Estate Planning

Oct 13

There are two common misconceptions when it comes to wills and estate planning:

  1. Thinking that having a will means your estate planning is in order
  2. Thinking that it’s solely about what happens after you pass away.

These are costly misconceptions that cause families much avoidable stress and added grief.


Firstly, a will is just a small part of your overall estate plan. There are a number of other documents you need, which we address below.


Secondly, estate planning also covers what is to happen should you become incapacitated, either temporarily or permanently. Because a will only takes effect after you die, it fails to cater for a range of scenarios that, sadly, often occur.


A good estate plan takes care of all of these possibilities, and gives your loved ones comprehensive and specific information on how to proceed when you’re not around to help them.


This gives both you and your family peace of mind that if anything happens to you, they will be looked after and your wishes will be honoured.


Having only a will in place is a recipe for stress, confusion and disappointment.


So what do you need in your estate plan?


7 documents to keep up-to-date in your estate plan


1. Your Will


Your will may cover information such as:

  • how your assets will be distributed

  • what needs to happen with any debt

  • who gets the kids

  • what you may like to give to charity

  • instructions on your funeral.


But you also need to make it clear what happens if you and your partner die together, otherwise what’s written in your partner's will could determine how your assets are distributed.


And make sure it’s up to date. If you’ve had major life changes (e.g. getting a divorce, remarrying, births and deaths in your family) and you don’t update your will, it may be invalid.


That’s as good as not having a will.


Action Plan: Dust off your will and check to see it is up-to-date and still reflects your wishes.


2. Testamentary Trusts


Testamentary trusts are set up in a will, but only take effect after the death of whoever made the will. People set them up for a number of reasons, including:

  • protecting assets for minors

  • dealing with the trustworthiness of beneficiaries

  • protecting assets against divorce or bankruptcy.


The trust is administered by a trustee, who manages the assets of the trust until the trust reaches its expiration date.


Action Plan: If you feel any of your beneficiaries aren’t capable of handling the assets of your estate you may want to look into establishing a testamentary trust. If you already have a testamentary trust, make sure it’s up to date and still reflects your wishes.


3. Superannuation and Insurance Policies


Did you know the beneficiaries named in any Binding Nominations made in your superannuation or insurance policies will override whatever’s in your will. Which means your will may not even cover your biggest cash asset - your superannuation.


Action Plan: Make sure your insurance and superannuation are both up to date, and that  any binding nominations reflect your preferred choice of beneficiaries.


4. Family Trusts


One thing you need to keep in mind is that for a Family Trust, the assets of the trust will be distributed according to what’s specified in the Trust Deed - regardless of what’s written in your will.


Action Plan: Make sure the Trust Deed for your family trust reflects your current wishes. You should review it every 3 to 5 years, or whenever a major event changes your life circumstances.


5. Powers of Attorney


A number of documents fall into this category. Here’s what they’re used for.


Document Type

When and why it’s used

When it can no longer be used

General Power of Attorney

To cover a specified period of time you may not be around (e.g. taking an overseas holiday).

When:

  • the period has elapsed

  • you can no longer make decisions for yourself.

Enduring Power of Attorney

If you lose the capacity to make legal and financial decisions for yourself.

When you can once again make these decisions.

Medical Power of Attorney

Gives the power of attorney to make medical decisions for you when you can’t make them for yourself.


You should choose someone who:

  • will be around when needed

  • is trustworthy

  • you can keep up to speed on how you feel about specific health events.

When you can once again make decisions for yourself.


Action Plan:  If you have any of these documents, make sure the people you’ve nominated as powers of attorney are still willing and capable of administering the role.


And if you don’t have these documents, now’s the perfect time to get the ball rolling.


6. Living Wills and Guardianships


These documents record how you want to be treated (or not treated), and appoint trusted people to act on your behalf. Here’s what they’re used for.


Type of Document

When and why to use it

Enduring Power of Guardianship

Whoever you nominate in this document can choose where you live, your medical care and other lifestyle choices if you’re incapable of making those decisions yourself. So choose carefully.

Anticipatory Direction

This is where you can record your specific wishes about future medical treatment in case you’re ever incapable of expressing your wishes.

Advance Healthcare Directive (also known as a Living Will)

This document provides instructions on how to administer your future health care, and may include specific instructions about resuscitation, life support, treatments, and even your beliefs.


Action Plan: Make sure you’re still happy with the health directives you’ve specified in these documents. If you don’t have any of them yet, it may be time to reflect on what your future needs may be and get them drawn up accordingly.


7. Critical Events Plan


There’s no point having any of these documents if they can’t be quickly found and acted on as the need arises. You need to have a critical events plan so your family knows exactly what to do and who to contact. It’s a way to give them the comfort they need when they need it most.


The Plan should include:

  • the key issues of any potential crisis that could have an impact on your loved ones

  • a complete register of both family members and professionals who can deal with any estate matter

  • the purposes and entitlements of the structures in place

  • all documents needed so decisions can be made unimpeded

  • a list of insurances in place

  • a register of assets and debts

  • the legal responsibilities of the estate, particularly regarding care of dependents.


What should you do next?


Objectively ask yourself, how up to date is your estate plan? It’s too important to leave it in the ‘some day’ category.


When we undertake our estate planning process here at Gill Mckerrow, we focus on one goal: to protect your family's future by protecting and maintaining the family wealth and distributing it according to your wishes.


If you need help with your estate plan, get in touch with us. We can:

  • conduct a needs analysis

  • review of your existing structures

  • facilitate any legal documents you need

  • tailor a complete Critical Events Plan to the needs of your family

  • regularly review your estate plan to ensure it’s always up to date.


Don’t wait until it’s too late. Let us help you create or update your estate plan now, and give yourself and your family the peace of mind you all deserve.


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