The Money Managers | In the News

Getting married brings a whole new dimension to our planning objectives. Starting a family is also a time when protecting your loved ones takes on increased importance. ‘Living for today’ may have been the old mantra but it takes a back seat compared to planning for the future when you have a spouse and family to think of.

Sound planning begins with protecting what you have. The most valuable asset for a young couple is their income earning ability. This can be insured through income protection insurance and for a relatively modest (and tax deductible) premium you can have the peace of mind of knowing that up to 75% of your current income can be protected against loss due to sickness or accident. You can also buy cover for life threatening critical illnesses.

Life insurance is probably not something many single people have given much thought to but with dependants and a mortgage it becomes critical. Insuring not only against premature death but also insuring against total and permanent disability is something that we should consider. Many super funds offer this as an option and this way the premiums can be paid out of the contributions from our employer or our own tax deductible contributions. It is important to calculate just how much life insurance we need as simply relying on the default option is usually way too little to be meaningful.

We nearly all recognise the need for car insurance and home and contents insurance, particularly after seeing the devastation of those that lost their homes in the bushfires but we perhaps haven’t given much thought to health insurance cover. This is particularly pertinent when pregnancy and childbirth are on the agenda. The government rebate with the premium can be helpful too.

Drawing up a last will and testament is something we should think of doing once we get married and start a family. It is interesting that a marriage revokes a will but divorce does not. There have been many an estate that has been left to an ex spouse by accident. It is important to determine how our worldly goods are going to be distributed after we are gone and to ensure our wishes are carried out.

Interestingly, our superannuation doesn’t form part of our estate and isn’t distributed via our will. These days with all the tax benefits, an increasingly large part of our wealth can be held in a superannuation fund, more so if insurance is included in the super fund and a large lump sum is available on death. It is important that you nominate a beneficiary for your super fund and that you make that nomination binding.

Finally, it is good to ensure we have an enduring power of attorney should anything happen to us. A power of attorney is sometimes described as a ‘living will’. It appoints someone we trust to act on our behalf and manage all of our affairs if we become incapacitated. This is different to a medical power of attorney. An enduring power allows our attorney to stand in our shoes and take care of all of the financial and life decisions even if we are beyond the mental capacity to make decisions for ourselves.

Part of the responsibility that comes with getting married is the responsibility to ensure that we have covered off on all of the issues discussed here. We might elect not to protect certain aspects of our life but we should at least discuss it with our spouse. They may have a different view to us and a key to a good relationship is communication and joint decision making.

Those of us that are parents with adult children owe it to them to discuss the need for different types of insurance and making a will as well as ensuring that they have considered nominating a beneficiary for their super and establishing a power of attorney should anything happen to them. There is so much uncertainty in the future but establishing a sound financial plan that considers the protections that can be put in place is a good way to have the best chance of success.

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