When most people think of estate planning they simply think of having a Will. A Will directs your Executor as to how you want your assets to be distributed and is a very important document but it is not the “be all and end all” of an estate plan. Other things to consider include:
- Power of attorney (PoA): Appointing others to make decisions on your behalf if you lack the capacity to do so. There are several different types of PoA but the main ones are General Power of Attorney and Enduring Power of Attorney. General PoA is in force while you have the legal capacity to make decisions. A common use for this is when you are overseas or work remotely and you defer your decisions to others whom you trust. An Enduring PoA comes into effect when you lose legal capacity for making decisions. This usually relates to loss of mental capacity either through mental illness or coma.
- Guardianship: If you are not able to look after yourself who do you appoint to do this for you? Who do you want to look after your children if they are orphaned?
- Testamentary trust: This is usually done as part of your Will. This kind of trust is set up for your minor dependants to fund their upbringing in the event of your premature death. There are tax advantages for establishing this kind of trust and not simply having funds set aside for their education, upbringing and upkeep, etc.
- Estate funding: If you have dependants and you would have insufficient net assets to fund their ongoing upkeep then how will you fund the estate? The common approach is to take out sufficient life insurance over the parents to meet your objectives.
- Superannuation: Super has the ability to be passed directly to a dependant. That is, is does not automatically form part of your estate and you have the ability to direct it to a limited number of people without going via your Will. These people include your spouse (married or de facto), children of any age, any financial dependants or those with which you have an interdependent relationship with. Please note that the tax treatment of your super death benefit can vary among different dependants so it is important to get advice. It is important to make a valid beneficiary nomination on your super fund. You should also be aware that super funds are not under any obligation to check that your nomination is valid. For instance unless they are financially dependent upon you you cannot nominate:
- Your father/mother
- Your brother/sister
- Your grandchildren
- Your friends
These are common nominations and all potentially invalid and will not be honoured by the fund.
If you have any questions regarding estate planning, you can talk to us or consult your solicitor for more information.