Global market volatility: Why it’s time to urgently review your estate planning and estate administration strategies
In recent weeks, global stock markets have experienced a dramatic decline, with the ASX 200 falling by 6.5% in a single day on April 7—marking its steepest one-day drop since March 2020. The S&P 500 has entered correction territory, and a staggering $9.5 trillion has been wiped from global markets in just a few days. Australian superannuation funds have recorded their worst quarterly performance since 2020, leaving many Australians facing the immediate financial impact, whether through superannuation balances, investments, or business interests. Experts are pointing to escalating geopolitical tensions, new tariffs, and ongoing economic policy uncertainty, particularly stemming from the Trump administration, as key drivers of this instability. The rapid and profound loss of wealth has radically altered the financial landscape overnight, highlighting an urgent reality: asset values can no longer be relied upon.
For those involved in estate planning or administering estates, these events serve as a stark wake-up call: the financial environment can shift suddenly and dramatically, and what was once a carefully crafted estate plan may no longer reflect your current financial reality. If your estate plan was based on pre-crash valuations, it may no longer align with your current financial reality and may expose your estate to future challenges under Part IV of the Administration and Probate Act 1958 (Vic), with disappointed beneficiaries demanding adequate provision from your estate.
The Cautionary Tale: “Paper Wealth” and the risk of assumptions
Imagine a typical scenario: a client’s estate plan, created five years ago, includes a bequest of a share portfolio valued at $500,000, intended to provide financial support to grandchildren. At the time, this portfolio represented a solid and dependable asset. However, after the recent market downturn, that same portfolio could now be worth far less—perhaps significantly less.
This dramatic shift in asset value highlights a critical issue: without regular reviews, your estate plan may be based on outdated assumptions, leaving it out of sync with your current financial situation. Such misalignment can lead to unintended consequences, particularly for beneficiaries who may expect more than what is now available. We are already seeing this scenario play out with many clients, whose once-stable significant asset bases have been significantly reduced, altering both their intentions and the practical outcomes for their loved ones.
Estate planning is not a one-time event—it requires ongoing attention, especially in times of market volatility. If your estate plan hasn’t been updated to reflect the impact of recent economic shifts, your wishes may no longer be fulfilled as intended.
Superannuation: The Silent Victim of Stock Depreciation
Superannuation is often one of the most significant assets in an Australian’s wealth portfolio, playing a central role in both retirement planning and estate distribution. However, the recent sharp downturn in global stock markets has severely impacted many super funds, especially those with substantial equity exposure. For Australians nearing retirement, this market correction is particularly concerning, as their ability to recover lost value diminishes with age. While younger Australians may have time to ride out the current market volatility, those approaching retirement are particularly vulnerable to the erosion of their superannuation balances.
For those who rely on their superannuation for retirement income or as a major component of their estate, a reduction in their super balance can have far-reaching consequences. Superannuation benefits may pass directly to nominated beneficiaries or through the estate, and a reduced super balance can:
- Impact the fairness of distributions among beneficiaries.
- Alter tax implications and create unforeseen liabilities.
- Affect the financial support your loved ones were expecting from the estate.
Given these potential outcomes, it is essential to review your superannuation arrangements and ensure that binding death benefit nominations are up-to-date and in alignment with your broader estate plan. The recent market fluctuations underscore the importance of revisiting these key elements of your financial strategy, as what was once a secure asset may now be considerably reduced in value.
Executors and Administrators: The weight of timing and judgment
If you are acting as an executor or administrator, the recent market volatility has significantly increased your responsibilities. The financial landscape has shifted dramatically, and your role in managing the estate requires even greater care and attention. The key considerations for executors and administrators during this uncertain time are as follows:
- Asset Valuation: Executors must obtain up-to-date, accurate valuations for all assets. Previous valuations or outdated appraisals are no longer reliable, especially given the rapid changes in market conditions. You need to ensure that asset values reflect the current market reality to avoid potential disputes or challenges from beneficiaries.
- Investment Management: Executors are responsible for managing the estate’s investments prudently. With the current market downturn, it’s essential to diversify or rebalance investments to protect the estate’s value. Failing to act in a timely and informed manner could expose executors to claims of negligence or breach of duty, especially if assets are allowed to lose further value due to inaction.
- Liquidity Risks: Executors must ensure the estate has sufficient liquid assets to meet tax liabilities and outstanding debts. In the current market, there’s an increased risk of needing to sell assets at a loss. Proper planning and management are critical to avoiding the need for a “fire sale” of investments, which could cause further financial strain on the estate.
What was once a straightforward process is now fraught with complexity and potential risks. Executors and administrators must exercise heightened caution, make informed decisions, and be prepared to adjust their approach in response to the shifting market landscape. The need for sound judgment and proactive management has never been more critical.
Cross-border assets: Uncertainty knows no borders
In today’s interconnected global economy, economic shocks don’t respect national borders. Whether your investments are in Australia, the UK, Europe, or the United States, recent market volatility demonstrates that no jurisdiction is immune from financial upheaval.
If your estate includes cross-border assets, these market fluctuations could affect estate administration in ways you may not have anticipated. Australian probate processes, UK resealing, European succession rules—all can be complicated by sudden asset devaluations or liquidity issues. Effective planning for cross-border estates now requires more attention to jurisdictional issues, tax implications, and asset preservation strategies.
What you should be doing now
Given the current climate, we strongly recommend:
- Reviewing Wills and Estate Plans: Ensure they reflect your current financial position and align with your intentions.
- Updating Superannuation Nominations: Double-check that your nominations are current and fit within your broader estate plan.
- Establishing Testamentary Trusts: Consider trusts that allow flexibility in distribution depending on future financial conditions.
- Reassessing Liquidity Needs: Ensure there are sufficient liquid assets to meet debts and taxes without needing to sell investments at a loss.
- Reconfirming Executor Appointments: Ensure your chosen executors are willing and able to navigate a more complex and uncertain landscape.
Final thoughts
If the recent stock market losses have taught us anything, it’s that change can happen quickly—and that those who plan and adapt early are best placed to protect themselves and their families.
Estate planning is not a set-and-forget exercise. It must evolve with your life circumstances, financial position, and the broader economic environment. The world is uncertain—but your legacy doesn’t have to be.
At KKI Lawyers we are here to assist you in navigating these challenging times. Whether you need a simple review of your will or a complete restructuring of your estate plan, our team is ready to help.
