Part 1
Jordan Vaka
Hello and welcome back to Life, Loss & Legacy – the podcast for people navigating those first few years after losing their partner.
My name is Jordan Vaka, and I’m from PlanningSolo. I’m an independent financial adviser who specializes in helping people through those first years.
And I’m joined today by special guest Lucy Percy of Head and Heart Estate Planning.
Hello, Lucy.
Lucy Percy
Hi, Jordan. How are you?
Jordan Vaka
I’m very well, thank you. I’m very well.
And I’ve asked Lucy to join us today to discuss estate planning, will’s, beneficiaries and documents. And in doing so, obviously, Lucy is an expert in this space.
She’s the founder and principal lawyer of Head and Heart Estate Planning, and she’s helped quite a few of my clients lay out the documents that they need to make sure their wishes are carried out.
So, Lucy, thanks for joining us.
Let’s start a little bit with. I think let’s hop straight into it. Let’s start with a little bit of a background on estates, if we can.
Specifically, where are the three areas that lawyers can really help with people in that period of planning?
What happens at the end?
Lucy Percy
Yeah, absolutely.
So in terms of planning, you’re right. What we start with is, what’s the outcome you want to achieve? And then we reverse engineer it.
We’re like, okay, well, to achieve that outcome, you’re going to need to do this, and this in terms of your legal documents.
So in an estate plan that is typically, I say, we want documents that are going to operate in your lifetime and on your death.
That’s a really key distinction.
And we also need to do planning for your assets that are going to fall inside your estate and outside your estate.
So a lot of people don’t actually realise that your will can’t gift everything that you own. There are certain asset types that your will just isn’t going to have jurisdiction over.So I say before death and after death, if inside and outside your estate are the key things that I say to people when we’re planning, and that’s.
Jordan Vaka
The planning aspect – and we’ll cover in other episodes the administration and the disputes – is one piece of estates.
But with the planning side of it, I guess one thing that I’m keen to find a little bit more about, and most of the people that are listening have probably been through part of the process, but why is it so valuable for people to have an estate plan in place?
Lucy Percy
Yeah, I mean, we can look at this in two ways.
We can look at estate planning as bringing us closer to the things we want.
So that could be leaving a legacy that outlines our values and really is a continuing last act of love for the people that we want to take care of on this earth.
It can bring us control. Yeah, it can bring us control. They’re all the things we’re moving towards.
But the other way to look at it is it’s so valuable because it helps us move away from the awful experience after probate when something might be going wrong.
That could be we’re moving away from uncertainty, conflict, time delays, expensive legal fees.
So, you know, I always think of it in two ways. It’s bringing closer to the things we want to achieve for the people we love.And we’re also pushing away the things that we just. We would never, ever knowingly want to leave people with that kind of mess.
Jordan Vaka
I like that perspective because I think most people’s vision of an estate is that negative, is “what do I want to avoid?”
I don’t want to have that big argument that happens after I’m gone, but it can be, I think you mentioned it’s the “last act of love for the people you leave behind”, giving them that roadmap of how you wanted things to play out.
Hopefully that helps some people, encourage some people to get this plan in place, because a lot of people avoid it.
So I am curious, who do you think should be doing an estate plan?
Lucy Percy
I mean, the textbook answer is anybody over 18.
So even if you are a young adult and you don’t have any assets, we always have, usually by that age super, with typically a portion of life insurance inside it, the super rules, and I know that you will cover this in another episode about who we can pay our super benefits to are really quite strict.
If we have a young adult who’s 21, has a portion of two or $300,000 covering their super, they might say, I don’t have anything to gift. Why would I do a will?
Well, the answer is, you can’t nominate your parents or your siblings as beneficiaries of your super, so you want to make that easy for them.You might also be in a domestic relationship at that stage, and so, you know, if something happens to you, there’ll be some uncertainty, some conflict.
I certainly hear about these cases at least once or twice a year where a young adult has died. You might say, I don’t have much.
