Caring for family with a Will
Few of us like to think about death, let alone plan for it. But far from being morbid, getting your affairs in order and drawing up a Will is one of the kindest and most caring things you can do for your loved ones.
Not only does a Will make your wishes clear but it ensures your family isn’t wrestling with legal red tape at a difficult and emotional time.
Yet despite the advantages, it’s estimated 45 per cent of Australians don’t have a Will.
Who needs a Will?
The short answer is everyone over 18. Even young adults have assets such as super, personal possessions, possibly a vehicle and some savings.
Once you reach an age where you have a partner and children, along with a home and perhaps other investments, the need for a Will becomes even more pressing.
What can be included in a Will?
Generally you can and should set out where you want your physical assets (property, cars, jewellery, furniture and collectibles), financial investments (bonds, shares, bank savings) and sentimental possessions (family heirlooms) to go.
Generally, assets you jointly own, such as a house bought with your partner, pass automatically to your co-owner. But if you own property under what is called a ‘tenancy in common’ you can distribute your share according to your Will.
Because superannuation is held in trust, it’s treated differently to other assets. The trustee of your super fund has the final say on where your money, formally referred to as a ‘death benefit’, ends up unless it is paid to your estate.
If you wish to be certain your death benefit goes to the person you want it to, you should fill out a ‘Binding Death Benefit Nomination’ form and lodge it with your super fund. You can nominate your estate as the beneficiary and your death benefits, including any life insurance, will be distributed according to your Will.
Individual life insurance payouts don’t automatically go through the policyholder’s Will, but if that’s what you would like you can nominate your estate as the beneficiary.
How watertight are Wills?
If you invest the necessary time, effort and expense into producing a well-drafted Will, you can be more confident your wishes will be respected.
The exception to this rule occurs when it can be argued a Will treats a dependant unfairly. Classic examples are a parent leaving more to one child than another or leaving everything to a new partner and excluding children from a previous marriage. Assets don’t need to be split equally, especially if one dependant has previously received financial assistance, or has dedicated years to caring for you. But be aware a dependant who feels dudded may successfully contest your Will.
What happens when there’s not a Will?
If you die without a valid Will, legally referred to as dying intestate, the relevant state or territory laws will be left to sort things out.
Someone, typically your next-of-kin, will have to apply for a grant of Letters of Administration. An administrator will then be appointed. They will divide your estate according to set formula, which differs slightly in each state but generally goes to your surviving partner and children.
Even in a best-case scenario, dying intestate may mean one or more of your loved ones will have to go through an arduous bureaucratic process during a traumatic time. In a worst-case scenario, a partner, child or friend may receive far less than you would have wished.
There are essentially four conditions a Will needs to meet:
- It has to be made by someone over 18 who is mentally competent
- It has to properly dispose of all assets
- It needs to be signed and witnessed appropriately
- It needs to be properly drafted.
While DIY ‘Will kits’ may be better than nothing, if you have substantial assets, a complicated family situation, or you just want peace of mind, you’ll want to engage the services of a trusted solicitor.
A Will is just one part of the estate planning process. If you would like to know more, give us a call.
Changing the narrative to achieve success
As children, we are surrounded by stories. The books our parents read to us, the cartoons we watch, the imaginary games we play. As adults we might like to think that story time is over. But it isn’t.
We are constantly surrounded by narratives in the media, amongst our peers and in our own heads. If these narratives are positive, they can propel us forward. But if they are negative, they can hold us back.
The sky’s the limit until we hit our self-imposed limitations, usually founded in feelings of fear and unworthiness.
So how do we break through these limitations and start reaching our goals. The answer is to change the narrative.
How we limit ourselves
To change any narrative, you need to have the right words. And in this case, that means identifying the obstacles you’ve set yourself and being able to communicate them. Identifying your fears is never easy or comfortable, but it helps to know that they usually fall into three main brackets.
