Plan on leaving something to your kids when you pass away?
Each year as we review the Google web traffic to our site, we regularly see in our top 10 most-read articles our blog article called, 'How to Split an Unsplittable Inheritance'.
Clearly, there's a lot of interest in this ongoing question, particularly now as most families in Australia own property or business assets - all different assets with different values – and these are by nature usually often hard to divide equally between beneficiaries to a Will, without destroying the value of those separate assets.
Read in this article
- Plan on leaving something meaningful to your kids when you pass away, not a nightmare
- How to leave an inheritance without also leaving a problem
- When old thinking doesn’t keep up with modern life
- Let's get practical
- The problem of having more than a single beneficiary in your Will
- Most decisions made under severe stress are not the best ones
- A Solution for sensible estate planning for All Families (& Small Business Owners)
- A better way to leave an inheritance for your kids and not a nightmare
- FAQ's
- I have a simple Will that just lists who gets what. Isn't that enough to avoid the "nightmare" you're talking about?
- The article mentions superannuation being separate from the Will. I thought my super automatically went to whoever I listed in my Will?
- You talk about leaving a "meaningful inheritance." Does that just mean leaving a lot of money?
- My kids all get along great. Do I really need to worry about complex planning and potential challenges to my Will?
- What is the single most important step I can take right now to avoid leaving behind a mess?
- Sources & Further Reading
Plan on leaving something meaningful to your kids when you pass away, not a nightmare
It's a problem that haunts parents of traditional families, step-families, and modern families who create 'family of choice'. The solution to this future 'leaving a legacy' puzzle, requires an understanding of;
- how Life Insurance works,
- usually how to establish a Protective Will, and
- where to get a personalised Modern Estate Planning strategy
(and yes we can help you with all of these).
How to leave an inheritance without also leaving a problem
This very uncomfortable question stops many people from even searching for a solution.
When planning an inheritance, taking an old-fashioned head-in-the-sand approach of, ‘my family will just know what to do,’ guarantees you’re leaving a nightmare for those left with sorting out an emotional and expensive mess, that usually tears a grieving family apart (because people don't always make their very best decisions during times of immense emotional grief).
Perhaps the strategy of estate equalisation might help you think through this problem better.
When old thinking doesn’t keep up with modern life
When it comes to leaving a meaningful inheritance for your children (or your grandchildren) or your family of choice, you'd think there would be a simple mathematical solution like; just add up the value of all your estate assets, then simply dividing by the number of beneficiaries you want to share that with'.
Today's Modern estates are made up of a collection of different assets, with very different values (often said to be ‘lumpy’ because they take time to sell) and not just cash in a bank (that’s easy to divide with little to no emotional connection).
Let's get practical
When you have assets of varying values and you want to leave specific items to one child and not the others, you don't have to look far to realise this can create a significant emotional problem later.
The problem of having more than a single beneficiary in your Will
What happens when your estate is made up of different assets all with different values that may not divide equally between the beneficiaries listed in your Will? Remember that your Superannuation fund is not considered an estate asset and has separate rules about Who is your super beneficiary.
Most decisions made under severe stress are not the best ones
When it comes to deciding how to distribute lumpy assets in an inheritance, many families can face deeply emotional problems that trigger arguments, usually because quick and complex decisions often need to be made during a stressful time of their lives (ie: the death of a loved one).
- Should all assets be sold first, then money distributed between the beneficiaries? (and if so who pays any taxes?)
- Would this fire-sale-approach destroy the real value of any asset like property sold at the wrong time of the market cycle, or if a family business was forced to sell off some of its business assets to pay out an inheritance?
- And what would happen if a family business was also partially owned by an outside business partner or used the family home to secure the business debts?
The problem of working with these ‘lumpy assets’ (ie: assets that cannot be easily sold) faces many Australian families and small business owners.
A Solution for sensible estate planning for All Families (& Small Business Owners)
To help reduce family arguments and reduce the risk of your Will being challenged, the sensible approach is to use an estate equalisation strategy.
- No good parent wants to knowingly leave a set of circumstances for their children and grandchildren, that will more likely than not, create an unequal environment to set up one of them for failure and the others for success.
- No good business owner wants to leave their family with a set of circumstances where, their family is suddenly forced into business with the remaining business partner who is unable to buy out the departing owner's share of the business, and its debts.
Estate equalisation is a strategy used by folks who want to make sure any assets left to their nominated beneficiaries (eg. children, step-children, elderly parents, chosen family, and friends) are evenly distributed in value. Usually, the estate value is equalised with a life insurance policy that adjusts low value assets with a cash injection, so the total estate value can be distributed equally and that everyone who has a valid claim is dealt with equally.
A better way to leave an inheritance for your kids and not a nightmare
- Add up the value of all your significant assets
- Divide by the number of beneficiaries you may have, then
- Use a life insurance policy to provide any needed additional funds to equalise the value of your estate, and ensure all beneficiaries are treated equally.
