Although travel insurance is often considered before travelling overseas, the importance is ensuring your financial affairs are in order is often overlooked. We asked Nigel Smith of Covisory Partners for his thoughts on best practice before you travel.
It never ceases to amaze me just how many people decide that they need to update their Will, Trust or letter of wishes a few days before a major overseas trip. Often these documents have sat hidden in a dark place gathering dust for years despite frequent reminders from lawyers and accountants that you need to check they are still appropriate. Then all of a sudden, a few days before you board the plane for that lengthy overseas holiday, a sudden panic takes over and you have to recheck them.
We generally recommend you at least read and check your Wills and letters of wishes, plus any powers of attorney, every 2 years. Usually no major changes are required, with only minor tweaks which can be easily done via a codicil, a secondary document which amends rather than replacing or redoing a Will.
The reality is that you are often more likely to die while in a car going to the airport than on the trip itself. However, people do die on holidays so none the less it is better to check these than not. A few years back a NZ family of 4 were all killed when a light plane crashed while on a sightseeing flight in the islands. A family friend who was the executor spent 1 year sorting out the Will but more importantly the business which the family owned.
So, what do you need to think about. Firstly, a Will is a legal document and it is very fixed and inflexible. It needs to be done properly by someone who is appropriately qualified. It should cover:
- Who is your executor? This is the person who administers the Will.
- Bury or cremate.
- For those will children under 18 who will become their guardian. This is very important as there are a lot of factors to consider in reaching this decision like:
- Their ages.
- How busy they are.
- Do they have kids themselves?
- Will your kids fit into their family?
- Financial support – what if one of them needs to give up work to look after your kids?
- Back up/secondary guardians.
- Use of your house or beach house.
- Where they live – same school zones or city etc.
- Today most valuable assets are owned in trusts and not part of a Will, but personal property and effects are still owned personally. There may be some valuable items in this, but there will always be more fights over sentimental items than those of value. Making a list of specific valuable or sentimental items and who they are to go to is very helpful, as are pictures.
- Whether your executor can charge for their time.
- Any replacement trustees or who the power to appoint and remove trustees goes to.
This is not comprehensive but is a start. By comparison a letter of wishes to your continuing trustees is an informal, non-binding document. It can be a simple letter from you. It needs to spell out who gets what and when. It can also cover various "options" or different eventualities, eg if my child does drugs, they get nothing.
While non-binding trustees will usually follow it and courts will look at it to decipher a settlor's intention. Again, this is a document that does need to be thought and talked about.
Finally, there are powers of attorney. These fall into 2 distinct categories:
- Health and Welfare which apply when you are sick or injured and unable to act for yourself; and
- Enduring or general powers which allows someone to act for you and a company while you are away or otherwise can't.
There are specific forms for both which sadly have become far more complicated in recent times. However, we recommend that you look at having both.
So, these are all matters that do require some clear and deep thinking. While the urge may be there to do this quickly before you get on a plane etc, if you do then make sure you do a full and proper job when you get safely back.
Nigel Smith is a director of Covisory Partners Limited a chartered accounting, trustee and advisory practice dedicated to looking after families, their businesses and investments.