Wills, Trusts and Estate Planning for New and Young Parents

The birth or adoption of a child transforms your estate planning obligations profoundly. Where previously the primary purpose of a Will was to ensure your assets pass to the right people, you must now also consider who will care for your child if you and your partner are no longer alive, and how your child’s inheritance will be managed until they reach maturity. This article sets out the key estate planning steps for new and young parents in South Australia.

Making a Will: The First Priority

If you do not have a current Will, making one should be your first priority upon becoming a parent. Under the Succession Act 2023 (SA), dying without a Will — intestate — means your estate is distributed according to a statutory formula that may not reflect your wishes. A Will allows you to:

• Specify exactly how your assets are to be distributed
• Appoint an executor whom you trust to administer your estate
• Appoint a testamentary guardian for your minor children
• Establish a testamentary trust to manage your children’s inheritance

Appointing a Testamentary Guardian

Under the Succession Act 2023 (SA), a parent with parental responsibility for a minor child may appoint a guardian for that child in their Will. This appointment takes effect if neither parent survives to care for the child. The appointment of a guardian is one of the most important decisions a parent can make, and one that should be made deliberately and with care.

It is important to discuss the proposed appointment with the intended guardian before naming them in your Will: guardianship of children is a substantial and long-term commitment. You should also consider naming an alternate guardian in case your first choice is unable or unwilling to act when the time comes.

Testamentary Trusts for Children

A testamentary trust is a trust established within your Will that comes into existence upon your death. It is one of the most powerful tools available to parents for protecting a child’s inheritance. Without a testamentary trust, an inheritance passing directly to a child under the intestacy rules or under a simple Will is held by the Public Trustee or another appointed trustee until the child turns eighteen, at which point it is paid out in a lump sum.

A properly structured testamentary trust offers significant advantages:

• The trust continues beyond age eighteen, with the trustee — a person of your choosing — managing distributions to your child according to your directions.
• Assets held within a testamentary trust may be protected against claims by the child’s future creditors or divorcing spouse.
• Income splitting within a testamentary trust may reduce the overall tax liability of the family group.
• You can specify the age or milestones at which capital is to be released, for example, upon completing education, reaching age twenty-five, or purchasing a first home.

Life Insurance: The Foundation of Family Protection

Young parents frequently underestimate how much life insurance is required to adequately protect their family. The capital needed to replace the earning capacity of a deceased parent, to pay off a mortgage, and to fund the costs of raising and educating children to adulthood is typically far greater than most people assume — and far greater than the default life insurance cover held within many superannuation funds.

A useful exercise is to estimate the total financial cost of raising each of your children to the age of eighteen and through tertiary education, adding any outstanding mortgage balance, and then calculating the present value of the surviving parent’s lost income for the years they would otherwise have worked. This figure, however uncomfortable, is the minimum level of life insurance cover your family requires.

It is also important to ensure that your superannuation binding death benefit nomination is current and reflects your current wishes. If you wish your superannuation death benefit to form part of your estate — so that it passes according to your Will and into any testamentary trust — your nomination should direct the benefit to your legal personal representative.

Powers of Attorney and Advance Care Directives

Estate planning is not only about death. Young parents should also plan for the possibility of incapacity. An enduring power of attorney under the Powers of Attorney and Agency Act 1984 (SA) allows your appointed attorney to manage your financial affairs if you lose capacity. An advance care directive under the Advance Care Directives Act 2013 (SA) allows you to document your health care wishes and appoint a substitute decision-maker.

Without these documents, a family member seeking to manage your financial affairs during a period of incapacity would need to apply to the South Australian Civil and Administrative Tribunal for appointment as your financial administrator — an expensive and time-consuming process.

Reviewing Your Plan as Your Family Grows

Your estate plan should be reviewed whenever your family circumstances change: the birth of a subsequent child, a change in your financial position, or changes in the law. The commencement of the Succession Act 2023 (SA) on 1 January 2025 brought significant changes to South Australian succession law and is a compelling reason for all parents to review their existing Wills.

Want to Find Out More?

This article covers estate planning essentials for new and young parents. At Genders and Partners, we assist families at every stage of life to ensure their children are protected. The arrival of a child is one of the most compelling reasons to put a proper estate plan in place without delay.

When it comes to Wills, Probate, Deceased Estates, asset protection and estate planning in Australia, you can trust the oldest law firm in South Australia – Genders & Partners – to guide you through the tough decisions to create the best solution for your individual needs.

If you have any questions or would like further information, or a quick phone call to discuss, book a timeslot for a free 15-minute phone consultation.

We can help you to protect yourself and your family. We look forward to being of service.

More Resources for Parents Planning Their Estates

• Choosing a Guardian for Your Children in SA
• Planning for Minor Children
• What Are Testamentary Trusts?
• Estate Planning Trusts: How They Can Protect You and Yours
• Estate Planning for Children with Special Needs

All these and many more related topics are available for discussion with the oldest law firm in South Australia. Visit the Genders and Partners article library for further reading.

DISCLAIMER:  This article provides general information only and does not constitute legal advice. The law referred to is that of South Australia, with principal reference to the Succession Act 2023 (SA) (commenced 1 January 2025), the Advance Care Directives Act 2013 (SA), and the Powers of Attorney and Agency Act 1984 (SA). Individual circumstances vary; readers should obtain advice from a qualified legal practitioner before acting.