We do not like to think about our death but planning for the inevitable and having a well-considered estate plan can protect your assets and save your family and friends a great deal of time, hassle and heartache.
What is an estate plan? It is more than just a Will. Your Will is the basis for an estate plan, it takes into account things known as “estate assets” such as your personally held assets i.e. your house, bank accounts, investment portfolio but it does not necessarily consider “non-estate assets” such as family trusts, superannuation, and private companies.
That being said where do you start? The following checklist should give you an idea if you need to review your estate plan or indeed create one;
Do you have a Will & is your Will current?
If you are over 18 years of age and have any assets you should have a will. A Will is not a set-and-forget document, things change as we move through life. We get married, children are born, assets are acquired and unfortunately, sometimes divorce happens. All of these events have the potential to change what we want to happen to our estate after we pass.
If there is no Will in place when you die, the state will decide how your assets and funds are distributed. This can lead to legal challenges by potential inheritors who feel dissatisfied by the States’ decision and these challenges can lead to the estate being squandered by legal fees.
Your Will can direct who is to inherit your assets: bank account balances, property, investment portfolios, jewellery, vehicles, and other possessions. Perhaps more importantly the Will can also direct who will become guardians of your children. The Will can also be used to advise loved ones about your wishes for your funeral, cremation, or burial.
What about your non-estate assets?
If you have insurance policies, do these policies have a beneficiary? Is the beneficiary nominated still the beneficiary you would like to receive the funds from?
If you have a superannuation account do you have a nominated beneficiary? Is the nominated beneficiary a Binding Death Nomination or a Trustee Discretion Nomination? Is the beneficiary still the beneficiary you would like to receive your superannuation payout?
Do you have a private company? Are there arrangements in place that will allow the transfer of ownership to your beneficiaries upon your passing?
Do you have a Family Trust? Does the deed allow your beneficiaries to be beneficiaries of the trust upon your passing?
Are you in a business partnership? Do you have a buy-sell agreement? Is it sufficient to cover your share of the business?
How will taxes affect your estate?
Australia does not have an inheritance tax, however, there are other taxes that may be payable. Capital gains tax is a major consideration as is the taxable portion of your superannuation fund. There are tax minimisation strategies that can be put in place to further protect the capital value of your estate when passing to your beneficiaries.
Do you have an Enduring Power of Attorney?
An Enduring Power of Attorney allows a nominated person to manage your affairs if you become incapacitated and cannot make decisions for yourself. An Enduring Power of Attorney differs from a standard Power of Attorney as it continues upon your death.
Do you have an Enduring Power of Guardianship?
An Enduring Power of Guardianship will allow your nominated person to make medical decisions on your behalf if you are unable to. Instances, where this may be necessary, is if you are comatose and lost of mental capacity.
Do you require an Advance Health Directive?
An Advance health directive is a formal way to give instructions about your future health care and only comes into play if you lose the capacity to make decisions. An advance health directive can assist your Enduring Power of Guardianship to make decisions that you yourself would make if you were able.
Do you need to consider a Testamentary Trust?
A testamentary trust is a trust established under a valid Will, but it is not the same trust as the deceased estate. A testamentary trust functions in a similar way to a discretionary family trust, with certain provisions of the Will operating like a trust deed.
A well-governed testamentary trust will ensure that tax outcomes are achieved. More importantly, complex family or legal disputes can be prevented.
There are many times a testamentary trust can be useful, it can be especially useful when there are beneficiaries under the age of 18 years, where there is a dependent adult child due to disability. A trust can be used for the protection of assets where a beneficiary is a spendthrift or going through a divorce.
At MBC Wealth we recognize that an Estate Plan is more than just a Will and we recommend you speak to your financial adviser to ensure your Estate Plan is up to date and accurately reflects your wishes.