Do you want to make sure all your finances are sorted in the event you died or became unable to make your own decisions?
We think it is best to make the hard decisions early, rather than to rely on emotional family members to try and make decisions for you.
Here, we unpack wills, powers of attorney, non-estate assets and even give some tips for you to consider to ensure the transfer process is simple and easy.
If you would like further discussions on Estate Planning, please contact us at [email protected]
OR
Click on the link linktr.ee/angeladvisory.aus
Tom Gleeson
G'day, everyone. Welcome to another installment of the Real Wealth podcast. It's Tom Gleeson and Stefan Angelini here from Angel Advisory. Thanks for joining us, Stef.
Stefan Angelini
G'day. G'day. G'day
Tom Gleeson
Today, we want to have a chat about having finances prepared for death. We figure it's Friday. It's about to... The weekend's about to hit and what everyone wants to talk about, I imagine, is their own imminent demise. Before we get into it, can you rattle off the disclaimer and then we'll go. And go for it?
Stefan Angelini
Yeah, cool. If anyone's watching just the short snippet on the social channels. We're going to talk about your wills and powers of attorney, sort of how you can rule from the grave, how you can control everyone's life a little bit. We'll talk about what's not forming part of your estate. We're going to talk about how you can give away your passwords. What do we say? What are we going to use?
Tom Gleeson
Two different examples, the Da Vinci Code.
Stefan Angelini
Yeah.
Tom Gleeson
If you haven't seen that, I think everyone's at least familiar with Hansel and Gretel.
Stefan Angelini
And finally, when it does become end of the day, why it's important to simplify everything just to give everyone peace of mind. So if you want to listen to the whole thing, head on over to the podcast or Spotify. You know that? We're on Spotify?
Tom Gleeson
I think I found that out this morning.
Stefan Angelini
That's right. So number one listen to person at the moment is Ed Sheeran. Number two is Real Wealth Podcast with Stefan and Tom. But if you're out there, just remember that everything you hear here is just general information. Please then consider it as personal advice. And if you want personal advice, please go and see a licensed financial planner. And guess what? At Angel Advisory, we are financial planners. So head on over to [email protected]. If you need to talk to someone about your estate plan. Good.
Tom Gleeson
Out of the way.
Stefan Angelini
You're not going to die for a while.
Tom Gleeson
No, I'm not planning on it. What? Have you got plans for me?
Stefan Angelini
No, every Italian that I know goes between the age of 60 and 80. But when did your grandpa die? How old was he?
Tom Gleeson
Mum's dad was 100 when he passed away. So yes, good genes. I'm probably around for a while.
Stefan Angelini
Have you got many people that live to a 100?
Tom Gleeson
Well, actually, now that I think about it, his dad. So that's two in a row that have lived to 100. So then Mum's next. She'll probably bring up the time done, and then I'm after that.
Stefan Angelini
I can imagine your lifestyle is not conducive to living 100 years.
Tom Gleeson
No, no I've made some changes. I'm healthy as a horse never since when I was younger.
Stefan Angelini
Anyway, what's the go? Talking about the line.
Tom Gleeson
We want to kick off with basically just touching on wills and powers of attorney, what they are, how they differ, and why we want them in place before we jump into the three different types of wills.
Stefan Angelini
What is a will? Will is going to tell people what you do, what happens to your money when you die.
Tom Gleeson
Yeah.
Stefan Angelini
Right? Power of attorney. You're going to have two types of powers of attorney, which is pretty cool. It's just general power of attorney. That kicks in when you are still of sound mind, we call it. Let's say you're overseas, someone needs to sign something for you, you can get a general power of attorney done. Then you get an enduring power of attorney. Now, this kicks in when you cannot make decisions, so you lose capacity to make decisions. It's called an Enduring Power of Attorney, specific names. You can get it for medical situation, get it for financial situation, so you can just get a general one. We'd like to separate all three. But that's really important because who's medical one, simple one to do it. Who's going to pull the plug? Who's going to make the decision to pull the plug? I know in my situation, I haven't got my wife doing it because she might be too emotional. My brother will come in and go, No, see you later. We'll pull the plug.
Tom Gleeson
Is it actually Tristan?
