely an enjoyable or engaging experience. Many would prefer to believe they will live forever, or at least long enough to justify putting off consideration of the implications of their death. Others feel uncomfortable discussing or even thinking about wealth and its implications for their estate. The consequences of a head-in-the-sand approach, however, are often dramatically less benign than the deceased may have presumed. Instead of leaving a secure or empowering legacy, they may bequeath angst, conflict and considerable expense. Feuding families and disappointed potential beneficiaries are a lawyer’s best friend; even those who can amicably settle an estate may still struggle with the cost and administrative burden of a non-existent or ineffective will.

Motivation to address the issue

This is not just thinking or talking about money. It is your legacy to the world and the potential contribution to other people (or the community or the planet) in the future. A vision of the future you would like to create can help to frame a positive outcome from a potentially depressing process. Alternatively, consider that you are simply reducing the future burden on loved ones. If you have a spouse who is refusing to engage, you may need to go it alone and hope that your persistence will motivate them to act. Set a deadline to have your affairs in order, not too far in the future, and stick to it. Make an appointment with an estate planning professional if necessary.

In addressing your estate planning needs, consider both your objectives (what you want to achieve) and your strategy (how you plan to achieve it). While the most perfectly-designed estate plan has little value if it has not been documented, similarly, a perfectly drafted but ill-considered will may not support those who will ultimately rely on it. This article provides a framework for determining your estate planning objectives. Part 2 will consider strategy alternatives, including the structures, professionals and documentation required to ensure your wishes are met.

Estate planning checklist

The amount of time and thinking needed for this process is not the same for everyone: a 40-year-old with young children and a mortgage will plan differently from a 65-year-old who owns their own home and has several million dollars in investments. Similarly, those with complex personal lives, particularly blended families, will have more challenging decisions to make than those with simple affairs.

Here’s a useful framework for your estate planning objectives.

1. Consider all potential eventualities. These include your death (sadly this one’s a certainty), and physical or mental incapacity (such as dementia, long term illness or permanent injury). Many people prepare thoroughly for what will happen on their death, but do not consider a lengthy period of declining mental and physical capacity that may erode capital otherwise intended for their estate, or expose them to unscrupulous individuals. For younger people, injury or illness could have devastating financial consequences. Consider a protection plan for ensuring your needs are met if you no longer have capacity to make your own decisions, and insurance to ensure your dependants are financially secure in the event that you are no longer able to earn an income or due to substantial medical costs. Some of these decisions can be made independently (such as preparing Enduring Powers of Attorney so someone you trust will make decisions if you can’t); others should be considered together (life insurance should form part of your overall estate plan).

2. Ensure your needs are met. Many older people care greatly about providing for their children and grandchildren, and yet may not have considered their own needs for retirement and aged care. This can result in tragic circumstances where the elderly are financially dependent on the age pension and receive little recognition from the children (or others) who have benefitted from an early inheritance. Once an asset has been given away, it is generally the property of the recipient and the giver has renounced their rights to compensation, even if their circumstances change and they now require support. In addition, Centrelink and the Department of Veterans Affairs have specific rules for assessing gifts and other forms of ‘deprivation’ which can result in a reduced social security entitlement for the giver. Have a clear view of what you need to live a comfortable lifestyle, and determine what you can give only once these needs have been met. This doesn’t mean you can’t help others, it simply means taking care to do it prudently, as we will discuss in more detail in Part 2.

3. Consider the legacy you would like to leave. This should speak to your personal values most of all. Your beneficiaries will likely to be top of mind, so identify every person you wish to provide for, as well as those causes that are dear to you. Bill and Melinda Gates, for example, have invested their wealth in charitable programmes and innovations in healthcare and education for developing countries, while leaving a (proportionately) small inheritance for their children. Contrast this with the poor outcomes of ‘trust fund babies’, where children inherit vast fortunes which they are often ill-equipped to manage. For some, a legacy will be as simple as ensuring their grandchildren have a private school education while others may have grander objectives, such as preserving land for environmental causes.