Fear of failure
This is the big one and it manifests differently in everyone. For some, it’s short-selling your abilities, for example not going for a new job because you fall slightly short on the listed criteria. Others might suffer from a stifling perfectionism, missing deadlines and opportunities because of an inner critic in overdrive.
This in turn can develop into what famed TED talker and vulnerability expert, Dr Brené Brown, calls ‘self-handicapping’. Say you’re preparing a proposal that requires a lot of research—instead of doing the work you avoid it. The internal logic goes that if you don’t try, you can blame any ensuing failure on lack of effort, which is easier to bear than lack of ability. The problem with this approach: you never get anything done, and your career trajectory will inevitably stall.
To combat this, start with that old adage, ‘nothing ventured, nothing gained’. For as novelist JK Rowling said in her now viral Harvard Commencement Address, ‘It is impossible to live without failing at something, unless you live so cautiously that you might as well not have lived at all – in which case, you fail by default.’ Getting comfortable with failure isn’t easy, but it is perhaps the only given on the pathway to success.
Fear of comparison
No one likes to be negatively compared to others. But when we fear it intensely, envy can turn to jealousy, which doesn’t usually bear great outcomes. It doesn’t feel too good either.
Two-time Olympic Gold medallist, Abby Wambach, thinks we need to change our approach. She takes the soccer pitch as a metaphor. When you kick a goal, run towards your teammates. They set you up for the shot. Likewise, if your team mate scores, run towards them, and celebrate their victory. Success almost never exists in the vacuum; it is usually the cumulative result of a lifetime of learning and other people’s input.
Fear of conflict
While Hollywood screenwriters love conflict, in the workplace and our personal lives we tend to avoid it at all costs. But avoidance isn’t necessarily helpful. It often leads to a reduction in productivity, and mounting unspoken tensions. Worse still, when the conflict does inevitably come to a head, it is more profound than if it had been dealt with early on.
One useful tool in these situations is what Dr Brown calls ‘the story I’m telling myself’. It’s a great way to frame conversations and avoid misconstruing your projections about the other with their reality. Rather than casting aspersions or laying blame, open the conversation with the sentence ‘the story I’m telling myself…’ It will allow the other interlocutor the space to hear you, and open the door to vulnerability, which is crucial to conflict resolution.
Changing the narrative
We all have a tendency to limit ourselves when it comes to realising our dreams. But if you start to acknowledge the fears behind these limitations you can also start to unlearn them. Change the narrative you’re telling yourself about the life you deserve, and this might be story that ends happily ever after.
Mastering the Art of Negotiation
Negotiation is a fact of life. We do it with our friends and families all the time – ‘I’ll pick up the kids, can you do dinner?’ – deals like this are so easy, so normal that we don’t even notice them. But when the stakes are higher, it can induce anxiety. From asking for a raise, to sorting a supply deal or arranging a merger, negotiation can leave even the most confident among us feeling intimidated.
Luckily, like most things, you get better with practice. And it helps to know there are some common approaches to successful deal making.
Know what you want
A common problem when negotiating is not knowing what you want. It’s no use having a vague idea of what a successful outcome looks like. Before you go in, think about your objectives and make them measurable, decide on your ideal result and consider your non-negotiables as well as what compromises you’re prepared to make.
It’s also wise to spend some time assessing exactly what the other party might want, so you are not only prepared but can develop solutions that are mutually beneficial.
Go for the win-win
A common mistake of negotiation is viewing it as a competition where there is a winner and a loser, when ideally you want to pursue an outcome where everyone’s happy.
Psychologists call this tactic integrative bargaining, looking to treat negotiation holistically and in pursuit of both parties’ interests. The opposite is distributive bargaining, where someone has to walk away feeling at a loss.
It helps here to consider what the other party really needs. Think outside the box. There may be something you can offer them that you never initially thought of as a sweetener.
It sounds so simple. But people are scared to just ask for what they want. Instead, they beat around the bush, or settle for second best.