This way, the calculation for dividing your estate amongst beneficiaries is still simple, just a little fairer.
Speak with Sapience Financial about whether Estate Equalisation is a useful strategy for your situation.
FAQ's
Your Inheritance Questions, Answered. Here’s a quick summary of what you need to know about leaving a meaningful inheritance, not a nightmare.
I have a simple Will that just lists who gets what. Isn't that enough to avoid the "nightmare" you're talking about?
That’s a great first step, but a simple Will often isn't enough to protect your family from potential conflict or to protect the assets themselves. A Will is essential, but it’s just one piece of the puzzle. Think about it: does your Will protect a child’s inheritance if they go through a divorce? Does it minimise the tax your beneficiaries will have to pay? For many families, incorporating tools like a Testamentary Trust within the Will is the key to creating a truly protective and lasting legacy, rather than just a simple transfer of cash that could be gone in a flash.
The article mentions superannuation being separate from the Will. I thought my super automatically went to whoever I listed in my Will?
This is one of the most dangerous and common misconceptions in estate planning, and I'm glad you've asked. Your superannuation is held in a trust and is governed by its own set of rules, completely separate from your Will. To direct where your super goes, you must have a valid, up-to-date Binding Death Benefit Nomination (BDBN) in place with your fund. Without one, the trustee of the super fund—not you and not your Will—decides who receives your benefits, and it may not be who you would have chosen.
You talk about leaving a "meaningful inheritance." Does that just mean leaving a lot of money?
Not at all. A meaningful inheritance is about so much more than the dollar amount. It's about passing on your assets in a way that is helpful, not harmful. It’s about structuring things so the inheritance provides lasting security and opportunity, rather than causing a family feud or being lost to taxes, creditors, or a beneficiary's divorce. It’s the peace of mind that comes from knowing you’ve set your loved ones up for success and haven’t left them with a complicated, expensive, and emotionally draining legal mess to clean up.
My kids all get along great. Do I really need to worry about complex planning and potential challenges to my Will?
It's wonderful when families are harmonious, but unfortunately, grief and money can be a toxic combination that changes dynamics in an instant. We’ve seen countless cases where even the closest-knit families fall apart when a significant inheritance is on the table. Outside influences, like a beneficiary's spouse, can also create unexpected conflict. Proper estate planning isn't about distrusting your children; it's about protecting them from potential future conflict and outside risks by creating a clear, legally robust plan that leaves nothing to chance.
What is the single most important step I can take right now to avoid leaving behind a mess?
The single most important step is to stop procrastinating and get professional advice. Don't fall into the trap of thinking it's too complex or that you'll get to it "one day." Sit down with an estate planning specialist who can look at your entire financial picture—your Will, your superannuation, your trusts, your powers of attorney—and help you create a cohesive strategy. A well-laid plan is the only way to ensure your legacy is one of love, security, and opportunity, not the nightmare of a family torn apart.
Sources & Further Reading
- For Information on Wills and Intestacy: The NSW Trustee & Guardian provides comprehensive public resources on the importance of having a valid Will and the legal consequences of dying without one (intestacy) in New South Wales.
NSW Trustee & Guardian, "What is a Will?" - For the Legal Framework of Testamentary Trusts: The validity and operation of trusts created within a Will (Testamentary Trusts) are governed by state legislation. In NSW, the primary act is the Succession Act 2006.
Succession Act 2006 (NSW) - For Superannuation and Death Benefits: The Australian Taxation Office (ATO) is the regulator for Self-Managed Super Funds and provides definitive guidance on how superannuation death benefits are handled, including the critical role of a Binding Death Benefit Nomination (BDBN).
Australian Taxation Office (ATO), "Paying super death benefits" - For Setting Up Powers of Attorney and Enduring Guardianship: The appointment of substitute decision-makers is a crucial part of estate planning. The NSW Trustee & Guardian explains the roles and legal requirements for creating these important documents.
NSW Trustee & Guardian, "Power of Attorney" - For Family Provision Claims (Challenging a Will): The grounds upon which a Will can be challenged by eligible persons are outlined in the Succession Act. This legislation details who can make a "family provision claim" and the factors the court considers.
Succession Act 2006 (NSW) - Chapter 3 Family Provision
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Drew Browne is a specialty Financial Risk Advisor working with Small Business Owners & their Families, Dual Income Professional Couples, and diverse families. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His business Sapience Financial Group is committed to using business solutions for good in the community. In 2015 he was certified as a B Corp., and in 2017 was recognised in the inaugural Australian National Businesses of Tomorrow Awards. Today he advises Small Business Owners and their families, on how to protect themselves, from their businesses. He writes for successful Small Business Owners and Industry publications. You can read his Modern Small Business Leadership Blog here. You can connect with him on LinkedIn. Any information provided is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance.
