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Estate Planning

Language paramount in estate planning

Estate planning language

A legal specialist has warned financial advisers need to give just as much consideration to language as they do figures when providing estate planning advice.

Financial advisers must give great consideration to language and not just figures when providing items such as estate planning strategies for their SMSF clients, a legal specialist has said.

“What are we talking about? We’re talking about how definitions can vary sometimes … [for example] the court might read a binding death benefit nomination, a will or a trust deed far differently as to how it was intended,” CBA Commonwealth Private Office strategic advice specialist Caroline Harley told delegates at the SMSF Association 2020 National Conference held on the Gold Coast last week.

“So understanding who’s in and who’s out and what the definitions include and exclude is fundamental for estate plans to work.”

Harley pointed out the situation for advisers and their clients is made more complex due to the differing laws from state to state, with only superannuation and tax law applying equally across the country.

She used the definition of a child in an estate planning context as an example of how language can significantly shape an outcome.

“What can go wrong with binding death benefit nominations? Obviously if the child is not a child at law, they’re not going to satisfy the SIS (Superannuation Industry (Supervision) Act) dependant status. You may be able to get them in [as a] financial dependant, but obviously you’d want to be clear about the way in which you’re nominating that perceived child,” she said.

She stressed the importance of getting wording correct cannot be underestimated as an error has the potential to affect multiple generations with regard to the distribution of death benefits.

“[If one person misses out on the death benefit] it’s going to cut that [avenue] off entirely so their kids, their grandkids, none of them will be captured if they themselves are not,” she said.

She highlighted a focus on language is now more important than ever given the construct of modern families, with advisers now having to consider situations such as de facto relationships, blended families, stepchildren, surrogacy and in vitro fertilisation.

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