Anna Hacker - Estate Planning, National Unity

Anna Hacker: So in my background as an elder law lawyer and as an accredited specialist in wills and estates, I've seen where it all goes wrong, and that's especially the case in the trustee company of Australian Unity where I work. We see where the wrong people have been appointed or the wrong people are doing the wrong things on behalf of very, very vulnerable Australians. So it's really critical to make sure that when you're thinking about your estate planning that you don't just stop at the will and you think about making sure that in your lifetime you have the right people in those right roles to protect you, protect your wealth and ensure that your own objectives are going to be fulfilled. And that it's not going to be someone who has a conflict of interest.

Josh Funder: Anna, can I just ask you there, because it's come up in other panelists. As you talk about your experience at Australian Unity, what would be absolutely fantastic is if we can understand how you work with customers to anticipate things and not make an urgent or rash decision late in life, but to really get ahead of things about facility, home, care, family. And it sounds like you're doing a great job of it, but a lot of other people struggle to get ahead of these situations. So please take us through how you help customers do that and clients, because that's a real struggle across the whole sector.

Anna Hacker: Absolutely. And I think that that's a real issue when it comes to estate planning. I'm often talking to journalists, I'm talking to community members, about when is the best time for estate planning, and it's usually in a discussion around retirement. Now, for me, I always kind of joke but I do mean it earnestly that people really need to get for their 18th birthday a present of a will, of an estate plan, because we need to put in place as early as possible this idea that planning for your future happens really early. It doesn't happen when you're retiring. It happens a lot before that point. And so, where I've seen it go wrong, it's because people have started planning too late. What is it that you do properly? What is it that you get right? Well, you need to make sure that you start planning well, well in advance.

Anna Hacker: The, I guess, warning signs I see for where people have put the wrong people into the wrong roles and where I think, "Oh, that might be a bit of a disaster later on," is where I see a really clear conflict between people's objectives for their estate planning and the people that they're putting in certain roles. And I'll give an example, and this is something I've unfortunately seen happen way too many times. That is where you have very, very specific instructions in a will. So let's say you say, "I'd like to give my family home to this particular beneficiary, and then I'd like to give my shares to someone else." And then what happens is the person who inherits the shares is an attorney. The attorney, when they're making decisions about how to fund someone's lifestyle as they retire, they look at, "Okay, well, if I sell the shares, I lose my inheritance. I'm going to get nothing when my parent passes away. So instead of selling the shares, which is what I'm going to inherit, I'm going to sell the family home." And that might be the completely wrong decision. That's where we have these conflicts.

There's a few lessons, I guess, that you can learn from these sorts of scenarios, and one is having as much flexibility as possible, so trying not to give too many very, very specific bequests to people. So it is really easy to think, "I'm giving the family home to that person, I'm giving this asset to that, and these assets to that beneficiary." But instead, try to give a lot of flexibility within your will. So saying, "I just want an equal share to go to each of my beneficiaries." That means there's less likely to be some sort of a conflict. The other thing is that you can put into your will things like an equalisation clause. And so, that means that even if that asset is depleted or may no longer exist, there can be an equalisation within the estate to make sure that each beneficiary still receives the equal share that you're intending. And that includes not just the assets in your estate, but also assets outside of it. So it includes things like superannuation, trust assets. It's a really important thing to remember to do, but unfortunately it is easily forgotten, and unfortunately things like will kits don't have equalisation clauses. So those off-the-shelf...

[overlapping conversation]

Josh Funder: Another big balancing act that people need to do between different beneficiaries when they don't in the will, but there's another two big balancing acts: What those people themselves need to fund their retirement, because they don't know how long they're going to live and they don't know what major expenses they will incur along the way, but then also whether their beneficiaries need the money when they die or they need it earlier. So how have you worked to understand the needs of a client, the needs of the people who will inherit, the balance between those two, but also the living will or the inter-generational giving, at a time when they might need first time buyer's deposits, education, other things? There's a couple of other big balancing acts there that you've got to take your clients through.

Anna Hacker: Yeah, absolutely. And that's again I guess... We see the worst case scenarios where people just take the money without asking often.

[laughter]

Josh Funder: That's terrible.

Anna Hacker: So trying to anticipate that that is going to happen is all about family discussion. So it's about understanding what the needs of Mum and Dad are, and making sure that they can be met. Because in the end, that's probably the first priority. A lot of clients talk about skiing, they talk about spending their kid's inheritance. I think that's a bit of a joke more than anything, because people really... They want to make sure their kids are provided for. They want to make sure that the beneficiaries are going to get what they need, when they need it, and in a way that will benefit them the best. So absolutely. We talk a lot with clients about, "How is it that you're going to make sure your beneficiaries can be benefited when they need it?" And that coupled with the vulnerability of clients. "So what happens if you lose capacity and your beneficiaries need that inheritance maybe a little bit early? How can we make sure that you are as a priority protected, but you make sure your loved ones are also looked after too?"