Stefan Angelini
He won't care. I'll do it together. Then you got financial. If you got, a lot of people just put their partners on, but it's always good to have a secondary person. I talk about my situation. I've got a whole lot of stuff going on. I've actually got my old man that comes in with my wife to make decisions for me financially if something happens to me. This is the stuff that needs to be signed off by a lawyer because it's pretty important that if you become capacitated, someone is actually you. To the banks, to the doctor, they make your decisions. So a lawyer needs to sign off to make sure everyone's on board.
Tom Gleeson
Yep. So the power of attorney staff concerns while you're still around, the will concerns once you've kicked the bucket.
Stefan Angelini
That's it. Yeah. Do you know what happens when you don't have a will?
Tom Gleeson
Fair game. Everyone just likes to see you on a ship.
Stefan Angelini
Pretty much. State trustees. So it goes to state trustees, and then they determine who gets the money and it is pretty much whoever wants to get it. There's almost like a hierarchy. It'll go to your wife and it'll go to your kids and it'll go to your kids you don't know about. Then it'll go to your cousins or your parents. It's almost like there's a hierarchy listed on state trustees and who gets first claim to it.
Tom Gleeson
Right.
Stefan Angelini
But anyone can come in and try and get access to it. Everyone always prefers for a will to be done. Everyone always thinks about it's expensive to do a will. It's not. You can get a quid with access for simple wills. If you're talking about simple wills, if you're just like a husband and wife, PAYG, you've got a home, you don't have many assets, you want to just tell people what happens to the money when you die.
Tom Gleeson
Yep.
Stefan Angelini
And they can take that will, go through probate, and hopefully make the process really easy. You can get that done for $100 by a lawyer. So there's lawyers out there that have online systems that just spit out these wills online. So if you need access to that, let us know because we've got a really good one. But then wills can become more complex, right?
Tom Gleeson
Yeah, that $100 will concerns the simple will, doesn't it? That's as opposed to the complex and the ultra.
Stefan Angelini
Yes. What do we say? What goes into a complex will?
Tom Gleeson
Testamentary trust.
Stefan Angelini
Yeah.
Tom Gleeson
Testamentary trust.
Stefan Angelini
Testamentary trust. Yeah. Yeah. Testimony trust. Yeah. Testimony trust is I like to explain it as you're concerned. Two different types of people want to testamentary trust. It's basically when you start getting a lot of money, I say when you start getting a decent amount of net assets is when you want to start thinking about a testamentary trust. When you got kids or someone you want to leave money to. For young people, for younger people is when you've got young kids, you don't really know what's going to happen with their relationship status as time goes on. But importantly that if you have a whole lot of wealth and you go for whatever reason.
Tom Gleeson
Yep.
Stefan Angelini
In your will, you want to make sure you've got the Guardian set up. So who do the kids go to?
Tom Gleeson
Yep.
Stefan Angelini
But also the testimony trust, what it does, it creates a really good tax planning element to it. So kids who have money in their own name get taxed at adult tax rates when they earn passive income.
Tom Gleeson
Yep.
Stefan Angelini
Sorry, that's a lie. That's wrong. They actually get taxed at worse than adult tax rates. So once they earn above 416 bucks from passive income, their tax rate goes right up.
Stefan Angelini
So you could imagine if you own a house or whatever, and let's say whatever the family gets three million dollars, you got three kids, they get a million dollars each.
Tom Gleeson
Yep.
Stefan Angelini
If they had that in a bank and let's say they own 3% interest on that each, they earn 30 grand a year.
Tom Gleeson
Yep.
Stefan Angelini
And they're going to be paying a really big amount of tax on that. If, however, you set up this testamentary trust, the tax rate actually goes to adult tax rates. So the money is in the trust, it gets used, the people taking care of it can access the trust to help the kids. But the tax in there is adult tax rates. It's a lot more efficient.
Tom Gleeson
Is that fairly controlled where the Guardian is able to access that money, but only for the purposes of what's in the interest of the child that's been passed on to them?
Stefan Angelini
That's it. You've got these whole different people that are like, one person will look over. When you set up testamentary trust, you got to say who's the appoint or who's the beneficiary, who's the trustee, and they work together to make sure it's always in the benefit of the kids down below.
Tom Gleeson
Yep.
