Welcome to the August 2024 Edition of the BFG Report
Top 5 Estate Planning Mistakes
Estate planning doesn’t have to be a complex process. In fact, it’s usually fairly straight forward. However, there are some common pitfalls you should avoid.
- Not doing it
The most common mistake is not creating an Estate Plan. Let’s face it: our mortality is not something we like to dwell on. But by not planning for the inevitable you may end up exposing your loved ones to needless stress and financial hardship.
If you die without a valid Will, known as dying intestate, your assets will be distributed according to a formula set by the State Government, not according to your wishes.
Even if you have a Will, it will rarely cover the entirety of your estate. A full, up-to-date, legally valid Estate Plan is the only way to ensure your wealth is distributed how you want.
- Confusing a Will with an Estate Plan
Whilst a Will covers how you would like your assets to be distributed, an Estate Plan includes a Will, and can address areas such as:
- Jointly held property
- Superannuation funds
- Proceeds of life insurance policies
- Power of attorney
- Guardianship of children
- Assets held in trust
- Company assets
- Not updating your Estate Plan
As your life changes; so, should your Estate Plan. Divorce, remarriage, family and asset changes can all affect the distribution of your assets. We recommend your Estate Plan is reviewed whenever your circumstances change, or at least every three years.
- Choosing the wrong people
During the Estate planning process you may consider nominating a close friend or family member as your Powers of Attorney or Executor. However, there are some important points to consider:
- Will they be driven by your wishes or by their emotions?
- Can they shoulder the burden during their time of grief?
- Do they have the skills to deal with the complexities of the process?
Choosing a trustee company to be your Power of Attorney (financial) or Executor of your estate can avoid these problems.
- Forgetting tax planning
Don’t assume that all your assets can be transferred to beneficiaries without being subjected to capital gains tax. Many can, but there are notable exceptions. Expert Estate planning can help in avoiding tax pitfalls.
Source: Equity Trustees
Investment Market Review – June 2024
Markets
- Global inflation has gradually cooled in the past year as lower prices for key commodities (e.g. natural gas and wheat) as well as improving production and transport supply chains have lowered inflationary pressures.
- However, consumer inflation has recently become sticky and stubborn around the 3% to 4% rate in Australia and the US. This stickiness is a result of more persistent price pressures in food, health care, insurance, and rents.
- Europe has made more progress on lowering inflation towards a 2% annual rate, which has supported a rate cut in June. China remains the exception with their inflation barely registering a pulse.
- The US economy has been a source of strength as businesses and consumers have kept spending despite higher interest rates and inflation. Strong jobs growth has provided employment stability and supported wages.
- Non-US economic growth has experienced headwinds as European economic activity has stagnated and China’s economic growth has been constrained by a cautious consumer and weak property market.
- Emerging markets delivered a strong return. India was a key contributor given strong economic growth and technology optimism. However, Chinese share prices continued to struggle.
- Australian and global bond markets delivered modest returns. The gradual progress to lower global inflation encouraged investors that interest rate cuts are coming.
Asset class performance to 30 June 2024 (total returns in AUD)
| Annualised | ||||||||||
| Asset Class | 1-mth | 3-mth | 6-mth | 1-yr | 3-yr | 5-yr | 7-yr | 10-yr | 15-yr | 20-yr |
| Australian equities (S&P/ASX 200) | 1.0% | -1.1% | 4.2% | 12.1% | 6.4% | 7.3% | 8.7% | 8.1% | 9.1% | 8.5% |
| International equities | 1.6% | 0.3% | 14.4% | 19.9% | 11.2% | 13.0% | 13.2% | 13.1% | 12.6% | 8.4% |
| Australian REITs | 0.4% | -5.6% | 10.2% | 24.6% | 5.7% | 4.4% | 7.6% | 8.9% | 10.7% | 5.6% |
| Australian bonds | 0.8% | -0.8% | 0.2% | 3.7% | -2.1% | -0.6% | 1.3% | 2.2% | 3.7% | 4.3% |
| Cash (AUD) | 0.4% | 1.1% | 2.2% | 4.4% | 2.4% | 1.6% | 1.7% | 1.9% | 2.5% | 3.4% |
Sources: Bloomberg, IOOF calculations
* AUD total returns as at June 24 assuming reinvestment of dividends unless otherwise specified
** Returns reflect index performance excluding any fees; Actual ETF/managed fund performance will vary due to both fees and tracking error.
High yielding internet savings accounts
| Financial Institution | Interest Rate** | Financial Institution | Interest Rate** | |
| Rabobank | 5.75% | Ubank | 5.50% | |
| ME Bank | 5.55% | Move Bank | 5.50% | |
| ING | 5.50% | AMP Bank | 5.40% |
** Rates are subject to conditions and change. Rates are correct as at 12 August 2024
