An effective estate plan helps you to prepare for the inevitable and the unforeseen. It involves:
- appointing somebody you trust to manage your legal and financial affairs if you are unable to do so yourself;
- ensuring that health and welfare decisions that align with your wishes and values can be made on your behalf if you are incapacitated;
- appointing a trusted person to manage your estate when you die;
- ensuring your assets are protected from third parties and distributed to your intended beneficiaries with optimum taxation outcomes.
Making a Will
Everybody over 18 should have a Will. If you do not have a Will, you die intestate and your assets will be divided according to the rules of intestacy which may not be as you would have desired.
A valid Will determines who should benefit from your estate when you die (your beneficiaries) and who will be responsible for administering it (your executors and trustees). A Will can be simple or complex and may also appoint guardians for minor children and provide directions for funeral arrangements.
When preparing or reviewing a Will, you should consider your family structure, your personal, and financial circumstances. The risk of a family provision claim being made against your estate after you die should also be considered. Revising your Will after a significant event such as birth, death, marriage, divorce or receiving a major inheritance, is also important.
Ensuring the most tax-effective distribution of your assets when you die and protecting at-risk beneficiaries if necessary, forms an important part of estate planning.
A testamentary trust is a more complex Will that creates one or more trusts after the testator dies. A trust can help safeguard assets from third-party creditors, protect at-risk beneficiaries, and provide flexibility in the distribution of assets resulting in more optimal tax outcomes.
Talking to a lawyer and your financial planner can help tailor your Will to address these important considerations.
Powers of Attorney
For various reasons, we may need help managing our affairs when it becomes impractical or impossible to do so ourselves.
A power of attorney is a legal document that you can make to authorise another person/s to make personal and / or financial decisions on your behalf. The person appointed to do this is known as the attorney and the person authorising the appointment is the principal.
The range of functions authorised under a power of attorney is specified in the relevant document prepared by your lawyer, and may range from a one-off transaction to the complete management of your affairs.
A power of attorney ends when the principal dies after which the provisions of the deceased’s Will (or the legislation governing an intestate estate) take effect.
Advance Care Planning
Advance care planning considers your values and wishes concerning your future health care needs. You can document directions about these matters now, so that your wishes are respected if you become incapacitated and cannot convey these directions yourself. Directions can include the type of medical treatment you consent to or refuse, and your values and preferences that should be considered regarding your future health care needs. For example, you may include directions to withhold or withdraw certain life-sustaining measures (subject to certain criteria).
Advance care planning involves:
- consideration of your values regarding health care;
- appointing a substitute decision-maker;
- completing the relevant documentation.
Advance care planning requires transparent and open communication with your family, friends and carers, and your health care providers so that your values and wishes concerning future medical care and treatment options are understood.
Deceased Estates – executors and administrators
After a person dies, someone needs to look after their assets and liabilities and administer the estate. An executor is the person appointed under a Will to do this. An administrator has the same role however is appointed by the Court through Letters of Administration when a person dies intestate or an appointed executor is unable to act.
Executors and administrators have significant legal responsibilities and may need to protect themselves from personal liability. This is particularly so with complex estates or where a claim is made against the estate. They will often need to consider matters outside their areas of expertise such as the tax implications on the sale or transfer of assets, the order of payment of debts, and the consideration of a family provision claim. Obtaining professional advice and guidance in these areas is essential.
Probate and Letters of Administration
An executor may need to apply for probate in the Supreme Court before administering an estate. The granting of probate ‘proves’ the Will of the deceased and authorises the executor to deal with the assets.
The requirement to obtain probate depends on the size of the estate, the type of assets and how they are held. Most financial institutions require a grant of probate to release funds over a specified amount. Probate is also required to transfer real estate that is not jointly held between the deceased and a beneficiary. A grant may also be recommended if contentious issues exist.
A grant of Letters of Administration appoints an interested person administrator of the estate, allowing him or her to deal with the estate assets and liabilities in the same manner as an executor.
It makes sense to plan ahead, not just for expected end of life events, but for matters as simple as travelling overseas so that your affairs can be managed while you are away, should the need arise. We have many years’ experience with estate planning and the administration of estates, and have assisted numerous clients with their individual needs, tailoring plans to suit their unique circumstances.