Effective estate planning provides you with peace of mind that your loved ones will be financially secure if you pass away or become incapacitated.
Preparing for a future where you might not be around feels morbid. However, your family will need stability and assurance more than ever before during these times.
The national median home value stood at nearly $550,000 in January 2018, according to CoreLogic data.
But how much is enough to guarantee your surviving relatives are financially comfortable when you're gone? Let's examine some important life costs you may need to consider.
1. Raising children
Ensuring your children are adequately provided for should the worst happen is a priority for any parent. But calculating how much you must set aside is a complex task.
You must consider day-to-day expenses, such as clothing, food and entertainment, as well as education costs and childcare.
The AMP.NATSEM Income and Wealth report estimated that the cost of bringing up two children to adulthood for a typical middle-income family was $812,000 in 2012. This was up from $537,000 five years previously and the figure is likely to be even higher now.
2. Outstanding mortgages
The Australian real estate market appears to have plateaued in recent months, but this comes after years of sustained house price rises.
Combined dwellings index post modest 0.3% fall in January – dwelling values 0.7% lower since their recent peak in September 2018 | https://t.co/Iynr4qXJRt#ausproperty #realestateau #realestate #SydRE #MelbRE pic.twitter.com/TdAWX2cV60
— CoreLogic Australia (@corelogicau) February 1, 2018
The national median home value stood at nearly $550,000 in January 2018, according to CoreLogic data. The average property in Sydney and Melbourne was worth $884,442 and $721,28, respectively.
This can be a significant burden for surviving loved ones to shoulder, particularly if you were the main or only income earner.
3. Other debts
Australia's average household debt is 211 per cent of net disposable annual income, a 2015 OECD report found. That means families owe more than twice as much as they earn in any given year.
MoneySmart figures show the country has accumulated approximately $33 billion worth of credit card debt, with the typical Australian over $4,200 in arrears. Furthermore, the average funeral can cost between $4,000 and $15,000, depending on the ceremony's elaborateness.
MoneySmartTeam (@MoneySmartTeam) November 22, 2016
Before executors can distribute your estate, they must first pay off all liabilities, meaning you should calculate the value of your assets after any debts are settled to ensure beneficiaries don't lose out.
Do you need help with estate planning?
These are just three of the life costs people must consider when estate planning, but everyone's circumstances are different, so it's important to seek professional help when undertaking such an important task.
WMC Accounting provides specialist estate planning services to help you ensure your end-of-life preparation takes care of every eventuality. Please book an appointment today to learn more.