What you’ve got is going to pay for your mum to take a year off work, to grieve, you know? So sometimes even the less we have, the more impact it’s going to have for the people around us when we’re gone.
So who are we to say that 1$100,000 isn’t much? If you’re the person suffering that grief and loss? $100,000 could be life changing in terms of really letting you take care of yourself.
So, you know, for parents with young adult children, sometimes I say, you know, I’m thinking of a beautiful woman, and she had a daughter going off to be an au pair.
And I said, I’m just going to do this for free.
Like, I care so much about your daughter having proper documents, you know, and if I didn’t believe in it, I wouldn’t do those free things.
Do you know what I mean?
Like, if that’s a measure of how much I believe in it, there every now and then I’m like, oh, that young adult is at, you know, high risk. Let me. Let me help take care of that.
Or we bundle it into the parents package and do something pretty basic. So young adults, obviously, then you’ve got your other commencement triggers, or, you know, we’ve got.
When we increase insurance, when we have a relationship.
So that could be marriage, or it might not. You might also touch on this in the super legislation. That length of a relationship and what it looks like to make a claim under a will or intestacy versus under super is actually different. They’re different thresholds.
So, yes, starting a relationship, marriage, definitely.
Marriage revokes previous wills. So that’s at operation of law, divorce and buying a property.
Having a child is a key one with the buying a property. I always say to people, please come to me first. Like, don’t let your conveyancer tell you how to own your property. Joint proprietors, tenants in common.
And, like, it has such a critical impact on the end game on your estate. Come and see me before.
Jordan Vaka
You know, that’s interesting because we will have an episode with a buyer’s advocate and a finance broker about buying that first house on your own.
So just to emphasize that point, get proper advice around how that should be structured.
Lucy Percy
Totally. So sometimes I’ll do a discovery call and clients will be like, okay, we’re just finishing this settlement, and then we’re going to be ready to start after it.
And I say, actually, can I put my hand up?
Can we do a free half hour even?
And I just want to talk to you about your ownership options, because it’s not uncommon for me, as part of my estate planning and especially with blended families, to actually ask clients to change the way they own their home.
So get that advice early, and you’ll save us having to restructure it.
If it’s an investment, we will not be able to change the manner of holding without paying stamp duty.
Please get the advice early. It is fatal in terms of the end game. Yeah. When you die.
Jordan Vaka
And I think that’s a crucial lesson for all of this for anybody listening, is getting the advice early saves you a fortune compared to trying to fix things after it’s done.
We’re working with somebody at the moment where we’re trying to retro actively fix some things, and it’s just, it’s a real mess.
So get the advice early.
Get good advice as quickly as you can.
Lucy, what about business owners? How does that, like, are they people that. Yeah, how do they document things?
Lucy Percy
Yeah, that is a great question.
Obviously, it’s a passion of mine because I’m a business owner and my husband has had a business before.
We are just self employed business people.
And the responsibility and risk that you have is, you know, not heavy. What do I want to say? Fulsome.
So it depends on the way that you’re structured. If you’re a sole trader versus in a partnership, I don’t see too many of them anymore, versus you have a company or a company owned via a trust. So my answer to that is going to depend on those things.
But the key thing to understand is that you’ve got your will and your will is going to appoint a personal executor. I’m going to use my structure as an example.
My will only let me gift the shares in my company. Okay?
And then the recipient of those gifted shares, so let’s say that’s my husband, is going to vote in a successor director of my company.
So if we have mum and dad and they have a company worth $5 million, let’s say it’s all in dad’s name, and his will gifts his shares in the company equally between his three children.
We’re going to end up with a situation where two of those children could form a voting bloc against the third. They could vote themselves in as director, and the third child could be left out.
So there’s lots of great things we can do there.
You know, you can change the constitution of a company that says, you know, appointing a successor director to Lucy Percy requires an absolute majority, a special majority, you know, something over 50%.
So for blended families, self managed super funds with corporate trustees, this comes up a lot.
