The complexities of today’s society, asset ownership structures, taxation and superannuation laws mean that having a simple Will alone may not ensure that your assets are passed on to your intended beneficiaries. Effective estate planning requires various considerations. Even those with ‘simple’ family structures and modest assets should plan how their estate will be distributed after they die and how their legal and financial affairs will be managed if they are incapacitated. We don’t just draft wills, we can create detailed estate plans that reflect your intentions. Good estate planning requires:
- Preparing for the inevitable – having a valid Will to appoint an executor / trustee and to determine who receives or controls your assets when you die.
- Planning for the unforeseen – ensuring documents are in place so your legal and financial affairs can be dealt with appropriately by somebody you trust if you are away, become ill, disabled or incapacitated.
- Ensuring your estate maintains value – distributing assets in the most tax-effective manner, using a tailored approach specific to your circumstances.
- Protecting vulnerable beneficiaries – creating testamentary trusts to safeguard at-risk beneficiaries from third party creditors, estranged partners, or depletion of their inheritance due to incapacity, disability or dependency.
- Succession planning – ensuring appropriate arrangements are in place for business and company interests, whether those interests are to be wound up or handed down through generations.
- Minimising the potential for family provision claims – understanding family provision and implementing strategies to limit such claims.
Making a Will
It is important for everyone over 18 to have a Will to make sure their wishes are followed, and their assets distributed as they would want after they die.
If you do not have a Will your assets will be divided according to the rules of intestacy, that is, when you die without having made a Will. If you die intestate it is possible that your estate will not be distributed as you would have desired.
A Will can also indicate to your family and friends your wishes on other important matters, such as who you want to be the guardians of your children and shows a level of care in not wanting to give loved ones any more stress to deal with than they will already face when you die.
Preparing a Will is not a once-off event. It is sensible to review your Will regularly. Changes in your personal and financial situation may create problems for others in interpreting your wishes in a Will that has not been updated to reflect new circumstances.
Powers of Attorney and Enduring Powers of Attorney
A Power of Attorney is a legal document made by a person (the principal) which appoints another person (the attorney) to manage the principal’s financial affairs if / when a specified event occurs and subject to certain conditions.
A Power of Attorney is useful if you are planning to go overseas, taking an extended holiday, suffer from poor health, have an accident, or reach a stage in your life when you need greater assistance managing your affairs.
A Power of Attorney will be ineffective if the principal loses capacity and therefore many people will consider making an Enduring Power of Attorney, which as the name suggests, endures or continues after capacity is lost by the principal.
A Power of Attorney gives considerable power to another person, who is essentially authorised to ‘stand in your shoes’ to manage your affairs. Your attorney can pay your bills, do your banking and even enter into legal agreements on your behalf. It is therefore essential that you choose somebody you trust explicitly, with the capacity and willingness to make sound decisions that are in your best interests.
Your lawyer will ensure that the extent and nature of the authority you propose giving under a Power of Attorney is clearly explained and will carefully draft these documents to reflect your intentions.
Structuring your estate for asset protection
Asset protection involves the structure of affairs to eliminate or reduce financial loss and to safeguard property. When planning your estate, there are steps you can take to ensure your assets are protected for future generations and that your estate is left only to those you intend to benefit.
The effect of a trust is the separation of the beneficial, from the legal ownership of property. Holding assets in trust can protect them from claims by third party creditors in the event of bankruptcy, insolvency, court or family law proceedings.
A testamentary trust is a discretionary trust contained in a Will that comes into effect when the testator dies. A trustee is pre-appointed to manage the trust and may choose how and when the deceased’s assets are distributed to beneficiaries. The flexibility and control in distributing assets has potential benefits including the protection of vulnerable ‘at-risk’ beneficiaries such as minors, those with intellectual disabilities or drug and alcohol addictions.
Even modest estates may benefit from having a testamentary trust, particularly where the testator is part of a blended family.
Trusts are complex and advice and guidance is important to ensure the trust is compliant, structured to achieve the required objectives and that any stamp duty and taxation implications are considered.
Making the most of your superannuation
Death benefits of a superannuation account are paid to an eligible ‘dependant’ determined by the fund trustee, or in accordance with a Binding Death Benefit Nomination (BDBN). Preparing a BDBN can help to ensure that your superannuation benefits are paid to your intended beneficiaries and they receive the most advantageous tax treatment.
Consideration of the way death benefits are taxed in the hands of the recipient is important to ensure the most tax-effective results are achieved.
Essentially, a spouse or partner will be considered a tax-dependant under taxation law and accordingly, will receive death benefits tax free. Alternatively, whilst adult children are considered dependants under superannuation legislation, they are not ‘tax-dependants’ and may need to pay tax on some death benefit components.
Proactively planning for how you would like your assets to be distributed after your death can save many hours of heartache for friends and family. Estate planning also helps to ensure that the assets you have spent a lifetime accumulating are not depleted by costly legal battles after your death which may arise simply because no direction has been given as to how you wish your estate to be divided.
We have experienced lawyers on our team who specialise in this important area of law. Please contact us to discuss how we can best assist you in planning for the future.