Are Your Estate Plans Current?

Along with making a financial plan to assist in meeting your financial goals and objectives, it is also important that your Estate Planning provisions are kept up to date.

Areas of importance include:

WILLS:

After planning your financial affairs it is most important to ensure that assets accumulated during your lifetime are disposed of in accordance with your wishes.  Yet the following assets may not form part of a deceased person’s estate:

  • A family home, when jointly owned
  • Other jointly owned assets  eg bank accounts
  • Proceeds of life insurance policies, depending on ownership
  • Superannuation entitlements

Approximately 50% of Australians die without a current Will.  This statistic probably reflects a common misconception that assets will automatically pass to their spouse or family on death.

To ensure your wishes are met and that potential complexities are suitably addressed it is critical that you receive expert and appropriate advice in the preparation of your Will.

When preparing to make a Will, some of the issues to which you should give careful consideration are:

  • Who will be responsible for the administration of the Estate?  This person or organisation is nominated as Executor
  • Who will ultimately benefit from the assets of the Estate?
  • The abilities of potential beneficiaries to manage their finances
  • The taxation status of the assets and the beneficiaries
  • The potential for family conflict; particularly in the case of blended or second families
  • The desire to provide for your spouse, dependants and / or to provide for people with special needs

Wills should also be reviewed regularly, for example every three years, or following a major change in personal circumstances such as marriage, divorce, the birth of children and so on.

TESTAMENTARY TRUSTS:

The term ‘trust’ describes the situation where a trustee looks after the assets on behalf of the beneficiaries.  ‘Testamentary’ simply means that the trust has been established as a consequence of your Will and comes into effect on your death.

The testamentary trust can be a tax effective tool to make distributions to beneficiaries, especially those under the age of 18 years, in a manner and proportion to properly reflect your wishes.

A testamentary trust could also protect beneficiaries from creditors or litigants in professional negligence claims, and can protect spendthrift or intellectually impaired beneficiaries.

POWERS OF ATTORNEY:

A Power of Attorney is a formal legal document in which an individual, the Donor, appoints another individual/s or a company, the Attorney, to make the legal, financial and personal decisions normally undertaken by the Donor.  The Donor also has to decide the scope of power that is to be granted ie whether unlimited or covering a limited range of financial categories.  Given these extensive powers, very careful consideration should be given to the selection of an Attorney and to the scope of Power that is to be granted.  However, granting a Power of Attorney provides protection for the ongoing management of your affairs if misfortune arises or circumstances change.

Three types of Powers of Attorney (PoA) generally exist:

1.    A General Power of Attorney is normally used in a limited capacity or for a short period of time  eg the Donor going overseas for a prolonged period.

However if the Donor becomes mentally incapable, a General PoA no longer has any force.  Most people would have their affairs better protected if an Enduring PoA was in place.

2.    An Enduring Power of Attorney – Financial continues to have force even if the Donor subsequently becomes incapable due to accident, stroke, or the development of a degenerative disease.

3.    An Enduring Power of Attorney – Medical Treatment is usually prepared when the Donor wishes a specific medical procedure to be withheld should they become ill.  This Power does not give the Attorney the authority to withhold basic needs or allow euthanasia.

This information is intended only to provide a general guide.  No investor should act solely on the basis of this information. The laws relating to Wills and Powers of Attorney are complex and vary according to the State or Territory.  Investors should consult their legal adviser prior to making a Will or granting any Power of Attorney.

Should you require a Solicitor please, refer to our useful links page.