Taking control of your finances
I was speaking with someone very close to me yesterday. They wanted to discuss how their finances work. They are happily married and their husband takes care of their finances.
They mentioned that if something happened to their husband they would have no idea about money, what they own, how they would get money, and how they would provide for their child. They said their eyes glaze over each time money is mentioned, they don’t understand it. Everything is managed by their husband because he is more financially savvy. This is not a bad thing, however what happens in this situation when the husband dies, the wife is grieving, trying to navigate documents, frozen bank accounts, funeral arrangements and locating passwords. When you add in trust or company structures which have been set up so that the husband is the sole director or the sole trustee and appointor of a trust, things get complicated.
Add another twist, where there is no Will, and pretty much, it’s a poo show.
What happens when there’s no Will
If someone dies without a will, they die intestate. Being intestate means that the laws of the state or territory they live in will decide how their estate is administered. An estate is made up of a person’s assets and liabilities.
A person’s assets are their property and belongings that have value, such as a house, car and bank accounts. A person’s liabilities consist of any money they may owe, such as a mortgage or a loan.
The proceeds from your life insurance and superannuation do not automatically form part of your estate. If there were no binding death benefit nominations or specific wishes mentioned in a will then superannuation law sets out who is eligible to receive superannuation death benefits on the death of a member of a superannuation fund.
What do you do if someone dies without a will?
The first step is to apply for permission to administer the estate. The estate includes all the person’s assets and liabilities. The court will then issue a grant of letters of administration. Letters of administration gives a person or trustee company the legal right to administer the estate of the person who has died.
The person who administers the estate is called an administrator rather than an executor, but their duties are mostly the same.
Sole Trustee or Appointor
If your spouse dies and they are the sole trustee and appointor of a trust, you or your advisor will need to read the deed to work through whether a replacement appointor can be appointed. In some cases, you will need to apply to the Supreme Court which can be an expensive drawn out process.
Sole director of a company
If you are the sole director of a company, and you die, the company may be unable to operate. With no-one properly authorised to make management decisions or act for the company, it may be unable to trade. Banks and other financial institutions in particular may be unwilling to accept instructions in relation to a company’s trading account if they are not satisfied there is someone properly authorised to act for it. Staff and suppliers may not be able to be paid.
Section 201F of the Corporations Act 2001 does provide that, in the event of the death of a single member/director of a proprietary company, the executor or other personal representative appointed to administer the deceased’s estate may appoint a new director to the company. The director has all the powers, rights and duties of the deceased director and can keep the company running until shares are transferred to beneficiaries who may then appoint new directors if they wish.
Where there is no will, however, a near relative or other person would have to apply to the local Supreme Court for letters of administration to manage the estate and this could take some time - possibly weeks if not months. Alternatively, the Public Trustee may step in and administer the deceased estate but this process can also take months.
If someone is willing to purchase the company, they may not be able to do so quickly because there will be no recognised owner of the shares who can authorise their transfer until the testator has been appointed and settled the estate. Even if the final decision is taken to wind up the company so all beneficiaries can be paid out, the delay of possibly several months may mean the value of the company will be much less than it might otherwise have been if it had been able to continue operating in the interim period.
When there is a will
A Will is a legal document that states how the deceased person's assets are to be distributed after their death. You’ll need to find the last known signed and witnessed version of the Will. Often legal advisors or accountants will have copies.
The Executor of the Will is responsible for distributing the deceased's assets to the people named in the Will. A will usually names one or more executors who will be responsible for dealing with the administration of the deceased’s estate.
The most important document in terms of finalising estates is a grant of probate which is an order of the court stating that a particular Will is valid and that the estate entitlements are governed by it.
Bank accounts
Once you notify the banks and provide at least one of the Proof of Death documents, a permanent hold will be placed on any transaction accounts solely held by the deceased. This means:
No money can be taken out of the accounts
Credit continues to be credited to any deceased estate accounts
Direct Debits are stopped from being debited – including utility bills, mortgage or loan payments.
Joint bank accounts - the joint holder will still have access to the account (credits and debits) as per normal (except for term deposits and if joint holder is a secondary holder of the product) and the surviving account holder will not need to be formally identified in order to access funds from the joint accounts. Joint accounts will be transferred into the name of the surviving joint account holder(s) once the banks have received a certified copy of the Death Certificate.