Stefan Angelini
It's a great estate tax planning tool for when you have younger kids, but when you're older and you got an even bigger amount of wealth, you got to have a sizable amount of wealth still and you've got kids and we know how many people get divorced these days. Anyone that's been divorced? Not close friends?
Tom Gleeson
Not as in recently.
Stefan Angelini
Not recently, no. Everyone's still too young, right?
Tom Gleeson
I think most people are like our mates are on their first marriage.
Stefan Angelini
What do they say? Half the amount of people get divorced? Right, half the amount of people get divorced, you could imagine if you're older and you've got a kid and say you've got a son who's got a partner that you don't really like and you die, you kick the bucket, and the money goes to your son in their personal name. It's also the wives in their personal name because they made the money together.
Tom Gleeson
Yep.
Stefan Angelini
That means she has claim to it, especially if there's kids involved. It can get quite ugly because when she comes in, she takes part of the money, she goes to get a new partner, which becomes his money too. It just becomes all muddled. Right, you can't really rule that from the grave. But if you spend some money up front, you get this testamentary trust done, the money when you die, let's say the money in your personal name, say your house sells, the other assets in your personal name, maybe properties, goes into this bucket called the Testamentary Trust. Trust these are your kids. It becomes their money for when they want it, or you can have it allocated towards the grandkids.
Tom Gleeson
Yep.
Stefan Angelini
No one else can get access to that money. It sits there for the sole purpose of those people. It's very tough for ex partners and things like that to actually get claim to it.
Tom Gleeson
Right.
Stefan Angelini
And that's where it's like that asset protection. So you're passing it down through your bloodline
Tom Gleeson
Yep.
Stefan Angelini
And skipping the people you might not like or that might not be in life forever.
Tom Gleeson
Sounds brutal when you laid out like, then someone gets remarried and then they have access to make sense.
Stefan Angelini
Yes, because you can get all these other people that then get your money. So it's just that protection. And if you like a lot of people that I know, they're like, no, no, no the money is not actually for my kid. The money is for my grandkid.
Tom Gleeson
Oh yeah.
Stefan Angelini
I don't care like, my kids are now set up. It's fine.
Tom Gleeson
They're already earning. It's yeah, yeah.
Stefan Angelini
But now when? I can imagine 40 years ago, divorce wasn't that big. Like, there wasn't as many people getting divorced as there are now. There's so many more options to separate from your partner, especially when you got Hinge and Tinder and
Tom Gleeson
Online,
Stefan Angelini
How easy it is to do online dating, theoretically.
Tom Gleeson
I suppose, if you had Hinge and Tinder really? Yeah. I don't know. I've never used it. Have you not missed all that?
Stefan Angelini
No, I got on a few weeks ago. No, I'm joking, Whitney, I'm joking. So anyway, so that's why different people want to set up these testamentary trusts. And that's the complex part. We say complex is testamentary. You've got some money, you might need to think about adding in this extra layer of security in your wills just to protect the main people to you from either taxes or from partners or people you don't want to get the money.
Tom Gleeson
Yeah, fair enough. So you got simple. You've got your $100 will if that's what's required for complex. A certain level of income or assets dictates the need for complex, which has that testamentary trust structure, I think you referred to as ruling from beyond the grave. Sounds pretty sinister, and then the last one is ultra complex.
Stefan Angelini
All right, ultra complex. When people own businesses and trust and have multiple trusts, you need to add all these things like memorandum of wishes. What do you wish to happen with your money? Because you can't fully rule a company when you're gone. You can set up like, I guess procedures, templates and what you want to happen and how they should run the company, but really, it's someone's got to take over and do what they want to do with it.
Tom Gleeson
Yeah. And you're not there to enforce anything that you've put in place. You're not there to enforce it.
Stefan Angelini
That's right. Yeah. So your memorandum wishes might say, with my company, I want you to go and sell this asset, do this, transfer this money over here, just wind the company up. I don't really care. But you got to nominate in the will who's going to be the director. And when you got trust and things like that, who's going to come into different trustees. You own the shares, who's going to take over the share ownership, and who's going to make all the decisions. So you might say, all right, well, I want my kids. If you own a business. I want my kids to come into the Director, but then I want my wishes to have this person actually be as a managing Director and approve everything that happens. Someone that's been in the business for 20 years outside of.
Tom Gleeson
Yeah, okay.
