Thinking about making a good estate plan is not just for the ‘older’ population, but should be an essential for every adult. Think of it along the same lines as opening a bank account or getting insurance for you car or job and budgeting the household expenses – estate planning should just be one of those things that you do. A good estate plan is not just helpful for down the track but starts you on a path now for positive financial behaviour.
A Good Estate Plan Is More Than Just a Will
A good estate plan is more than just a will, and people put off making even a will. In America only about 50% of adults have made a will and many of those have a will only and no other supporting estate planning documents like a power of attorney or an advance health directive. It is thought that at least 45% of Australian adults don’t have even a basic will. Developing a good estate plan can be a holistic process that is so much more than just planning for your death.
It’s not fun thinking about our death, but it’s even less so thinking that we’ll cause our families grief if we leave behind a burdensome situation. We have heard many media stories about celebrities who have died without a will or adequate estate planning and there is just so much heartache and drama surrounding those circumstances. Prince, B.B. King and Bob Marley are some of those who left behind no directions about their estates. Bob Marley’s family were still fighting over his estate 30 years after his death. Now we may not have a vast fortune and an empire that will continue to make money after we’re gone, but it really doesn’t take much for families to fall into conflict over what they believe (or would like to believe) would’ve been someone’s wishes. There are often very expensive fights over not very much.
Aside from helping families to avoid conflict, a good estate plan can help families to work together and to help individuals have a sure sense of their identity and place in the world. It is not a ‘set and forget’ process but will change and develop as your life goes on and your circumstances change. Good estate planning will change with you.
Fundamentals of a Good Estate Plan
There are some fundamental elements to creating a good estate plan.
A will is a legal document that sets out your wishes for the distribution of your estate assets after your death. It is probably one of the most important documents you will ever sign.
When making or changing your will it is important to repeatedly ask the question “what if?” You need to try to consider all possible subsequent and significant eventualities which may occur lest you later lose the mental capacity to make or change your will. Therefore, a well-drafted will takes into account that people may die before you, that more children and grand-children may be born and that, when you do die, you may not own what you own now.
In your will you will need to appoint executors. These need to be trustworthy people who will be up to the task of administering your estate after your death. They do not need to be a family member and sometimes, depending on your family relationships, it may be more helpful to have someone appointed to this task who is trustworthy but outside of your family.
A will needs to be clear and precise, so seeking the advice of a professional in planning this document is very wise. Experienced estate lawyers can help you to think through the best wording and to help prepare a document that is less likely to be challenged.
Enduring Power of Attorney
While an executor is a trusted person that administers your estate on your death, an attorney (nominated on your enduring power of attorney documents) is a trusted person that will help you in life at the time of your appointing.
An Enduring Power of Attorney is like a living will. It outlines your wishes regarding your finances and/or health in the event that you lose capacity to make decisions due to age, illness or accident. A person or number of persons are named as attorneys who will act on your behalf.
An Enduring Power of Attorney should set out what kind of decisions should be made, and how such decisions should be made if there is more than one appointed attorney.
Should you lose capacity without an Enduring Power of Attorney in place, the Public Trustees and/or the Public Guardian automatically make decisions on your behalf. In this instance, family members must make an urgent application to a tribunal to be legally appointed as your decision maker. It’s important to know that without your wishes recorded, those appointed may make decisions on your behalf that you would not have agreed with.
Superannuation Death Benefit Nomination
Because you cannot instruct your superannuation fund after your death, it’s essential that you do it now. You need to fill in a death benefit nomination. This is very important since there is often a level of life insurance held inside that super. Money held in super is not considered a personal asset so cannot be dealt with in a will. If you don’t have a binding death nomination in place, the trustees of the super fund can decide how to pay out your super proceeds, which may not be in accordance with your wishes. There are quite a few considerations here in terms of structure for you and your financial advisor to consider. A self-managed superannuation fund is the best vehicle for providing flexibility. Ad hoc rules can be drafted to for the fund to act like a living will, and dictate what happens to the assets when you die.
Letter of Wishes
This is not an estate planning essential, but it certainly can help with peace-of-mind. It is a non-legal document which contains your wishes. It is a vehicle for explaining why you have made certain decisions in your will and can help to prevent challenges by providing greater detail. It can be particularly helpful for parents who wish to instruct guardians on the raising of their young children; it may include their wishes on the type of education, values and care they’d like for their children.
Testamentary Discretionary Trust
A testamentary discretionary trust 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 and has four elements: the trustee(s), the assets, the beneficiaries and the discretion. It’s a wise move in protecting your nominated beneficiaries from
If you’d like to make a start on your estate planning or get some estate planning help then please contact us today! We offer a free, 10-minute phone conversation with one of our experienced estate lawyers.