Planning your estate is an important part of managing your financial affairs. It allows you to pass on your assets to intended people in your life while minimising adverse tax implications.
When planning your estate, consider the following:
First and foremost, individuals should have a valid and up-to-date Will. A Will sets out who you wish to receive your assets upon your death, provides funeral instructions and details such as guardianship over minor children. The assets in your Will form part of your estate and include property, bank accounts, Estate planning, essentials shares, managed funds and so forth. However, superannuation is separate from your estate, so you will need to make a death benefit nomination to choose eligible beneficiaries to receive your super.
It is critical to keep your Will up-to-date especially after major life events, i.e., marriage, having a child, divorce, an executor dies, etc., as these may affect the validity of your Will.
An Executor has significant responsibilities and duties in managing your estate. It is the Executor’s role to carry out the instructions of your Will including the distribution of assets, locating the Will, applying for probate, arranging the funeral, preparing and lodging tax returns and so on. Individuals must carefully consider and preferably ask the nominated person(s) before appointing them to the role as the duties can be quite complex and demanding, especially during a time of grief. An Executor(s) must also be aware of the tax, accounting and legal requirements of the role as well as the time demands of finalising an estate. Appointing two Executors is beneficial in the case where one becomes unwell or does not wish to accept the role.
Leaving a portion or all of your estate to charity is a great legacy. However, it is critical to use clear wording and provide accurate details of the charity or organisation to prevent the gift from failing. Clear instructions must be included for your Executor in the circumstance where the charity ceases to operate to ensure your intentions are honoured. This may include giving your Executor power to select a charity on your behalf.
Setting up a trust within your Will may be beneficial if you wish to protect assets from bankruptcy or divorce, provide for children with disabilities or, if you have high-risk beneficiaries (i.e., a beneficiary with gambling, drug or alcohol addictions). A trust has the added benefit of providing significant tax savings especially in regards to income tax and capital gains tax (CGT).
Appointing a Power of Attorney and an Enduring Guardian allows nominated persons to make legal decisions on your behalf. A General Power of Attorney will make financial decisions on your behalf for a specific period or event, such as going overseas. An Enduring Power of Attorney appoints someone to make financial and legal decisions on your behalf in the case where you lose the mental capacity to make decisions. Appointing an Enduring Guardian allows an individual to make lifestyle decisions on your behalf, such as healthcare treatment in the event you become incapable of making such decisions.