Stefan Angelini
So the family might still own it, but that person is an ultra decision maker. So it becomes more complex when you start going down, who makes decisions and what assets go where, and what do we do with all of our assets. And it's more or less around what do we want to happen, what we'd like to happen.
Tom Gleeson
Yep.
Stefan Angelini
Not what will actually happen.
Tom Gleeson
Yep.
Stefan Angelini
So it's just like, all right, well, someone's going to come back to the book and say, tom wanted this to happen, and then people are going to decide, yeah, we can either do that or we can just throw it away. So you can try and rule, but not so much. But that's where you get more complex. You need these memorandums or these wishes to sort of come into it and play the role.
Tom Gleeson
Yeah. So speaking of assets, the next one. We want to address is non estate assets or things that aren't covered by the will and how you address those just because they're excluded from so I suppose can we look at the three broad categories of what's excluded and also why they're not part of the will?
Stefan Angelini
Yeah, cool. All right, so three broad categories is your super doesn't form part of the will. So super is an non-estate asset. You nominate a beneficiary, so you can actually nominate for your super to go to a specific person in the event you die. That's called a beneficiary nomination. Everyone should have one done in their super funds.
Tom Gleeson
Yeah.
Stefan Angelini
If you don't have it, it's going to go down through your will and become an estate asset. Or if you nominate 100% to your legal personal representative, it will go down to your will, right and then it becomes an estate asset. But you can actually say, let's say I want to give my money directly to my kids. I don't want it to go to my wife. Then I can say, I nominate for the money to go directly to my kids 50 50, because I've got two kids.
Tom Gleeson
Yep.
Stefan Angelini
And my wife won't get the money, won't get paid to her to get paid to my kids.
Tom Gleeson
Yep. It's not required to be part of the world. The addition of a beneficiary means that the instructions are already there.
Stefan Angelini
Yep. The next one investment bonds.
Tom Gleeson
Investment bonds
Stefan Angelini
Investment bonds is cool. Such a door, right? I just called myself the door. Excuse me. Investment bonds. So these are something that's not under your tax phone number. Investment bond is like a structure that's set up outside of your personal name, still yours, but you get all these tax benefits of holding it. So you can cap your tax rate at 30%, can go as low as 0%. But with these, they're called, again, a non estate asset. So it's because outside of your tax file number, it doesn't form part of your will. We see a lot of these used for, say, older Australians who want money to go directly to their grandkids at a certain age. So they might set up this investment bond and say, I know that I'm 90 years old and I've got my kids that are 15 years old and I want money to go to them when they're 30. They'll set up this investment bond, they'll put in 100 grand each and then when they die, the money won't go to their kids because outside of the estate, it'll stay there and then it'll go to the beneficiaries at whatever age it goes, it becomes available.
Tom Gleeson
Whatever you've dictated in as part of the bond.
Stefan Angelini
Yeah, that's it. And that's a common way we see it used common way. So that's, again, something that's not forming part of the will. What's the other one?
Tom Gleeson
Last one.
Stefan Angelini
What have you done?
Tom Gleeson
Investment bonds, super and trusts.
Stefan Angelini
Trust structures. Trust. So like, when you businesses are spent for businesses, trusts go to these wishes. You can sort of say who comes in and who controls it. But really, what forms part of your estate is things in your personal names.
Tom Gleeson
Yep.
Stefan Angelini
Things that are in trust and companies, you need to make sure they're handled in another way.
Tom Gleeson
Yeah.
Stefan Angelini
So, yeah, it's important to make sure you differentiate it because as you start building your wealth, start buying assets in trusts, you start buying properties in trusts, for example, right. You have land tax bills, you start building investment portfolios in trusts. So it doesn't form part of your will. So you need to have another way to determine what to do with that.
Tom Gleeson
And it doesn't form part of your will because it's not in your name. The trust structure exists as a separate entity to you. The will concerns you as a person. That's it? Yeah.
Stefan Angelini
That perfect way to put it.
Tom Gleeson
Perfect. Cool. So that's covering off a little bit of I suppose it's background for we're here to prepare our finances for death. That's a background into wills, powers of attorney, what is and isn't an estate asset. Next thing we want to look at is the, I suppose the administrative side of getting ready for or being ready because we don't know when it's going to happen. I mean, I'm going to last longer than you. We've done that genetically.
