Gen Z , Gen X & Baby Boomers- Proper Planning has something for everyone
Whether you are Generation Z, a baby boomer or anywhere in between- Estate Planning and documenting arrangements is equally as important at any age.
Let’s put this into perspective…
Gen Z (born 1994- 2000)
You may be studying and possibly work part time as well– maybe in your own business enterprise. If so it could be online and operate in the digital world.
If you have studied, you may have a HECS Debt. It feels like you are saddled with debt from the outset. You might feel like there is not much hope in buying a home given that house prices are out of control and your deposit seems a long way off.
Like many of your Gen Z cohorts, you live at home with your parents.
If you have a job working for someone else you will have some superannuation. If you die young, this is most likely to be your biggest asset. Your other assets include your digital assets and hey, you have a lot of those! Think Netflix, Flickr, Itunes, social media accounts, websites, blogs, bitcoins etc. Read more here about protecting your digital assets.
Baby Boomer (born 1946- 1964)
You are retired or at least thinking about it.
You have established some wealth. Your largest asset may be your house and your superannuation savings.
Your children have supposedly moved out of home. You are considering your personal estate planning and possibly succession of control of your business.
Gen X (born 1965- 1980) (“cynical entrepreneurs”)
You are working.
You may be the generation assuming control of the retiring baby boomer’s business.
Your Gen Z children may still be living at home. You are financially supporting them.
You are thinking, it will be nice when your financial support for them ends- if ever.
It would at least be good if they moved out, you did, but how can they? They have no savings. They think it would be unreasonable to expect them to rent or even pay board while they are still studying, or to live in an older house, or one too far from the city etc… Their budget does not get in the way of expectations.
One day though they decide its time! They want to buy a property. They have found the right one. They have compromised- it only has one bathroom… Your child and their partner are planning on setting up a home together!
There is only one small problem. The bank will not lend them the money and they just need one more small favour…
They have asked you to “assist them” so as to satisfy the bank’s lending criteria.
The options suggested include:-
-lending them money directly;
-acting as a guarantor of their home loan or;
-buying a portion of the property with them.
You agree to help as it seems like a win- win for everyone- you get your house back!
What could go wrong?
For the Gen Z Child
A relationship break up after a house purchase can be a real showstopper. We recommend before purchase that you consider a binding financial agreement to deal with relationship and property exit strategies in the event of a breakup. If the other party stops paying the mortgage, you are still on the hook for the full extent of the loan. Ultimately the house may need to be sold to payout the debt.
What if you, or they, lose their job? Do you have any income protection insurance?
If the relationship goes well but one of you dies, what then? You need a Will to deal with the gifting of your interests in the property. They forgot to do one. Everything passes to their parents on an intestacy. The ability to gift any interest in the property also depends upon how it is owned in the first place. Is it tenants in common or is it a joint tenancy? What is the difference? And who gets your superannuation when you die? That may be relevant… Did you both remember to update those previous nominations? At least the business can continue. But where are the passwords? We need to place (or cancel) those stock orders and update the social media sites.
Your loved ones might also need to get into your digital life to investigate and protect your assets. Are there any arrangements in place for that? Do they have any authority to do so?
For the Gen X Parent
If there is a break up between your child and their spouse- you may want your money back! You might want that house sold.
Having a loan agreement in place is important. In the absence of an agreement, the former spouse (or their executor, or even your child!) claims it was a gift. The Family Court agrees. If only it had been properly documented at the time. A mortgage or caveat over the property to protect your interest, and that of your child in the event of a break up or death of a spouse, might help to clarify things.
A deed between all interested parties might also set out arrangements both during and after the relationship ends about ongoing mortgage contributions, and contributions to other expenses such as insurance, rates, taxes etc.
A formal deed of arrangement might provide for what happens in the event of your child’s breakup. Maybe insist upon a sale process if that happens. Maybe insist upon them having some life insurance in place in the event that your child or their spouse dies or is incapacitated.
And what about your other children? How do you assist them now that you have this depletion in your wealth as a result of child number 1?
For all concerned, having the following in place will create a much smoother path:
- Properly prepared and document loan agreement secured by mortgage or caveat
- Properly prepared Deed of Arrangement between any co-owners of a property (including parent and children)
- A binding financial agreement between spouses to deal with property and financial obligations in the event of a relationship breakdown
- Life and total and permanent disability insurance cover to satisfy any loan on the death or disablement of a borrower
- Appropriate superannuation death benefit nominations in place and current
- A current Will that deals with your digital assets
- A current Power of Attorney document that also deals with your digital assets
- An Advanced Care Directive to deal with your medical, health and lifestyle decisions if you lose capacity to make them.
It may be daunting, but Donlan Lawyers can make the process seem much simpler. Call us on 8344 6422.