Do I Need to Prepare a Will & What is Estate Planning?

There’s an old saying, “where there’s a will there’s a relative.” But let’s not get too cynical.

Preparing a ‘will’ comes under the broad umbrella of Estate Planning. And from 30 years advising clients we can tell you Estate Planning is the elephant in the room for many Australians.

The stats support this. More than 50% of Australians over the age of 18 don’t have a will. That’s 10 million Australians who don’t have a clue what happens to their money or Estate when they’re gone.

Not having something like a will in place can place an unnecessary burden on your family members or next of kin and put your Estate in jeopardy. Let us explain in more detail:

Why is Estate Planning so important?

Estate planning is vital for everyone (no matter how wealthy you are). Without a plan in place, there could be a long-lasting impact on your loved ones.

You should have an estate plan to ensure:

• Your assets don’t end up with unintended beneficiaries (like the government or tax man).
• You manage the tax your beneficiaries (the people entitled to receive funds or property) may pay when they inherit your assets.
• Family members don’t end up fighting unnecessarily over who gets what (“where there’s a will, there’s a relative”).
• Your children will be cared for by nominated friends or family rather than the courts

Following are some strategies to get you started on the path to preparing for a day when you won’t be here.

Strategies for estate planning:

1. Write a Will

A will is a legal document that gives instructions about how you want your estate to be managed and distributed once you’re gone. You can find information on ASIC’s MoneySmart website if you want to dig a little further here.

It may be worthwhile engaging the services of a solicitor. Remember, a will needs to contain certain elements or statements, and if it’s not written correctly, part or all your will may be invalid.

What’s not automatically covered in your will?

‘Non-estate assets’ are things that aren’t automatically considered part of your estate, so you must make specific arrangements.

These can include things like:

• Joint assets – like property or bank accounts
• Assets held in discretionary family trusts
• Your superannuation
• Life insurance proceeds outside super

2. Appoint a Power of Attorney

Granting a Power of Attorney (POA) means you legally appoint a person or an organisation to make decisions, sign documents and act on your behalf in various matters.

When you grant a Power of Attorney you may choose to limit the actions which the attorney can perform on your behalf (Limited Power of Attorney) or give the attorney wide powers to undertake actions on your behalf (General Power of Attorney).

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

1. An Enduring Power of Attorney – Financial allows you to appoint an Attorney or Attorneys to make decisions in respect of financial matters.  It ensures someone, chosen by you, takes control of your financial and legal affairs if you are ever unable to do so yourself (i.e. through injury or illness).
2. An Enduring Power of Attorney – Personal allows you to appoint someone, and if desired an alternative person, to make lifestyle decisions on your behalf.   This may include decisions on where and when you work, where and with whom you live and your healthcare. This power commences if you lose legal capacity to make these types of decision on your own.
3. An Enduring Power of Attorney – Medical Treatment allows you to appoint an Agent, and if desired, an alternate Agent, to make medical treatment decisions on your behalf. This document commences if you lose legal capacity to make these types of decisions on your own. This Power does not give the Attorney the authority to withhold basic needs or allow euthanasia.

Benefits of having a Power of Attorney

By making a POA while you have legal capacity you’re able to choose whom you wish to appoint to make decisions on your behalf and you can provide, if necessary, conditions and limitations for the exercise of such powers.

If you do not have a POA and you lose legal capacity, a family member, friend, or the Public Advocate may make an application to the Victorian Civil and Administrative Tribunal (VCAT) on your behalf.  VCAT will then choose whether the applicant or another individual or a Trustee Company is most suitable to be appointment as your Administrator and/or Guardian.  This process is costly and may not reflect your wishes.

Recommendation:

We encourage you to contact us if you would like to discuss how we can support your estate plans and how they form a key part of your overall financial planning strategy. We can arrange a meeting with a qualified legal professional to discuss your needs, or if you have an existing legal relationship, we can assist you with facilitating this discussion as well. 

It is important to have professional legal advice when considering, and implementing, your estate plans.

3.      Nominate a beneficiary for your super

Do not forget that your super isn’t automatically covered as part of your estate. You may be able to specifically nominate your beneficiaries to your super fund, that is, who you want to receive the balance of your fund.

You can make different types of death benefit nominations. Some must be followed by your trustee, and others can be an indication of your wishes only. You must understand what kinds of nominations your super fund provides and who you can nominate.

4. Review your estate plan when life changes

You should update your estate plan any time there’s a change in your financial or family circumstances or at different life stages such as marriage, children, divorce, retirement, or death of a spouse or dependent.

Just like your investments and superannuation, it’s a good idea to review your estate plan on an ongoing basis. When appropriate, also use a legal professional to check your estate plan.

5.      Organise life insurance

Make sure you have the right amount of insurance to cover your income, your family’s lifestyle, and any debt repayments after you’re gone. Remember, your insurance beneficiaries aren’t automatically covered as part of your estate. You must specifically nominate preferred beneficiaries with your life insurer.

6.      Make a funeral plan

Make your wishes clear about how you want your funeral to look, how much you want to spend on it and how you would like your family to pay for it. You can make these instructions clear in your will.

To sum up, make sure you’ve nominated the beneficiaries for your super and life insurance and make sure you have enough insurance coverage, so you don’t leave family members in the lurch. Establish a power of attorney and make sure you review your insurance regularly. (And keep your paperwork where someone can find it!)

Finally, please note there are several risks to consider when it comes to estate planning. Consult a professional if you need to.

The best you can do though is start the conversation with your spouse of family member and get the ball rolling on one of the most important events in your life.

If you’d like to discuss your Estate Planning needs further, we encourage you to speak with an adviser from our qualified financial planning team on (03) 5224 2700.

DISCLOSURE: This information is intended only to provide a general guide.  You should not act solely based on this information. The laws relating to Wills and Powers of Attorney are complex and vary according to the State or Territory.  You should consult a legal professional prior to making a Will or granting any Power of Attorney.

Photo by Álvaro Serrano on Unsplash