15 April 2010

Dear Investor,

Your will be done

In the small world of US shopping mall magnates, Melvin Simon was a legend. A permanent fixture in Indianapolis high society, Simon had amassed a multi-billion dollar fortune built on ownership of over 300 shopping malls. He was well known for donating to charity, owned the Indiana Pacers basketball team and had even financed some comedy films.

However, Simon's legend has been obscured since September 2009, when he passed away from cancer at age 82. A bitter battle over his will has raged between his second wife and his daughters and son from his first marriage. Court documents reveal a web of allegations and counter-allegations between the contesting parties:

  • His eldest daughter, Deborah, alleges that Simon's most recent will was drawn under duress, when his health was failing.

  • His wife, Bren, alleges that Simon changed his will primarily because he was concerned that his son and daughters would not properly look after his wife.

Surely this battle between his loved ones was not what Simon would have wanted. But such battles are occurring with increasing frequency today and they are not limited to the relations of the uber rich. Any experienced lawyer will tell you that some of the bitterest legal battles are those amongst families and friends following the death of a loved one. And with about $2 trillion set to change hands in Australia through inheritance over the next 20 years, we are likely to see a lot more of them.

As the Simon case shows, the mere drawing of a will is not sufficient to ensure perfect peace amongst the relatives of the deceased. But it is an important step in the right direction and one that all investors should take. The following are five steps that you can take to help protect against disputes about your estate:

  1. Have a will: failing to have a will can be an extremely costly mistake. Many people believe that, if they do not have a will, their estate will pass to their spouse or partner. This is frequently not the case.

  2. Seek proper advice: many people rely on DIY will kits. Although such kits can have their place, the issues dealt with in a will are frequently complex. One key issue that can have a serious impact on the estate is tax. Frequently a death can have income tax, CGT, stamp duty and superannuation death benefits tax implications. For people with overseas connections, foreign inheritance laws (that are frequently draconian by Australian standards) can also apply. The net result is that your estate could lose up to half of its value. The only way to mitigate this is to plan ahead and structure your affairs in a tax effective manner. Expert legal and financial advice can be critical in this process. Legal advice will also be particularly useful in making your will robust enough to withstand challenge.

  3. Stay up to date: In recent years, estate planning has been made much more complex. Increasing divorce rates and non-marital relationships have changed forever the formerly straightforward model of "mum and dad passing property onto the kids".

    The law has attempted to address some of these areas by increasing the rollcall of those eligible for provision from a deceased estate. Predictably, however, these amendments have served to make the whole area significantly more complex. NSW has recently passed intestacy legislation introducing the concept of 'multiple spouses' to increase provisions for de facto relationships. Similarly, the Commonwealth government has passed its "mistress laws", to provide de facto, same-sex couples and partners in affairs the same rights as married couples in terms of maintenance and division of assets.

    For this reason, it is imperative to keep your will up to date with births, deaths, marriages and divorces and to pay proper attention to complications arising from blended families, step-families and former spouses.

  4. Choose your executor carefully: An executor can have a significant influence in ensuring that your wishes are properly fulfilled and that your estate passes smoothly to your intended beneficiaries. The role of executor can be a difficult one and can require a high level of diplomacy. You should ensure that you do not pick someone whose age, health or experience makes them unsuitable for the position.

  5. Be specific where appropriate: Frequently, the big disputes about estates are triggered by the small items of sentimental value, rather than large sums of money. The organisation of the funeral is also a common battleground. If you provide explicitly for these issues in your will, you will be going a long way to eliminating these squabbles.

Ultimately, the possibility of estate disputes cannot be eliminated entirely. However, any time and cost spent in carefully arranging your affairs will go a long way to reducing the likelihood and scope of such disputes - a prudent step for any investor.

Best regards,
Chris Andrews


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Chris Andrews
Head of Funds Management

t  +61 3 8610 2811
e  candrews@latrobefinancial.com.au

Chris Andrews is the Head of Funds Management for the La Trobe Group and has responsibility for the La Trobe Australian Mortgage Fund.
Read full profile here.

La Trobe is one of Australia's leading independent specialist mortgage Financiers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 115 staff and has raised over AUD$10Billion to assist over 100,000 customers since inception in 1952.

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