Estate planning is more than just a will. Does this knowledge make you gloriously happy, instill you with fear or do they make you feel, well, not very much at all? What is estate planning and why is it more than just a will?
Estate planning is more than just a will because it’s planning for the transfer of your whole estate on your death. Easy? Bryan Mitchell, the principal of Mitchells Solicitors, is an accredited specialist in Succession Law (estates and wills). He explains estate planning as “the transfer of wealth from one generation to another in a tax effective and risk effective way.”
There is one article after another available on estate planning mistakes. What not to do. There’s the top ten mistakes, most common nine failures, eight errors. . . Some may feel like there is one slap after another when reading through those lists! But what if you need a bit of encouragement? Read on. This is for you whether you’ve done your estate planning or not. You can either give yourself a pat on the back, or take positive steps in the right direction for getting an estate plan started or on track.
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Start your estate planning. But where do I start? Seeing a professional is a good place to start. Estate planning can sometimes be a bit tricky, so having someone on your team to assist you will not only help you to get started, but to finish it well, too! A specialist in estate planning will guide you through the process and help you to see that it’s more than just a will.
Make a will. Estate planning might be more than just a will, but having a will is an integral part of estate planning. A will is a legal document that says what you would like to happen with your money, belongings and other assets (your estate) when you pass away. A will names your beneficiaries (those whom you wish to give your estate to) and the executor (someone you’d like to administer your estate when you die). It’s also the place where you can name the guardians for your children and elect to give money to charity. One of the reasons that it’s important to update your will regularly is that life circumstances change: you might have more children, more grandchildren, get married, divorced, and remarried. You might even face the situation where someone you’ve left something to dies before you do. The second reason to update your will regularly is because assets change. You might buy and sell houses, or start and then sell share portfolios. This is so important because if your heir will receive nothing if the asset no longer exists at the time of estate administration. For example, John has a principle place of residence and two investment properties. He decides to leave each of his three children a property. Prior to his death, his principle place of residence is sold and the funds used to secure a place in a aged-care facility. The child who was set to receive that home, which no longer exists as an asset, could receive nothing from the estate at all. This is called ademption and is one of the trickier aspects to succession law – and why you need to seek specialist legal advice when establishing your estate planning.
Consider a testamentary discretionary trust. 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 and has four elements: the trustee(s), the assets, the beneficiaries and the discretion. A trust can protect assets from creditors, predators, bankruptcy and divorce.
Include rather than exclude people in your will. There are more and more wills being challenged in Australian courts. Each state is different, but in Queensland you must make adequate provision for your spouse, children and step-children and in limited circumstances a former spouse or dependent. Don’t assume that you’re exempt from having your will challenged. Do what you can with a professional’s guidance to protect your assets from potential claimants.
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Arrange an Enduring Power of Attorney. If you become incapacitated in any way and unable to make certain decisions, an appointed power of attorney can make financial and/or personal decisions on your behalf. If you don’t have the right documentation in place then the rights do not automatically go to your loved ones. In Queensland, the Public Trustees and/or the Public Guardian make decisions for you if you do not have an enduring power of attorney appointed. Having the documentation completed with the help of a professional will ensure that your power of attorney will only start making decisions on your behalf when your incapacity becomes evident.
Include superannuation in your estate plan. Superannuation is not included in your will. Unless you have specifically completed a binding death nomination, the trustees of the super fund have the discretion to distribute your superannuation as they see fit. Further steps need to be taken so that your superannuation goes to whom you want on your death, rather than on the terms of the superannuation fund or to the trustee of the superannuation fund.. A death benefit nomination is required for your wishes to be achieved.You may also consider setting up a self-managed super fund so that you have more control over the super asset and what happens to it when you die.
Complete an advance health directive. Although having a power of attorney for personal matters may be included in your enduring power of attorney, an advance health directive includes more specific directions about health care and medical treatment should you become incapacitated. It can also give directions about treatments you do not wish to receive. They are also sometimes referred to as a ‘living will’.
Having a clear and complete estate plan should give you and your loved ones piece of mind. Don’t forget to have it updated with any significant life-changes and review your circumstances regularly. Most people now have substantial wealth tied up in their family home and superannuation, and just as estate planning is more than just a will, there is also no such thing as a simple will.
If you’d like to speak to an experienced estates and wills lawyer then please contact us today for a free, 10-minute phone consultation.