They say all is fair in love and war. 

And it was first said by Miguel de Cervantes who made the comparison in 1604 in Don Quixote when he wrote, "Love and war are all one . . . Which was translated from the original Spanish used.

Variations have been used since, though it was not until 1850 that we saw the exact phrasing we know today.

Frank Smedley wrote in his novel, Frank Fairlegh: Scenes from the Life of a Private Pupil:

"You opened the letter!" exclaimed I.

"In course I did; how was I to read it if I hadn't? All's fair in love and war, you know . . ."

What has this got to do with insurance?

Just that, sometimes when it comes to family matters it can be war, ideally peace, love and harmony, but life is not always like that.

The days of people having little, getting married, having kids and living to near retirement age and passing away quickly have passed us by. Things used to be a lot simpler.

Today we live well into our retirement years, potentially a good 30-40% of your lifetime could be in what we currently consider retirement. 

Relationships have changed, situations where we have kids with several mothers or fathers, depending on the perspective. Multiple long term relationships/marriages, traditional and same sex.

Blended families have become common, and the issues of estate planning and responsibility become complicated. And no I am not talking about those on the bread line and social welfare having kids to qualify, this permeates the whole of society.

Wealth and stature have no boundary when it comes to the success or failure of relationships. 

My own family is an example of the times, both old and new. My maternal grandparents married young and lived together until well into retirement, with my grandfather passing at 77 and grandmother at 92. 

Contrasting that my paternal grandmother divorced my grandfather quite some time before retirement. Moved in with a fulla around retirement and then got married for a second time at age 80. 

Eventually outliving the three blokes and causing merry havoc at the local rest home, before passing away at 94. She was the leading cause of ACC claims for staff in the 4 1/2 years she was there!

Where's this going?

Planning. Planning is where this is going. Continuing on from our joint blog with LegalBeagle on Wills.

When we had simpler times, it was pretty straight forward. Everything went to the other and then everything went to the kids.

Today it is a tougher proposition.

Take the following situation.

Mum, two kids, new partner. Without a Will, the following could happen.

Mum dies, new partner gains control of the relationship assets, spends them, and the kids get nothing. Even though the kids have rights in law. This article in Stuff runs through a recent example of this situation in real life. 

With the situation that is often the case, kids from more than one relationship. Hers/his/both, the whole situation becomes more complex, and many people have no idea where to start, so don't do anything.

Not to mention that just having the conversation creates its own issues. Again one of those things that need to be done but busy lives get in the way.

Why is this so important?

If you do not have your estate planning sorted it makes it very hard for me to correctly structure your insurance planning.

Most of the time it is not nearly as complicated as people think and make out.

There's a really simple approach; give it all to charity. 

However, excluding people due your natural love and affection, yes this is a piece of law, from your Will is a great way to have it challenged and overturned.

Being realistic, there are some practical realities that can guide all of this.

Let us use an example.

Sally & Jessie married with three kids. The older two kids are Jessie's from a previous marriage, and the youngest is their child together.

Sally's view may be that the kids should all inherit equally, they grew up together and their teenage years were spent together, etc. Jessie's view is likely to be similar; they are all his kids.

The reality is Sally is likely to say the youngest gets my share, and the three get your share. Which on face value is the logical approach and sounds simple.

The challenge is in the execution. If Sally passes away first then no trouble, Sally's share transfers to Jessie. Jessie's will says the three kids get an equal share. 

Did you get that?

Yup, there's a problem already. Sally's will likely say Jr gets the lot and Jessie's three get an equal share. Or some variation on the theme.

Keeping in mind it is of 50% of the relationship property, not the whole lot. 

So in mathematical terms, Jr should receive 50% plus 1/3 of 50% and the older siblings 1/3 of 50% each. Creating a significant disparity advantage for Jr

So what about Sally or Jessie, the survivor, in the meantime.

What do they do, where do they live?

If their Wills state that the other receives in the traditional way, we get the distortion above and if we have the Wills operate for the kids, we have the survivor facing selling their home to pay out the kids.

If assets are jointly owned rather than severally owned then they will not end up in the Will but with the surviving party. So their home is likely to go straight to Jessie.

Yes, insurance can help this, but only to a point. Not executed with clarity, adding more money to the estate we just make the problem larger not smaller.

The smart approach is to instigate a relationship property agreement or a family trust. Then there is some control over how the assets are managed and transferred. Also too, timeframes for the survivor can both be limited and secured. 

Limited as Sally may not want Jr to wait 20 years for Jessie to pop off before he get's mum's share of the estate. Given there could be, and usually are, future relationships. 

Conversely, Jessie needs some level of security to make plans around the sale of assets and finding a home.

Frankly, this is a little simpler as Jr is the child of both of them. 

Turn that round, and Jessie pops off leaving Sally behind.

Then Sally has a challenge in that the older siblings may want their money and Jr is happy to wait given it is mum that's received the inheritance.

I am seeing the fair, and reasonable approach is to hold the relationship assets in a family trust. Then there is some level of governance available to make decisions in the interests of the beneficiaries. 

This is preferable to a relationship property agreement, which is usually pretty black and white and inflexible to unforeseen changes.

Add to that the accumulation of assets in the time of the relationship, and the often unbalanced level of assets introduced; trusts can be more effectively managed for the benefit of the children.

I am talking about future relationships, with the surviving Sally or Jessie, if assets transfer to the survivor has a significantly reduced impact on the value destined for Jr and his older siblings.

Not to mention a dependency on the survivor not changing their Will after their partner passes away. Alternatively, having their Will voided because of a new relationship.

There are many things that a trust can achieve in ensuring you have flexibility into the future while protecting the assets for the beneficiaries.

Trusts for hiding assets and minimising tax are from a bygone era. Trusts for managing and protecting assets is what they were originally designed for and to this day are still the most robust way of ensuring your wishes, when you die, are taken care of.

Which then makes the job of doing your will very simple.

Address the distribution of your personal effects to those you love.

Want to have a chat about how you might approach your situation, give us a call. 

We can discuss some ideas that you and your family can discuss further to get you to a point where talking to a suitably qualified lawyer is going to be cost and time effective. 

We can and will also talk how we can fund the things you need to achieve with this too.

The flow of assets is an important part of your insurance and risk planning. Without this understanding, you are potentially throwing a lot of money at a problem as a band-aid, where you could be doing things in a far more effective way, both with outcomes and costs.

Have a chat with us today about how you manage your risks in a cost effective way.

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