Anna Hacker: And again, powers of attorney come into play here, because generally an attorney can't have that position of conflict. They can't say, "I'm going to benefit someone other than the person who gave me the power." But more often than not, our powers of attorney that are drafted with quite detailed instructions to attorneys include things like, "I want to make sure that my dependents are also looked after. Obviously not at my own expense, so I'm looked after first, but if I have gifts or I support a family member, let's say in a business, I want to make sure that I can support them if they need it, even if I do not have capacity." And then that's that balancing act. So again, the will needs to have some provision to make sure this is all equalised in the end. It's something that we need to look at, "How do we balance the need for the retirement income during someone's lifetime, and also their want to make sure that their beneficiaries can be benefited later on as well?" It is an absolute balancing act that is really critical to get right, but with the right documents and the right advice, it can be achieved.

Josh Funder: And the right conversation between...

Anna Hacker: Exactly.

Josh Funder: The family. That sounds like it's an absolutely critical part of what you are able to help people with.

Shelley Wettenhall: And that's usually an awkward situation or an awkward conversation sometimes too, getting them all around a boardroom table, talking about what's going to happen to Mum and Dad in the future. That's something we don't usually like to talk about. One point that I like that you make, Anna, is that a will is a living document, not something to write and just put away in the cupboard. In your experience though, do most people who have a will also have powers of attorney? Because powers of attorney are something that we come across quite a bit.

Anna Hacker: So I would say the clients that I see all have powers of attorney. But before they come to me, then in most cases, all they're thinking about is a will. They're thinking estate planning just ends with that one document and not the other sort of supplementary documents. I would say that when we think 40% of Australians don't have a valid will when they pass away, an even smaller percentage, even larger percentage, sorry, of people would not have valid powers of attorney. And the other complexity here is each state has different legislation, which powers of attorney people need. They've also changed significantly so there's different names for the powers of attorney, so people get a bit confused about what they have in place. Powers of attorney from 20 years ago can still be valid, but they've changed name many, many times over the last few years. Look, and this is something really just from my own anecdotal experience, I would say more than 80% of people don't have powers of attorney in place. I think that people who get advice know how critical and important powers of attorney are, but people just don't get them in place in a timely manner. And so it's something that's really important to make sure it's done alongside the will and supplements it.

[overlapping conversation]

10:39 S3: We're seeing that most Australians won't get full financial advice. So as a system, we need to support people to have the conversation that's necessary between them, their children and other dependents, to have the flexibility through retirement to draw on their super, their pension and their home. But also what you're saying is the flexibility to change over time, depending on how long they live, when their kids need access to the family money along the way. And then also flexibility in the estate to make sure that it's fair. And so that flexibility to draw on the family's assets during and after the estate seems to be a thing that we need to encourage people to have a conversation around. And from time to time, they're going to need expert advice, lawyers and advisors, but everybody needs to have the conversation.

Anna Hacker: Absolutely. And what we see is an issue of inheritance impatience with a lot of beneficiaries. So if you don't have the discussion early enough with families and family members, there's this idea that people become quite impatient to understand, "What am I getting? When am I getting it? How is it distributed to me?" and it becomes a stress within a family unit. That's even more so when you think about the complexity of family today. So you think about blended families. You have two different families also thinking, "Well, I want to make sure that my Mum's inheritance that she received from her parents is coming to me and not her new partner." And so these sorts of stresses can absolutely be alleviated by a really good family discussion, but it has to be done really carefully. And so I would only say it's useful if you have the right people supporting you. And that circle of support of professional advisors is really critical because they are the ones that can assist to understand, "What does this mean? How can this even be achieved? What does this mean for me, and how is this going to protect me? So the parents in the future, but then my beneficiaries." It's a really important conversation. It has to be done properly though.

Josh Funder: And Anna, just before we run out of time, I've one more question. You raised inheritance impatience, and we've observed actually a steep change in patterns of inheritance because people no longer die at 75. They die at 90. And by the time they die at 90, their kids are in their 60s, also potentially retired. It's not when they need the money. And so actually what's disinherited the kids, the baby boomers, isn't access or the wrong will or another sibling, it's the longevity of their parents. So as you know, the bank of Mum and Dad is Australia's fifth biggest bank. But we have to support the intention of parents to give to their kids, but to do it responsibly so they don't deplete their own needs. How do you balance enabling people to be the bank of Mum and Dad, but getting it right and making it responsible? How do you go about that? 

Anna Hacker: Look, as a lawyer, I probably have a much more structured approach to the bank of Mum and Dad than most people. I know that family members have written on the back of envelopes, "I loaned this child $5,000." That's not quite good enough. I think that to avoid issues later on, things need to be properly documented. And I know it sounds like this is just adding more complexity to an already complex situation, but where it goes wrong is where there's ambiguity. So if there's a loan, and that's how I characterize a gift from a parent to a child, you want to make sure that that is actually properly documented, because then that can also be properly taken into consideration in an estate administration, so after someone passes away. It also means that there's no question that it was done in full knowledge. It wasn't unduly influenced. It's actually a really critical part of making sure that the family can cohesively work together in the future, because you don't want that question of, "How did this person... " A sibling saying, "How did you get that money from Mum and Dad?" If it's properly documented, there's a really easy answer. "Here's the loan document, and here's how we can make sure that Mum and Dad are protected as well as the loan be taken into a consideration later on."

Josh Funder: Anna Hacker, we're out of time, but thank you so much for your contribution to the 2020 Third Pillar Forum.

Anna Hacker: Thanks so much for having me.

Josh Funder: Cheers.

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