The great estate – estate planning
No-one wants to think about death in the prime of life, yet it’s important to decide what will happen to your assets.
Developing an effective estate plan ensures your loved ones are properly looked after. Moreover, it makes sense to put a plan in place leaving instructions about your legal and medical preferences. An estate plan includes your will as well as any other directions on how you want your assets handed out after your death. It includes documents that govern how you will be cared for, medically and financially, if you become unable to make your own decisions.
Your WILL is likely to be the primary, though by no means only element of your estate plan. If there’s no valid will in place, an administrator appointed by the court pays your bills and taxes from your assets, then disburses the remainder based on a pre-determined formula which may not be how you intended your assets to be distributed. If you die intestate and don’t have living relatives, your estate is paid to the state government.
Letter of wishes: can also be read in conjunction with your will. Though not legally binding, it provides the ability to guide executors and beneficiaries of your estate on issues which are important to you.
Superannuation: Did you know that your superannuation does not automatically form part of your estate in the event of your death? It does in NSW but if you reside elsewhere it may be appropriate to implement a binding super death benefit nomination so that you can be certain your super will be dealt with in the way you want. If there are no binding death nominations, then the trustee of your super fund will decide how the benefit is to be paid.
Appointing someone as your POWER OF ATTORNEY gives them the legal authority to look after your affairs on your behalf. Powers of attorney depend on which state or territory you are in: they can refer to just financial powers, or they might include broader guardianship powers.
A general power of attorney is where you appoint someone to make financial and legal decisions for you, usually for a specified period of time, for example if you’re overseas and unable to manage your legal affairs at home. This person’s appointment becomes invalid if you lose the capacity to make decisions.
An enduring power of attorney is where you appoint a person to make financial and legal decisions on your behalf if you become unable to do so.
A medical power of attorney only makes medical decisions for you if you lose the capacity to make your own decisions.
You can set up other documents to help legal appointees and family, including:
An enduring power of guardianship that gives a person the right to choose where you live and decide your medical care and other lifestyle choices, if you become unable to do so.
An anticipatory direction records your intentions about medical treatment in the future, in case you become unable to express those wishes yourself.
TESTAMENTARY TRUSTS are usually set up to protect assets. They are a mechanism by which an inheritance can be kept separate from the personal assets of a beneficiary. In effect, they provide benefits in terms of asset protection as well as tax advantages. Here are some reasons to create a testamentary trust:
The beneficiaries are minors (under 18-21 years old)
The beneficiaries have diminished mental capacity
You do not trust the beneficiary to use their inheritance wisely
You do not want family assets split as part of a divorce settlement
You do not want family assets to become part of bankruptcy proceedings
The documents you choose to draw up will depend on your situation, and the responsibilities you are happy to entrust to others. It is important to get legal advice if you are unsure. Contact Allied Investment Group on 1300 886 149 for more information.
Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security in retirement.