4. Prioritise your objectives. Planning for the ideal scenario on your death may require compromises. Can you achieve all of your objectives with the available resources? If you are eroding your capital during your retirement, you may need to adjust your arrangements over time. It can be challenging providing for your dependants equally when they clearly have different needs. Providing for young children or a child with a disability, for example, is very different to providing for financially secure adult children. Blended families can create significant challenges. Adult children from a first marriage may have lesser needs than young children of a second marriage, but desire an equal share of the estate. They can also resent large bequests to very recent new spouses or partners. Similarly, family businesses can create disparities where one or more children or family members have made different contributions to the business without being adequately compensated or with expectations of receiving a disproportionate share of the business on your death. Finally, one or more children may make a disproportionate contribution to your care if you become physically or mentally incapacitated.

Seek professional advice if you are concerned or your scenario is particularly complex. Succession planners and estate planning experts can give you guidance and assist with counselling and conflict resolution once you choose to engage with potential beneficiaries.

5. Review. While your estate plan is ultimately a reflection of your wishes, the most positive outcomes are likely to occur when all beneficiaries are informed and prepared for what’s to come. Your spouse will preferably be assisting with the process; ideally you will reach a mutually beneficial agreement as to how you’ll look after each other and your children or others. If there are areas of contention, however, it is best to discuss these openly and engage a professional if you’re having trouble reaching agreement (if nothing else, to avoid costly litigation at a later date).

While you are under no obligation to change your plans as a result of other’s concerns or wishes, they may raise legitimate concerns and have alternatives or strategies you hadn’t considered. An informed conversation will also help to keep relationships intact in the future.

Once you have considered your objectives and your legacy, the process of preparing and documenting your estate plan becomes easier.

Part 2 and Part 3 will help you understand the various strategies for achieving your goals and avoiding the pitfalls that can create emotional and financial stress for those you care about.

 

Gemma Dale is the Head of SMSF Solutions at National Australia Bank. This information is general only and does not take into account the personal circumstances or financial objectives of any reader. Readers should consider consulting an estate planning professional before making any decision.

 

RELATED ARTICLES

Planning to make your money last forever

Estate planning: where there’s a will, there’s a way

Planning to make your money live forever

banner

Most viewed in recent weeks

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

Super crosses the retirement Rubicon

Australia's superannuation system faces a 'Rubicon' moment, a turning point where the focus is shifting from accumulation phase to retirement readiness, but unfortunately, many funds are not rising to the challenge.

Latest Updates

Investment strategies

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Superannuation

Meg on SMSFs: Indexation of Division 296 tax isn't enough

Labor is reviewing the $3 million super tax's most contentious aspects: lack of indexation and the tax on unrealised gains. Those fighting for change shouldn’t just settle for indexation of the threshold.

Shares

Will ASX dividends rise over the next 12 months?

Market forecasts for ASX dividend yields are at a 30-year low amid fears about the economy and the capacity for banks and resource companies to pay higher dividends. This pessimism seems overdone.

Shares

Expensive market valuations may make sense

World share markets seem toppy at first glance, though digging deeper reveals important nuances. While the top 2% of stocks are pricey, they're also growing faster, and the remaining 98% are inexpensive versus history.

Fixed interest

The end of the strong US dollar cycle

The US dollar’s overvaluation, weaker fundamentals, and crowded positioning point to further downside. Diversifying into non-US equities and emerging market debt may offer opportunities for global investors.

Investment strategies

Today’s case for floating rate notes

Market volatility and uncertainty in 2025 prompt the need for a diversified portfolio. Floating Rate Notes offer stability, income, and protection against interest rate risks, making them a valuable investment option.

Strategy

Breaking down recent footy finals by the numbers

In a first, 2025 saw AFL and NRL minor premiers both go out in straight sets. AFL data suggests the pre-finals bye is weakening the stranglehold of top-4 sides more than ever before.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.