But, yeah, really the key thing to understand is your personal power of attorney will not let your personal financial attorney stand in your shoes.
As director, your will not let your executor stand in your shoes as director. If we’re talking about company structure, they’re going to stand in your shoes as shareholder, and then that person as shareholder is going to vote in the next controller of the company. Is that helpful?
Jordan Vaka
Absolutely.
And I think that’s a really key point. And there’s probably one that if people wanted more detail on contact Lucy, I think, because, again, a lot of the people, I imagine a lot of people listening to this have been through something.
Their late partner owned a company. They’ve had to deal with that kind of… There’s not a tussle, but it’s an administrative wrangle they have to go through.
So if you are in the middle of that, or if you’ve navigated through that, please reach out to Lucy and have a chat.
Lucy Percy
Oh, I was going to say one last thing that I will add, though, is a very valuable document is a company power of attorney.
So you can’t, your personal power of attorney can’t do those things. Your company as an entity can have a power of attorney in terms of the cost, like, let’s say it’s 550. The benefit and the security that you’re giving yourself is just the value of that is just exponential. So what that means is that if a director loses capacity while their personal attorney is going to ASIC changing the directorship, or maybe they decide not to, the company won’t cease trading. So we can still contract, we can still call in money, we can still pay wages, we can pay rent, we can collect rent.
If we don’t have a company power of attorney and there is a death or an incapacity, there is going to be a lag that is going to have a severe consequence on a trading entity. Yeah, yeah. There are emergency things we can do at court. Maybe some of your audience will have had to do those, like rush off to court and get a limited probate just to pay wages or do something like that. But you really want to avoid that. And for a very simple document, you can.
Jordan Vaka
Yeah. And I think we’re talking about estate planning, and I think for a lot of people, maybe that haven’t been through the process that translates into will. But even as you hearing you speak, there’s so many other documents, there’s so many other things in place. And one of the things that I initially found almost frustrating about working in the estate space now, I think it’s fantastic. There is no right solution. You mentioned earlier that it’s about identifying the goal of the objective and then building it around that every path is. Feels like every path is possible, but every path has a consequence. And that’s why working.
Lucy Percy
That’s such a great way to put it. Yeah. Yeah.
Jordan Vaka
Working with an expert, I think, would really help you with that. Which brings me to my next point. There are many. There’s three main ways. I can think of three or four main ways that you can draft your quote, unquote, estate plan. Can you walk us through, probably from, in order of least effective to most effective, your different options for drafting that estate planning paperwork?
Lucy Percy
Okay, so the first one is probably my biggest competitor in business, and it is people who choose to do nothing. Just apathy, overwhelm. I’m going to do nothing about this. So I’m not worried about all the other wills and estates companies. We know that up to 75% of Australians just don’t have anything in place or have very old documents. So in terms of how effective is that? It’s awful. It’s terrible. You do not want to. You don’t want that to be your legacy. So that is what we call dying intestate, where you die without a will in place at all, and it can increase time, delays, complexity, means you have zero control over who’s controlling your estate, and the court can put complex conditions on that probate. So, you know, if I can touch one.
An example would be that if I died without a will and I had children to my current husband, but I had children to a former spouse, the court isn’t going to release all of the money to my husband. They need to assign a portion to the children from another relationship. But they might ask for what’s called a surety guarantee, although they probably will ask for it. So that means the amount of money going to my children, not of my relationship with Nick, they would say, okay, that’s $400,000. Someone needs to put $400,000 surety up to the court so that if the administrator runs away with that money, the children have a recourse to get it back. So think of it as bail. When Tony Mockbell skipped town and went to Greece, it was his sister in law.
If someone put up a million dollars bail, surety is the exact same thing, but in the estate space, so it’s not just where there’s minor children. The court can demand a surety over a certain amount of money. And I had a case two years ago where the administrator just couldn’t come up with a surety. She was an aged care pensioner, no assets and were just stuck in this vortex of.