Questions also allow you to arm yourself with knowledge. Until you’re in the meeting, you’re never going to have all the answers. But you should know exactly what you’re going to ask. Robust questioning has the added benefit of easing social tensions and making both parties feel like it’s a collaborative space.
Managing your emotions
Emotionality can both help and hinder negotiation processes. It’s useful then to understand which emotions can get in the way and which can actually get you closer to your goal.
Anxiety can be particularly unhelpful. Though a healthy dose of nerves will make sure we do the adequate research prior to a negotiation, actually appearing anxious in the meeting rarely does anyone any favours. Similarly, conversations led with anger can either put people off side or bully them into submission which rarely leads to good long-term outcomes.
Instead try to frame your emotions around your passion for the deal. Excitement can elicit a strong response, so too can remaining calm and respectful.
Getting a third party
Certain negotiations such as purchasing or selling a business or working through a divorce, are so high stakes or emotionally fraught that it can be best to engage a third party. Engaging a professional to assist can bring expertise, insights from their experience and also ideas for compromise that may have alluded you. Whether you employ a professional or a trusted ally, a third party can provide perspective, remove some of the emotion from discussions and also allow you some breathing room.
Be prepared to walk away
If you’re not entirely comfortable with the outcome, give yourself time to sleep on it. Don’t allow yourself to be pressured to agree to something on the spot.
And remember, not every deal is meant to be. Sometimes by walking away from something you can actually preserve the long term relationship, rather than settling on a contract that would have left both parties resentful. Understand your bottom line and know there is power in saying no.
Certain negotiations are always going to be difficult, but it helps to know there are tried and tested approaches that work. By taking the time, practicing and mastering the art of negotiation you could reap the benefits in your business or personal life.
Living with Adult Children
The number of young adults living in the family home well into adulthood is growing. ABS data indicates, amongst adults under 35, nearly one third are still at home, and the trend is on the rise. If managed well, multi-generational living can be beneficial to both your adult kids’ financial goals and your relationship with them, that said it’s not without its challenges.
What’s behind the shift
Today’s young Australians spend longer in higher education, stay single for longer or choose not to tie the knot at all and start families later than previous generations. They’re also living through a period of sluggish wage growth, high underemployment and youth unemployment and despite recent corrections, a housing market that is inaccessible for many first home buyers.
There are however, young adults who use living at home as a strategic move, with 28% using it as an opportunity to save for their financial goals – like owning a home or planning for a big trip.
Benefits of having a kid at home
Helping kids save for their future isn’t the only benefit of continuing to provide a roof over their head. For many, especially those who boomerang (returning to the nest after a period away), it offers the chance to build a relationship on a level footing. You get to know each other as adults which can be a wonderful thing.
Having adult kids at home can also mean you get help with the domestic duties and maintenance around the house or assistance looking after younger siblings.
Problems can arise
Despite the benefits, in some cases continued cohabitation can become detrimental to the relationship. Common gripes include: entitled kids who don’t contribute to costs and chores, and overbearing parents who continue to treat their offspring as if they were tantrum prone toddlers.
Equally worrying is the added cost of having an extra mouth to feed and the associated costs of an extra member in the household. If you are a parent in this situation, make sure the not-so-empty-nest is not derailing your retirement plans. According to a 2018 study, Aussie parents spend a combined $235 million each week on adult children living at home.ii
Set boundaries early
Communication is key to making co-habitation with adult kids work. This means staying in touch to make sure everyone’s expectations are understood and that boundaries are in place. If your kids are earning, are they paying board? How much are they contributing towards groceries and bills? And what about household labour?
On the parent’s end, there also needs to be some flexibility. Are you happy to have your child’s friends over to socialise? Are partners allowed to stay the night? Rules around curfews that may have been appropriate when they were a teenager may not be relaxed enough to allow your adult child freedom so as not to become resentful.
