Financial planners need to be aware of their client’s marital status, whether it is actual or merely aspirational. Marital status including pending changes has a significant effect on the form and content of each client’s estate planning strategies.
Sometimes this means discrete enquiries are appropriate, and this can often be done in the small talk that proceeds the (apparently) business part of the meeting. For example, a joking enquiry about a young man’s romantic life may elicit a comment like “…yes, there actually is someone special now…”.
This comment is a signal that the client needs advice on wills and related areas, and also needs advice on related matters such as life insurance. If parenthood is a prospect…
If a client is getting married
Marriage automatically revokes a will, unless the will specifically contemplates the marriage and names the intended spouse.
First marriages are generally straight forward. Each partner executes a will in favour of the other partner. The wills are usually simple and short, and unless there are already children, or children are expected quickly, usually would not create a formal testamentary trust along the lines discussed in Part 3.
But problems may still arise. For example:
- one partner may be significantly older than the other;
- one partner may be significantly wealthier than the other;
- one partner may be in litigation prone profession, such as a financial planner; and/or
- one partner may in poor health with a higher risk of mortality.
In cases like this legal advice should be sought as to whether any specific provisions should be in the will to make the will better suit the clients’ circumstances.
If the client is getting divorced
Divorce does not automatically revoke a will. This means all clients who are getting divorced or who have recently divorced need specific legal advice as to the status of their will.
Separation has no effect on a will.
This is the case even if the partners have reached a property settlement.
This means, for example, that if a separated partner dies after reaching a property settlement and without making a new will his or her assets will still go to the spouse, and not to any other person, either under the terms of the earlier will or under the intestacy laws.
Blended families are common and are becoming more common. They create their own problems for estate planning and in most cases expert advice is needed to balance the genuinely competing claims of spouses, ex-spouses and different batches of children if your client dies prematurely.
The general goal will be to ensure that the client’s wishes are achieved, at least as far as the law allows the client’s wishes to be achieved. And sometimes there will be the further goal of helping the client through what can be a very difficult and emotional process. Awkward questions must be asked, and the adviser has to strive to understand the client and his or her family history and dynamics.
The wealthier and more complex the family’s financial arrangements the more difficult the will making process, and all the other issues discussed in this manual become more difficult too.
Family law interacts with estate planning law, and some complex and surprising results can arise.
The issues are discussed in a paper presented by Zinta Harris in 2006 titled Blended Families and Estate Planning which can be accessed here: Blended Families and Estate Planning by Zinta Harris.
The paper considers the complications caused by blended families in estate planning generally with extensive and detailed comments on:
- executor and trustee selection;
- testamentary trusts;
- succession of discretionary trust assets;
- succession of company assets;
- effect of joint tenancies;
- super and binding death benefit nominations;
- life insurance;
- binding financial agreements; and
- mutual wills.