“You only live twice. Once when you are born. And once when you look death in the face.” So said Ian Fleming, author of James Bond novels.
It’s also a good way to think about estate planning. Many of us, naturally, put off thinking about our own mortality. But estate planning – legally laying out what happens to your assets after you’ve gone – can free you up to get on with life. Because you’ve done what you can to look after those you care about.
The fundamentals of estate planning.
- A valid will
A will sets out your wishes as to what happens to your assets when you’re gone. If you have assets – and people you care about – you should have a will.
A solicitor can help you draft a will. It’s cheaper to do it yourself via a will kit, but as the NSW Trustee and Guardian1 points out below, poor drafting of a will can tie up your estate in legal complexities and disputes. That can cause real pain and suffering for your family.
“There are many rules set out in legislation and in case law about how words and phrases in wills are interpreted, and how wills are interpreted as a whole. Where the interpretation of the will is uncertain, it may have to be determined by the Court, which can result in long delays and expenses.”
NSW Trustee and Guardian
You may be surprised to learn that your super can’t be ‘managed’ by your will, or at least by your will alone. That’s because it’s held in trust in your superannuation fund and in legal terms, it’s your super fund trustee who decides how it’s disposed of upon your death.
However, you can help ensure that it goes to the people you want to give it to by creating a Binding Death Benefit Nomination through your super fund and so directing your super fund to pay your super to a specific person, or into your estate on your death. At that point, your will can determine how your super is disposed of.
As you can see, this is a more complex area than many people expect – so talk to your accountant, a financial adviser, and your super fund.
Powers of Attorney
According to the Australian Bureau of Statistics2 12.6% of people who live to 85 or over have Dementia/Alzheimer’s as their main long-term health condition.
That’s a reminder that for many of us there will come a time when we have difficulty making decisions about our own health or finances. A legal instrument called a power of attorney can help ensure that someone with your best interests at heart can make those decisions on your behalf.
There are different types of powers of attorney and they vary by jurisdiction within Australia. These are challenging ideas to contemplate but having the appropriate legal structures in place can provide peace of mind.
Powers of attorney can also ensure that someone who cares about you has the legal right to make important (sometime life-saving) medical decisions on your behalf.
Bottom line: don’t leave a mess behind
Wills, super and Powers of Attorney are just some elements of a good estate plan. You might need a family trust to ‘own’ and control some of your assets. These vehicles can have tax and asset protection benefits.
The bottom line though is that once you have a reasonable level of assets, you should start thinking about your estate planning.
Thinking about your own death or disability may not be fun. But ensuring your loved ones are cared for and your assets are disposed of in accordance with your wishes – is something you should do now. Calmly, rationally, in consultation with your family and with the help of a financial adviser, accountant and solicitor.
The alternative – leaving these big decisions to your family who may be unfamiliar with the law and dealing with grief – is something you wouldn’t want to leave to anyone.
1 DIY will kits - buyers beware. Angela Teng, 3 November 2020, https://www.tag.nsw.gov.au/news/diy-will-kits-buyers-beware accessed 8 March 2021.
2 Disability, Ageing and Carers, Australia: Summary of Findings. Australian Bureau of Statistics 24 October 2019 https://www.abs.gov.au/statistics/health/disability/disability-ageing-and-carers-australia-summary-findings/latest-release, accessed 8 March 2021.
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