Jordan Vaka
So it’s actual cash. It’s not a personal guarantee. They have to stump up the actual cash or assets.
Lucy Percy
It’s a guarantee. But she didn’t have the assets and.
Jordan Vaka
Guarantee it wasn’t worth anything.
Lucy Percy
Yeah, and. But also, would I want to stump up a guarantee? Not really. Like. No, no.
Jordan Vaka
And those calculations in that, there’s no. There’s no discretion around there, is there?
Lucy Percy
Within integrity, all of the beneficiaries can consent to dispensing with the requirement for surety guarantee. Oh, God.
Jordan Vaka
Everybody has to.
Lucy Percy
Yeah. And the beneficiaries have to have the ability to consent. So if we have minor children, maybe their parent or their guardian just wouldn’t consent to it, you know, like, why would you consent to dispensing with the requirement? You don’t know that the money’s gonna. You know, you’re not in charge of the money for them. So. But again, it’s just an example of something that can blindside families. Like, you think you’ve had the worst thing happen to you, and then you think common sense will prevail. Actually, the law and the court system has all of these rules that are designed to protect us, but they’re really complex and they add a lot of delay and a lot of cost.
Jordan Vaka
So here I am thinking that one of the worst things about intestacy is that your estate is divided according to a formula. Like, it goes, doesn’t it? And that’s different across the country. Each state has its all different surety idea. Makes it even worse. That’s horrendous. So intestacy is your biggest competitor and the biggest danger, I think, to most people’s financial future after passing away. So please avoid intestacy. Get a will done.
Lucy Percy
Yes. Post office will kit.
Jordan Vaka
That’s the next along the spectrum.
Lucy Percy
Yeah, I’m going to deal with post office will kit together with. It’s probably a new phenomenon, but the online law firms, some of them are law firms, but then they’ll have a disclaimer. We’re not giving legal advice in these documents. They might say the wills are lawyer checked or written by a lawyer, unless you’ve got strategy advice from a lawyer. Like, the written by a lawyer is meaningless. Like, I could write a template and sell it. But you know what? If I believed in these documents, I would release a product myself, but I just don’t believe in them.
Jordan Vaka
I think already you’ve covered so much nuance, and we’ve only been talking for a little while, so have an off the shelf solution feels a bit limiting, but. So post office and online, quote, unquote, law firm.
Lucy Percy
Yeah, yeah. Post office will kesh. Very simply, we see them filled out incorrectly. So the law societies in Vic, in New South Wales, is where I’m most, you know, comfortable talking about. They do count the statistics about where these things go wrong, or they also count the statistics about where lawyers get wills wrong and are sued. The most commonly. And I’ll actually tell you that later because it explains why you need an expert. But a post office will kit so people can fill it out incorrectly. One example could be, and this is the most common with diY, people might gift specific things. I give my car to, I give my house to, but they don’t have residue gifting. So the gifting of the residue of your estate is the most critical gift in the will. It’s actually surprising.
Sometimes when I do my wills, I say to people, was it anything you thought we’d talk about that we didn’t. And, you know, have we not covered anything? And they say, no, I’m just so shocked about how general it is. Like, we haven’t named anything. And I say, yeah, because you’re going to get the most flexibility, the most longevity. Like gifting your car doesn’t matter. Like, you know, I mean, it might to some people, but the residue is the most important bit. So that is, we call in all of your estate. They’re your assets, we pay all of your liabilities, they’re your debts, and then we’re left with what’s called the residue. And your residue clause should be written in parts or shares or percentages. So we don’t know what your residue is going to be.
So I’m not going to give 500,000 to one person. You know, we don’t talk in numbers. We talk in percentages. DIY will kits really often miss out on that because the general public isn’t thinking about the residue. They’re thinking about, what do I own today? And if you sell your house or, you know, your bank account closes or your superfund moves, then those gifts are going to fail. So you can have partial intestacy where we’ve got some of a will, but it fails to appoint an executor, or it fails to gift the residue. And then you’ve got to go along to court and you get letters of administration with the willer next. So we’re going to use the will to the maximum capacity we can, but the rest of it is going to be called intestacy that makes sense.