Stefan Angelini
Will it actually happen?
Tom Gleeson
Yeah, well, I mean, I could get hit by a bus, but it's not in the plans.
Stefan Angelini
So getting things ready, like preparing for what's going to happen when you're not around, who knows your own situation better than you? Probably nobody. So how are you going to set yourself up for when someone else comes in to divide up the assets, to do all the administrative work when you're not there?
Stefan Angelini
Yeah.
Tom Gleeson
And a key part of that is passwords.
Stefan Angelini
Everything's online now.
Tom Gleeson
Exactly. Which is why I have actually I've started changing passwords to be a bit more uniform, but I had, like, a different one for every platform. You would have seen me try to log in, like mygov stuff, and it takes I'm getting text messages and emails and stuff because I just forget them all.
Stefan Angelini
Yeah, well, that's why I've got, like, a password now, but instead I've got to record the password for that somewhere. It's all about recording your password, otherwise it's so hard for people now to get into things. Like, the big companies around the world now have policies that allow people to get access, but it's like, still, you got to jump through so many hoops because you could imagine someone's going to pop in and say, hey, look, I want to get into Tom's account. He's dead. Yeah, here's a fake certificate. Can you let me in?
Tom Gleeson
Yeah, I want to see his savings account.
Stefan Angelini
Yeah, there's so many different, I guess, risks around that part. So back in the day, it used to be, you want to know about my situation? Look at the folder in my study. Pull that out, have a look. Here's everything you need. And then my bank accounts. Go speak to the bank. And that was pretty easy. But now everyone's got a different login account. People have cryptocurrency accounts, different banks, online banks. There's no actual store you can go into. How do you access all these things? And how do you figure out what this person has actually got?
Tom Gleeson
Everyone's got multiple supers as well. Do you have a job when you're 15? 16, 17. That's one. Then you get a different job, then you move, then do this. Like, my own was complex enough, trying to get all my ducks in a row, let alone trying to do it for someone else. Be like, I don't know who they were with when they're 20.
Stefan Angelini
I reckon it's important to have things simplified, but life's easier when it's simplified. You want to make sure it goes. Whenever you die, the next generation come in and go, oh, that's pretty easy. Like, they've only got one super fund, not six.
Tom Gleeson
Yeah,
Stefan Angelini
They've only got with money with one bank, not ten. And that makes life a lot easier. But back to where we were with the passwords is that it's a growing area that people don't really think about anymore, that someone needs to be able to get into my accounts at one point. So there's different mechanisms that people can use. Some people write everything down in a book that's still in the folder in the study behind them, or in a safe, and we see people come in with their fault, with their books that have all their passwords written in it.
Tom Gleeson
Yeah. It's not common, but it is still done.
Stefan Angelini
Yeah. For the older generation.
Tom Gleeson
I was going to say.
Stefan Angelini
But as you get more complex, and if you're like me and really value security, especially now with cybersecurity and having cyber tax up, you need your passwords sort of spread. So different methods of doing that.
Tom Gleeson
Yeah.
Stefan Angelini
Isn't it? Well, one of them was we touched on before was The DA Vinci Code method, which is identifying people that are going to be somewhat responsible for your administration when you pass away. Breaking passwords in half.
Tom Gleeson
Half to your partner and half to a mate. A neighbor, you know can be a parent. That wouldn't work. Whoever, whoever you want. But breaking it up, I mean, not so complex that you have to break into the Vatican, call Tom Hanks. What if you haven't seen the movie? That's not going to make any sense. But, like, simple way of breaking it up to be like, he's part of the password. He's part here. You two are going to come together when I kick the bucket anyway, you're going to chat. Go for it. You've both got the pieces.
Stefan Angelini
That's it. Some people you trust.
Tom Gleeson
Yeah.
Stefan Angelini
Piecing together the code
Tom Gleeson
could be a fun activity at your funeral.
Stefan Angelini
Yeah. What do you know?
Tom Gleeson
No.
Stefan Angelini
What do you know? I've got the first half, you got second half or you can send them on a wild goose chase. Tell me what you mean by that.
Tom Gleeson
Well, it's just a more complex version of the first one and more open to gamesmanship.
Stefan Angelini
Well, let's be honest, there's a lot of people out there that don't trust two people, therefore they want to make a game of it together.
