WHAT IS ESTATE PLANNING AND WHY IS IT IMPORTANT?
Estate planning is the process of arranging your affairs now to ensure there is an efficient and effective distribution of your estate after your death. An estate plan is designed to help to protect your family and loved ones minimise taxation upon transfer of assets in a legal and logical manner as well as ensuring your wishes are followed.
A Will Can Help Ensure Your Wishes are Carried Out
Having a valid Will is the most basic of estate planning strategies. If you die without a valid Will you die intestate. Being intestate means that the laws of the state or territory you live in will decide how your estate is distributed. Essentially it means the state will distribute your assets without taking into account your wishes. In some cases, this can mean that the people you want to benefit from your estate end up missing out. You can prevent this stress to your loved ones by having a valid Will.
Minimising Tax for Your Beneficiaries
- Nominate your spouse and dependent children to be the recipients of your super. Death benefits paid to your dependents are tax-free.
- If you have a significant estate, you could consider incorporating a testamentary trust into your Will. This could create capital gains tax savings as well as ongoing income tax savings for your beneficiaries. It can also protect your wealth from marital splits or bankruptcy.
Choosing the Right Executor
The executor is responsible for making sure that the instructions in your Will are carried out. You should nominate an executor and an alternate executor in case the first one does not survive you or does not feel confident to act.
Your executor should be someone you trust and who is willing to take on the work and the responsibility.
Powers of Attorney
There are three types of Powers of Attorney:
• General Non-Enduring Power of Attorney
A general power of attorney authorises a person to act on your behalf. It specifies when and in what circumstances it will operate and end. For example, you could grant a general power of attorney to permit someone to sell your house for a specific amount, or act on your behalf while you are overseas or in hospital.
A general power of attorney will cease immediately if the donor dies, becomes bankrupt or loses capacity to run their affairs.
• Enduring Power of Attorney
Under an enduring power of attorney your attorney can make legal and financial decisions on your behalf. However, they may also make lifestyle decisions for you, such as deciding what type of nursing care you are able to receive.
Unlike a general power of attorney, an enduring power of attorney continues if you subsequently lose capacity to manage your affairs.
• Appointment of Medical Decision Maker
A medical treatment decision maker is able to make medical decisions on your behalf including consenting or refusing to consent to procedures, consenting or refusing to consent to the use of pharmaceutical products and deciding what kind of palliative care you will receive. A medical treatment decision maker may only make these decisions if you are not able to make them for yourself.
Estate Planning is important for everyone as no one can predict when you are going to die or lose capacity. Having a valid Will in place means that your assets will be distributed according to your wishes and will also save your loved ones from additional stress at an already stressful time.
Enduring Powers of Attorney and Medical Decision Maker appointment are also very important as again we don’t know when we are going to lose capacity. Olivia and I have sat in front of many clients whose parents had not set up these documents and it was incredibly nerve-wracking for them to navigate the Aged Care system without them. Applications to VCAT can take a long time and in the meantime, you are trying to find somewhere for Mum or Dad to be cared for.
We strongly encourage you seek the advice of a specialist Estate Planning Lawyer so they can help you put in place the documents you need to cover all contingencies. We can provide you with the details of an expert in this field if required.