The Cardinal Newsletter

In November 2013, the Australian Bureau of Statistics (ABS) released figures indicating that Australians are living longer than ever before. According to the ABS Director of Demography, Bjorn Jarvis, “A boy born today could expect to live 79.9 years, while a girl could expect to live 84.3 years

Australians in increasing numbers are recovering from illnesses like cancer, heart disease and stroke even while these diseases are becoming more prevalent. A report released by the Stroke Foundation claims that in 2012, there were over 420,000 Australians living with the effects of stroke, and of these, 30% were working age.

Trauma insurance pays a lump sum if the insured person suffers a critical illness. Unfortunately, Australians are notoriously underinsured, and many believe that trauma cover is only for the family bread-winner, or that private health insurance covers the costs. This couldn’t be further from the truth. Consider Dave – 41, office manager, and wife Kylie – 38, part-time florist. Dave and Kylie have one child, Chloe, 5, an average mortgage, two cars and living expenses typical of a young family. Given that Dave was the main income earner, the couple believed they were doing the right thing by their small family when they asked their financial adviser to arrange life and trauma cover for Dave.

Their adviser suggested they consider insurance for Kylie but as she only worked part-time, and the couple had private health insurance, they didn’t believe it necessary. One morning at work Kylie experienced a sudden, sharp headache before blacking out. She awoke two days later in hospital. Kylie had suffered a brain aneurysm. Many don’t survive such a trauma, but Kylie was fortunate although she was left with a disability. Kylie could no longer walk unaided, couldn’t drive and was unable to return to work. When Kylie came home from hospital, modifications were made to the home, and Dave employed a housekeeper to take Chloe to and from school, maintain the house and prepare family meals.

This cost $750 per week ($25 per hour x 6 hours per day x 5 days a week). None of this was covered by health insurance.

Losing Kylie’s wage didn’t greatly impact the overall household income, but the family’s additional expenses were devastating. Health insurance covered a portion of Kylie’s hospital expenses and some specialist care, although there was a considerable gap to pay. After a couple of months of treatment and medication, her health benefit entitlement ran out.

Trauma insurance covers expenses incurred in the event of a major illness. If Kylie had been insured, Dave may have been in a better position to repay the mortgage and had cash available to modify the home, pay for Kylie’s treatment and the housekeeper.

For many, surviving a major illness is only the beginning of the trauma.

Protecting your loved ones after you’ve gone

Estate planning is an essential component of your financial plan – particularly when dependents are involved. Plan ahead and you’ll find the process less onerous than you expect!

Most people understand the point of a will, yet estate planning is not just about deciding who gets what when you die. There are other things to consider before you get started.

 What is your financial position? When you die, many of your assets and liabilities form your estate. A clear understanding of your net financial position will show exactly what you have and what you can bequeath (give away).
Who will be your executor?
You appoint an executor to ensure that the estate’s debts are paid and assets are disbursed as outlined in your will. It can be a difficult and time-consuming job so your executor must be competent, trustworthy and willing to take on the role. Alternatively you can appoint a private trustee company but be aware that fees will apply.
Are dependents involved?
If you have dependents, particularly young children, you will want to ensure they are taken care of. To protect your loved ones after you’re gone, consider the following:
• Guardians – appointed to take care of children until they are considered independent. It’s important to choose the right person – someone you trust to act in the children’s best interests.
• Testamentary trust – only comes into effect after your death, although you set it up as part of your will. This trust protects your assets and those who are to benefit from them – especially children or dependents who are unable to take care of their own finances.
• Discretionary trust – an entity created while you’re still alive which enables assets and their income to be distributed as the trustee sees fit.
Do you need a power of attorney?
Various powers of attorney serve different purposes. To determine whether you need to appoint a power of attorney, you should seek legal advice to first understand how they work.
What about superannuation?
Superannuation is not automatically part of your estate but you can easily nominate one or more beneficiaries.
hen should you review your will?
Your will should be regularly reviewed, and updated in any life changing circumstance such as:
• getting married,
• having children,
• buying a home,
• death of a spouse.
A professionally drafted estate plan offers invaluable peace of mind, regardless of your age.

Timely Goal Setting