Jordan Vaka
It does. I mean, it kind of boggles the mind, to be honest, but because we’ll talk a little bit about what makes a will valid, because there’s quite a. It’s very specific requirements, but I’d never thought of the residue element. The fact that specificity in a will can actually be to your detriment in the longer term.
Lucy Percy
Correct. It can be your undoing. Yeah. The one thing I love about post office will is only compared to intestacy. I mean, at least you’re usually choosing an executor. That’s hugely important. Typically, post office wills, DIY’s don’t have enough layers. So when people work with me, I’m always like, what happens if they die? What happens if they die? What happens if they resign? So we’re missing the layers. But the one thing I like about them, compared to the online will solutions is the people are limited by the space on the paper, so you can only muck it up insofar as you can fit the words in with the online wills.
I saw one that was 14 pages long, and this person had just kept typing these gifts, and the will maker platform didn’t cut them off, and it was just 14 pages of nonsense and absolute, really specific chaos. Like, I gift a nice amount for this person to put into their super, to enjoy their retirement. And I was like, number one, super is not an estate asset. Number two, what is a nice amount? Like, they double gifted things. They had. This person had done a 14 page will, included all of the beautiful people they love in their life. What they didn’t realize was they don’t have a cent to their name. All of their assets are owned in a trust that their dad left them. This person, their estate will be zero. They need to do succession planning of the trust.
And this was four years on, three conversations in, and they said, I’ve got a will. You know, oh, can I have a look? And I just thought that just the pages and pages of badly drafted gifting, and I just thought, at least the post office wills cut people off.
Jordan Vaka
It limits the rolling mistake they can make.
Lucy Percy
It limits it. It was just like, oh, goodness me.
Jordan Vaka
And I think historically, I’ve always been very tight, so I always thought you could diy a lot of things. And I have a long legacy of mistakes that have come with that. So I’m very much in the mindset now, if you’re going to do something that’s important, get an expert to help you. Whereas these systems, I mean, the post office one better but the online system, they’re not going to prevent you from cutting your own foot off, basically.
Lucy Percy
No. No, absolutely not. And they have no interest in doing that. They might, who knows?
Jordan Vaka
Well, they’re not providing firms.
Lucy Percy
They could be owned by firms that do litigation or, you know, who knows? And I’m not, that is not a declaration. I haven’t looked at the ownership of them, but certainly some of them are true law firms. They just exclude themselves from giving advice. I’m going to explain. The statistic about where do lawyers get wills wrong? Is going to help you understand why you need advice. So filling out those forms. In Victoria, lawyers get sued on estate planning for the greatest simple fact that they haven’t checked how their clients own their property. So a lawyer takes instructions, writes a great will, and they’ve failed to check. Is it owned by the testator at all? Like, people honestly sometimes think they own something and they don’t.
Or like, you know, like the other fellow, it could be owned in a trust or could be owned by the partner, or they own it jointly, which means if you own something jointly with another person, the wills act, you can gift it in your will. The property Law act is going to trumpet. And so the property Law act says anything owned jointly will pass to the survivor outside the estate of the will maker. It is not an estate asset. Or do you own it as tenants in common? Which means the percent that you own is discrete from the other owners and it will be able to be gifted in your estate. So where lawyers are going wrong is they’re taking instructions. I want to gift my house this way, but they’re not stopping and checking the source document. How does the client own it?
The death occurs and then in the administration phase there’s a surprise. Surprise, they don’t own that property, or surprise, it’s actually owned tenants in common. And now the other owner is going to force a sale on the widow or whatever. And so that’s where lawyers are getting sued. So that should hopefully explain we’re not just taking instructions and writing a document. You need our strategy advice. That’s actually what I sell. I sell strategy. And then we put it in the documents. So, you know, it’s something we come up.