In most cases, if an individual forming part of a joint account dies, the surviving account holder will gain full access to the funds and continue to be able to operate the account. The funds do not form part of the deceased estate.
Generally, the ‘principle of survivorship’ applies to jointly held bank accounts. This means that in the case of a joint account holder’s death, the surviving joint account holder receives the remaining funds, and full control of the account. The exception to this is term deposits.
Credit Cards - the banks will offset where possible the credit card debt using the funds available from any savings and transaction account. You’ll need to cancel any existing direct debits attached to the card. If the deceased was the primary cardholder, the card needs to be cancelled, which will also cancel any secondary cardholder’s cards automatically. This impacts on secondary cardholders who may be reliant on this card for making purchases.
Home Loans - the estate of the deceased will need to continue paying the loan. Interest will continue to accrue on the account until the loan is finalised. For sole accounts, the redraw facility will no longer be available and all debits will be blocked.
Personal Loans - the joint account holder or the estate of the deceased will need to continue paying the loan. Interest may still accrue on the account until the loan is finalised.
If the Deceased held a trust account and you are a beneficiary, we recommend that you seek independent financial and/or legal advice. You will then need to visit a branch to make any changes to the trust account.
How can I learn about money and investments that we have?
Below are a mixture of free and paid resources you can use to educate yourself:
Courses
InvestSMART Bootcamp here
ASX - Courses here which are free and cover shares, options, ETFs and ETPs and bonds
Money Smart - Free government initiative which has great easy to understand information here
Melissa Browne - Has courses, book and podcast more details here
Podcasts
She’s on the money - Victoria Devine
The Investing for Beginners Podcast - Your Path to Financial Freedom - Andrew Sather and Dave Ahern
The Australian Investors Podcast - Owen Raszkiewicz
Shares for Beginners - Phil Muscatello
Books
Clever Girl Finance: Learn How Investing Works, Grow Your Money by Bola Sokunbi
The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns by John C. Bogle
Checklists
The below checklist is to help you compile documentation to do with both yours and your spouse/partner’s estate. The list is not exhaustive and you can add your own items. Learn what these documents are - who has copies and who you need to contact.
Checklist for documents
1.Bank accounts, name, BSB, account number (attach current statements and advise if accounts are in Australia or other countries)
2. Credit Cards (attach statements)
3. Investments
a. Shares - inc purchase docs showing HIN, amount of shares bought and cost price. Any sale docs, return of capital, share buy back docs
b. Managed funds
c. Gold
d. Property
e. Cryptos
f. Super fund statements including binding death benefit nomination
4. Collectibles ie art, motor vehicles, and how you wish for these to be dealt with
5. Jewellery
a. list separately
b. jeweller valuations
c. insurance documentation
6. Mortgage & loan documentation
a. mortgage documentation
b. loan documentation
c. market valuation
d. Certificate of Title, or which bank holds
7. Insurance policies
a. Life & permanent TPD
b. Income protection
c. Home & contents insurance
d. MV
e. Other eg landlord insurance, boat
8. Will
9. Enduring Power of Attorney
10. Advanced Medical Directive
11. Company or trust documentation including prior period financials and income tax returns.
If you are part of a complex tax group, organisational chart showing the entities involved
12. If you are a director of a company, ASIC reports showing shareholding and officeholders
13. List of people you wish to be advised of your death
14. Passwords for accounts, computers, apps. This is a biggie - talk about this.
Contact list for organisations
Accountants - name of firm, address, contact details phone and email
Lawyers- name of firm, address, contact details phone and email
Banks - bank accounts and loans, term deposits, safety deposit boxes
Credit cards
Superannuation policies
Life insurance policies
Insurances other - privtae health, motor vehicle, income protections, landlord insurance, etc
Investments - shareholdings eg Computershare, Link Market
Centerlink
Medicare
ATO
Child Support
Australian Electoral Commission
Local Council
Local Australia Post - PO Boxes and mail
Utilities - electricity, gas, phone and internet, water,
Subscriptions - Netflix, Foxtel, Binge etc
Vehicle registrations
Local clubs
Health professionals - doctor, dentist, specialists
Remove name from mailing lists
Social media accounts
We all have good intentions of being organised. In reality, this is something that people quite often put off. The key to this is thinking ‘how would I like this experience to be for my loved ones'?’
If you would like to get this sorted - we can help. We’re more than happy to discuss and connect you with professionals.
To book in a time with me please connect here