If you’ve got people in your life that you love and want to take care of, you might be at a point where you’re thinking an estate plan would probably make good sense.
What is estate planning?
An estate plan is about more than just you drawing up a will. It involves formalising how you want to be looked after (medically and financially) if something happens to you, or you can’t make your own decisions later in life.
It also involves documenting how you want your assets to be protected during your lifetime and distributed after your death.
How does an estate plan help?
You can make your wishes known
One of the benefits of a sound estate plan is the ability to formalise your wishes in writing. This can help in the instance someone contests what you’ve said you want if you’re no longer around, or able to speak for yourself.
You could minimise disagreements
Being prepared could go a long way in preventing disputes from arising should family members be made to divide assets among themselves or make other hard decisions on your behalf.
You may improve tax consequences for your heirs
As the distribution of assets (including income) can come with different tax obligations, a good estate plan might also minimise any tax that may be payable by your heirs. For instance, if they have to sell something they’ve inherited, depending on the type of asset, capital gains tax may be payable.
Key points when creating your estate plan
Think about drawing up a will and whether you want something that’s legally binding
A solicitor or estate planning lawyer can help you draw up a will that is legally binding and that covers what you’d like to happen with your assets, children (if you have any) and your funeral, when you die.
It’s important this document is kept up to date to also ensure any changes to your situation (marriage, divorce, separation or otherwise) are accounted for, so those who matter most are taken care of.
While it’s also possible to draw up your own will (there are various kits available online), these mightn’t be adequate in complex situations, which is why engaging a professional may still be worthwhile.
After all, if your will is deemed invalid, your estate will be distributed according to the law in your state (which may not align with your wishes) and claims could be made by unintended recipients.
Review your nominated beneficiaries for any super or insurance you might have
You might assume that how and in what proportions you want your super to be distributed can be included in your will, but this isn’t necessarily the case unless you've specified certain arrangements with your super fund beforehand.
With that in mind, it may be a good idea to nominate your beneficiaries with your super fund and to make sure you’re across how long different nominations are valid for.
If you don’t make a nomination, the super fund trustee could use its discretion to determine who your super money goes to.
In addition, if you have insurance outside of super, you may want to ensure that you’ve listed your beneficiaries on your insurance policy and that those beneficiaries are also kept up to date.
Consider appointing an enduring power of attorney to make decisions if you can’t
This person will make legal and financial decisions for you while you’re alive, if you’re ever unable to.
For this reason, it’s important to choose someone you trust, as they’ll be responsible for looking after your bank accounts, ongoing bills, and even selling your house if you need to move into a care facility.
It’s also worth noting that you may be able to appoint a different type of power of attorney depending on what tasks you’d like this person to carry out on your behalf, such as general lifestyle decisions.
Choose an executor to help carry out your wishes when you’re gone
Generally, the executor manages and distributes the estate with the assistance of a solicitor, according to the terms you have set out in your will (which your solicitor should have a copy of).
When you nominate an executor in your will it’s important to let your family know and make sure the person knows their duties and where your will and other important documents are kept. You may also want to let your family know where this information is stored.
The executor will typically be responsible for carrying out duties, such as making funeral arrangements, ensuring your debts are paid and bank accounts closed, and any life insurance collected.
They will also need to apply to the court for probate, which is a legal step that is required before your estate can be distributed and that certifies that your will is valid.
Do you need help?
Estate planning can be a complex area and there could be legal and tax implications if you don’t set things up correctly and understand the fine print.
For these reasons, it’s very important to speak to a legal professional and your financial adviser before making any decisions and signing on any dotted lines.
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