Tom Gleeson
Yeah. They make it hard that you want to split if they don't trust two people with 50%, but they might trust ten people with 10%, and then you just kind of lead them on a bit of a it's like a treasure hunt.
Stefan Angelini
Yeah.
Tom Gleeson
But like, pick bright people who can follow clues, otherwise you're just going to end up with 80% of the password because two of your friends are morons to.
Stefan Angelini
Set up clues along the way so people can go play a game, go find the next password or figure out how your passwords are all set, or things might be hiding in different locations.
Tom Gleeson
Yeah. And then you end up in a situation where people like, thank God Tom's gone. He was so annoying. Like, this is such an annoying activity that he set for us.
Stefan Angelini
Some people like the security.
Tom Gleeson
Yeah.
Stefan Angelini
I like security, so they might want to do it that way. So if you're one of those people who don't trust anyone and would prefer people to go on a wild goose chase to find out your passwords because you don't want anyone to come behind your back and get them. Might be a good idea, but, yeah, that's it.
Tom Gleeson
And then the final one is just covering off on, I suppose, the core reasons for simplifying all this administrative work before, even if you are healthy and you're not planning on going anywhere, get it done, because you don't know when you're going to get hit by a bus or God knows what. But the core reasons for simplifying all this stuff is one thing that's become clear in conversations that we have with clients, is it's not all about dollars and cents. A huge thing is peace of mind.
Stefan Angelini
Yeah.
Tom Gleeson
And this is what you're providing to loved ones who are responsible for you and your assets once you've gone. So if you can simplify it, do it, get the systems in place while you can, that's it.
Stefan Angelini
We're lucky. We record pretty much everyone's entire financial situation. So we say to clients, who's going to know the most about your situation? Ask your kids. And I'll go. You probably will.
Tom Gleeson
Yeah.
Stefan Angelini
Okay, so we have like a central record of everything, especially for our older Australia, our older clients. But, yeah, that's all I say, though. I just want to make sure that when I'm gone, they can just get everything flows on nicely to them and it's not everywhere. They're not trying to figure out, they're not trying to solve The DA Vinci Code to get it done. That's what a lot of people want, just simplification and you don't need to wait until you're 85 years old to do it.
Tom Gleeson
That's it.
Stefan Angelini
You can do it, you can do it earlier. And just make sure life is arranged in a simple way. You don't have things everywhere. I've still got things everywhere.
Tom Gleeson
You're pulling it together bit by bit, though.
Stefan Angelini
Yeah. Slowly, slowly. Slowly. Slowly, but, yeah, peace of mind is huge. And that's why people get their estate plan sorted and that's why people have their wills, their powers of attorney done and all their beneficiary nominations sorted. So they know that if anything does happen, because we don't know when the bus is going to come, that everything's sorted for the next people taking over, all that stuff.
Tom Gleeson
And that's one that we push with anything to do with super is, hey, we need to get this nomination sorted. Because in the short term, the read I get is that it's a bit of admin and it's can be a bit of a pain because it's all wet signatures and back and forth, but once it's done, it's done, it's done, you've done it now.
Stefan Angelini
Yep. That's what people always try to do. They try to wait to do a will at a certain point, just like, just get done and then change it if you need to.
Tom Gleeson
I did my first will when I was, like, 24.
Stefan Angelini
Did you?
Tom Gleeson
Yeah, because we were going to go overseas, so they handed them out like, everyone do a will. And like I'm not proud of this. I thought it was funny. I made Mum and dad the executives and I made my brother the 100% beneficiary. So the situation that I pitched at the time was they would get up and just read out, like, golf clubs, wardrobe, like, I didn't have much, and just read out Jared, jared. Oh, again, my sister's been like, what? What is this?
Stefan Angelini
That's good, because we don't want it. Because we don't want to have to dispose of.
Tom Gleeson
Yeah, exactly.
Stefan Angelini
Cool. Great work, Tommy. Thanks for the chat.
Tom Gleeson
No worries. Thanks for joining us. Thanks for covering off on like I said, bit of a grim topic to take into the weekend, but it's worth doing.
Stefan Angelini
That's it all right. Thanks a lot. Thanks, everyone, for listening. We will see you soon. Bye.
Tom Gleeson
Cheers.
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