Preparing for the Inevitable

In my time as a Financial Advisor I’ve had my share of clients pass away; some with plenty of warning and others with less. Whilst it is unavoidable that we will all eventually take our last breath, there are certain financial outcomes left to our estate that are entirely avoidable.

With a little preparation now, you can avoid adding a financial or administrative burden to the already heavy emotional load for those left behind.

Earlier in life

In our youth and in the accumulation phase of our lives, prior to any children growing up and moving out, not only do we rarely contemplate our own mortality but we also go about making plans that entirely avoid factoring in this ultimate end.

I’ve worked with clients from all walks of life within this age group, both wealthy and poor and a common view is to believe that ’misfortune won’t happen to me.’

Psychologists have a name for this cognitive bias: illusory superiority. The false illusion that any sample group of average people are subject to the same external influences, that ‘it won’t happen to me’.  For example, studies have shown that when surveyed on their ‘driving skills’, individuals will grossly overestimate their own abilities as being above average.

Even the more mathematically minded in society grossly underestimate the probability of things not going to plan and it flows through into financial decisions. If you believe you are unlikely to die or to provide for your family, then you will go ahead and commit to buying that investment property, or avoid buying life or income protection insurance.

Put simply, reality always prevails and until we accept our own mortality, the road will unfortunately always be littered with the fallout – the remains of those families who have lost a loved one’s income and are forced to have to make difficult financial cuts and at a time when this is the last thing anyone wants to have to do.

Spending the time to work with an Advisor on a risk mitigation strategy is essential at this phase in life, allowing you to make a conscious choice around what financial legacy you want for your dependants.

 

Those who have realised their mortality

In later life, often in retirement, this trend shifts. The morning aches become more pronounced and physical frailty becomes a daily reminder of the limited tenure on this planet.

Generally, in this phase of life there are fewer (if any) financial dependants so your focus naturally shifts to funding your own retirement given that is the last of your income and ensuring your estate receives what is left behind.

All too often, either through complacency of lack of insight, I see clients who are not quite as financially set up as they should be. This lack of preparation can result in a tax bill upon death, or worse, the estate funds not going where the client had initially intended.

Certain simple, yet very powerful, outcomes are available to ensure that the estate avoids tax. After having worked so hard to build your nest egg, the last thing the family needs is to lose any extra that could easily have been avoided.

Likewise, I’ve often seen clients with Wills that generally reflect their wishes but lack essential details including Power of Attorney, guardianship, advanced health directives and superannuation estate nominations.  None of these are automatically covered by the Will and without them things can get messy.

It is within this phase of life that a little preparation in the form of a clear and well communicated estate plan, in conjunction with your Advisor, will save significant angst for those left behind.

In summary, recognising the reality of mortality and the fact that we are likely not to know in advance when the dreaded date will occur, means that now is the time to plan.  There is no need to shoulder it alone, share your plan with those around you by starting a conversation with your family and engaging your Advisor to help you navigate the best path.

One of the most rewarding experiences of my career has been seeing these plans put into action and knowing that from beyond the grave, my client’s wishes for their family, are being fulfilled.

 

Should you require assistance with preparing your plan, please be sure to contact us at Powers Wealth. We look forward to helping you.