We all know how important it is to have a current will, even if we haven’t got around to it yet. But documenting what happens to your assets after you die is just the start of a comprehensive estate plan.
Just as important as who gets the house or paintings when you’re gone, is where and how you wish to be cared for in the final stages of life if you can’t make those decisions yourself.
Life is unpredictable, but having a few crucial documents in place means that whatever happens your wishes will be clear.
An up-to-date will
A will is probably the last thing on your mind when you are young or busy raising a family, but what would happen to your children if you were to die? Who would care for them and how would they be supported financially?
A will can cover everything from how your savings and investments should be distributed to choosing a guardian for your children until they are independent.
Careful planning is even more important in an era of blended families, previous and de facto relationships and high divorce rates. In order to avoid unnecessary conflict when you die, it’s important to update your will to reflect changes in your circumstances such as the birth of a child, deaths, marriages or divorce.
Dying without a will is known as dying intestate and the court will decide how your estate and assets are to be distributed, often to a strict legal formula that may not reflect your wishes.i
Powers of attorney
A good estate plan also takes account the way you want to spend the end of your life. Who will care for you and look after your affairs if you are incapacitated in some way?
By giving a trusted person power of attorney, you effectively give them the legal authority to act on your behalf if you are unable to do so.
The two main types of power of attorney are:ii
- A general Power of Attorney is a person appointed to make financial and legal decisions for you, usually for a specified period of time. For example, if you are overseas and you need someone to bid on a property on your behalf. This becomes invalid if you lose the capacity to make decisions for yourself.
- An Enduring Power of Attorney is a person appointed to make financial and legal decisions on your behalf if you lose the capacity due to an accident, stroke or dementia, for example.
- An Enduring Guardianship sets out who should make decisions on your behalf such as where you live and the type of care you receive if you lose mental capacity.
In some states an Enduring Power of Attorney extends to decisions about medical issues. In other states an Advanced Health Care Directive (also referred to as a Living Will) is required to direct how medical treatment is to be administered.iii
Whoever you give a power of attorney or appoint as guardian and the executor of your will must be people you trust with your life, so choose carefully.
Super and other assets
There are some things that can’t be included in a will such as the distribution of assets held in super, by a company, a unit trust or a discretionary trust such as a family trust.iii
You can nominate the beneficiaries of your super through the fund itself. If no beneficiary is nominated, or the person you nominate is ineligible, then it will be left to the trustee of your super fund to decide who gets the proceeds.
With assets held inside a family trust, the beneficiaries are named in the trust deed and distributed according to the trust deed.
Assets owned by unit trusts or companies controlled by you will not be part of your estate, but the shares or units will be.iii
If you would like to discuss your estate planning needs so your wishes are respected in life and in death, give us a call.