Estate planning tools are the different elements that make up a good estate plan. Estate planning sounds complicated and stuffy to those who haven’t ventured into what, for them, is an unknown realm. But if you stop thinking about estate planning as being about paperwork and more about relationships then perhaps it’s the catalyst you need to look seriously at estate planning. Estate planning is less about money and more about people – particularly those we love.
You can either set up estate planning tools for the benefit of your family and loved ones, or die with no planning in place. The difference will be whether it is your plan or the governments’. If you have any assets at all then you have an estate, even if you don’t think it amounts to very much. A common misconception is that estate planning is really only for those who have significant wealth and assets to distribute on their death. This is not so. Estate planning is for everyone and it’s about more than just the distribution of your assets after you die. Good estate planning starts now and encompasses not just writing a will, but includes estate planning tools for how you would like your end-of-life care to look and who will make decisions for you when you can’t. It may also include a testamentary trust and letter of wishes. There are lots of considerations for estate planning that a good professional can help you with.
For example, it’s not uncommon for young people to assume they don’t anything. But they often have a life insurance policy within their superannuation, which can amount to hundreds of thousands of dollars. Who should get this if you unexpectedly die?
Good estate planning tools should minimise the tax paid by your heirs, and help avoid any potential family conflict. Once you’ve passed on, these decisions are not going to affect you, but will have an impact on your loved ones. Good estate planning involves great consideration about family circumstances and relationships. Excellent communication with your beneficiaries about what’s in your will before you die will help to prepare them for what you’ve decided and help them to understand your intentions. Paving the way for your wishes when you die leaves much less opportunity for there to be conflict between loved ones.
Estate planning is something that many people consider doing, but don’t actually do. It’s estimated that about half of all Australians die without a valid will. Most people cite lack of time, knowledge or inadequate assets as the reason for not attending to their estate planning. The reality is that many of us put it off thinking that death is a long way away. But the truth is that we don’t know when our time is up and so it really should be a priority.
In 1990, the man who is thought to be Australia’s first billionaire, Robert Holmes à Court, died intestate. This means he died without a will. Although legend has it that he carried an unsigned, drafted will in his briefcase for many years, this was of no use to his family when he died unexpectedly from a heart attack at 53 years of age. This was a man who had the means and ability to have excellent estate planning tools in place but because he didn’t family relations became strained. It took 20 years of legal wrangling to sort out his estate.
Good Estate Planning Tools
Estate planning doesn’t need to be complicated, but it needs to be done. Here are six important estate planning tools.
This is the legal document that appoints an executor to distribute your assets in the way in which you would like. If you don’t have a will then under Queensland law a formula is applied so that your assets are passed on – but you and your family will have no say in the matter. A will is also the document in which you can appoint guardians for your minor children. Not doing so can cause major conflict within your extended family and for your children.
Enduring Power of Attorney
Australians are living longer, but this also means more people are having to deal with loved ones with dementia or some other kind of condition with cognitive decline. 1 in 4 Australians over 85 years of age will suffer with some form of dementia. Having an enduring power of attorney means that you decide who makes decisions for you when you become incapacitated. You can nominate someone to make financial and/or health related decisions for you. This must be done while you still have the capacity to make decisions.
Letter of Wishes
A letter of wishes, whilst not a legal document, is still a very helpful tool in further explaining your will and can help make the administration of your will easier. It’s also a place where you might outline how you’d like your children to be raised or how you’d like your business to be wound up. It’s ‘extra’ guidance to help your family make united decisions about what you’d like to happen after you’re gone.
Testamentary discretionary trusts are great estate planning tools because they can offer tax minimisation, asset protection and flexibility. A testamentary discretionary trust is a type of trust created under a will, comes into existence only upon the administration of the deceased estate. It can offer protection against a myriad of ‘what-if’ scenarios, including divorce, bankruptcy and lawsuits.
Superannuation death benefit nomination
Because super is not a personal asset and so is not covered under your will, you need to instruct your superannuation fund specifically with a binding death benefit nomination. This is especially important because of the life insurance often held inside super. Another option to consider here is a self-managed superannuation fund.
Advance Health Directive
An advance health directive is a legal document that outlines the type of treatment you’d like to receive if you become incapacitated or at the end-of-life. It can be as basic or as comprehensive as you wish.
At Estate Battles we love to help people establish their estate planning tools. We see the benefits of people who plan well for the sake of their loved ones. We also see the challenges and angst that can arise when there is no estate plan in place. Please contact us today to speak with one of our experienced estate lawyers. We offer a free, 10-minute phone consultation.