Implications of COVID-19 on succession planning

Do you need to review your will in this COVID-19 climate?

It is not surprising that the financial uncertainty and personal anxiety caused by COVID-19 have resulted in many people undertaking a review of their estate planning arrangements.  Generally, lawyers recommend that clients should review their wills when there is a significant change to their assets or personal circumstances.  For some, this may have occurred recently as a result of COVID-19.

The primary objective of clients and lawyers in succession planning is to develop a strategy to ensure that a client’s final wishes can be carried out, both practically and effectively.  However, the recent COVID-19 related market falls may have had such a significant impact on the value of assets that the intended distributions to the beneficiaries are no longer appropriate.  For example, a will that gifts real estate to one child and a share portfolio to another child may no longer achieve the intended equality in distributions desired by the client.

In times of market volatility and significant changes in asset values, we find that wills that contain gifts of particular assets or sums of money and wills that are particularly prescriptive may be problematic.  Without careful succession planning, gifts of specific assets that may be more susceptible to external market forces could lead to inadvertent outcomes for beneficiaries.  Often, it is usually preferable to give executors and the beneficiaries a degree of flexibility in order to deal with unforeseen events and the consequences that these may bring.

In a world where there are ever-changing restrictions on travel and personal interactions, clients should consider: Who is of an appropriate age, health and ability to assume the responsibility of administering my estate and is that person located in a place that will enable them easily to administer my estate?

As with all estate planning exercises, it is important that clients obtain considered legal advice and, if necessary, financial advice about the best strategies to adopt to ensure their intended outcomes are achieved – even if there is a change in asset values. Proper estate planning takes into account not only the wishes of the client and the assets that will pass to the beneficiaries but also the personal and financial circumstances of the beneficiaries, the risk of claims against the estate by disappointed family members and the possible taxation consequences for the estate or the beneficiaries. For example, an estate might lose the benefit of the capital gains tax exemption that attaches to a principal place of residence if the property is not sold within two years of death.   

As we grapple with the uncertainty of how long COVID-19 and its impacts will last, it is prudent for clients to reflect on their wills, the gifts that they have made and who they have appointed as executors and trustees.  These are important questions whenever a client is considering their estate planning but they are especially so now.

If you are concerned about the effect that COVID-19 may have had on your estate planning arrangements including your personal and financial circumstances, please contact the Estates team at McCullough Robertson Lawyers for professional advice.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.