Both parties need to be aware of each other’s boundaries and expectations early on to set the foundations for a happy domestic life.
While your adult kids are at home it’s a great time to make their financial dreams a reality. Frame it as a shared goal, one that you all have a stake in. If both sides are willing and eager to uphold their side of the bargain, it will alleviate tension and make the goal more likely to succeed.
It might look like this: the parents allow their offspring to live with them rent free, provided the kid puts away 40% of their income towards a house deposit. You can have a system in place to prove this is happening and regularly meet to help make sure everyone is staying on track.
Not always the right choice
It’s important to acknowledge that cohabitation is not the right choice for all families. If things aren’t panning out well, be honest with each other. Then work together to find alternate living arrangements.
Modern kids are likely to come and go throughout their lives. Treasure the times you have living together while making them as fruitful for both your relationships and finances as possible.
Building wealth in diversity
What a difference a year makes. In recent months, Australian shares hit a record high, the Aussie dollar dipped to levels not seen since the GFC and interest rates were cut to historic lows.
Towards the end of 2018, shares were in the doldrums and while experts agreed the Aussie dollar would go lower most tipped the next move in interest rates would be up.
All of which goes to show that when it comes to predicting financial markets, the only sure thing is uncertainty. There’s no avoiding market risk, but it does need to be managed if you want to build enough wealth to live comfortably in retirement and achieve other life goals along the way.
Thankfully, there is a way to reduce the impact of market volatility on your overall investment portfolio. Hint: it’s not by putting all your money in the bank.
Mix it up
The best way to reduce the risk of one bad investment or a downturn in one market decimating your returns is to hold a mix of investments. This is what is referred to as diversification or not putting all your eggs in one basket.
To smooth your returns from year to year and avoid the risks of short-term market volatility, you need a mix of investments from different asset classes.
The difficulty of predicting the market in the short-term was certainly in evidence in the year to June 2019.
Investors who panicked at the end of 2018 and sold their shares would have missed out on the unexpected rebound in global shares.
A year of surprises
Australian shares returned 11 per cent in the year to June 30. Global shares returned 11.9 per cent while US shares returned 16.3 per cent, partly reflecting the fall in the Aussie dollar from US74c to US70c.i
The worst performing asset class in the year to 30 June was Australian residential property, down 6.9 per cent.ii But while the housing market downturn was constantly in the news, good news in other sectors of the property market went largely unnoticed.
The best performing asset class by far in the year to June was Australian listed property, up 19.3 per cent.
The gap in performance between direct residential property and listed property highlight another important aspect of diversification. You also need to diversify within asset classes.
Look beyond your backyard
Where property is concerned, that means investing across a range of property types and geographic locations. By diversifying your property investments, you reduce the risk of short-term price fluctuations in one location which can result in a big loss if you are forced to sell at the bottom of the market.
The same holds true for shares. Many Australians have a share portfolio dominated by the big banks and miners, attracted by their fully franked dividends.
The danger is that investors with a portfolio heavily weighted towards local stocks are not only exposed to a downturn in the bank and resources sectors but also the opportunity cost of not being invested in some of the world’s most dynamic companies.
Time is your friend
Over the last 30 years the top performing asset class was US shares with an average annual return of 10.3 per cent. Australian shares (9.4 per cent) and listed property (9.2 per cent) were not far behind.iii
And then there was cash. In a time of record low interest rates cash in the bank returned 2 per cent in the year to June 30, barely ahead of inflation of 1.6 per cent. The return was better over 30 years (5.6 per cent), but still well behind the pack.
While it’s important to have enough cash on hand for daily living expenses and emergencies, it won’t build long-term wealth.
There’s no telling what the best performing investments will be in the next 12 months, as past performance is not an indicator of future performance. What we can be confident about is that a portfolio containing a mix of investments across and within asset classes will stand the test of time.
If you would like to discuss your overall investment strategy, please give us a call.