An estate plan: don’t leave home without one

1. What is estate planning? estate planning

Everyone should consider planning how their assets are managed during their lifetime and in the event of incapacity and death. You simply must obtain legal and financial advice at every stage of life’s journey.

There are four key considerations when devising your estate plan.

The first is what are your personal wishes, how you personally want to manage and deal with your assets and those whom you wish to benefit during your life and after you pass on.

The second is building a suitable structure around what you want to achieve in drafting a will and other documents that are in sync with your goals and circumstances.

The third is to preserve your wealth during your lifetime in a tax-effective manner as time passes and you face all the various risks that are inherent in life today and in the future.

The fourth is to distribute the assets in a way you intend after your death in the most cost-effective and risk-free manner possible.

2. Why do you need an estate plan?

It sometimes takes a lifetime to build an asset portfolio. This may include your home, investment property, a business, cash investments and superannuation. It makes sense to plan what happens to these assets during your life and upon your death.

What happens to your assets should you be permanently incapacitated and can no longer work or care for yourself?

What happens to them if you die suddenly?

Whom do you wish to benefit?

A failure to plan is a plan to fail.

3. What should you have in your estate plan?

At the very least you should have a will.

Even if you have no significant assets almost everyone has superannuation and a will can be useful in determining how your superannuation is distributed after you die.

If you have significant assets such as a business and a family trust it may be advisable to set up testamentary trusts within your will so that income and capital may be distributed in the most tax effective manner amongst your beneficiaries after your death.

A power of attorney may be necessary to protect the management of your assets while you are alive but cannot manage your assets yourself because of age or infirmity.

The same applies to your medical care and wellbeing. You can pre-determine your wishes by nominating a substitute decision maker to make important decisions in this regard by having an Advance Care Directive in place before you become incapacitated.

4. When should you revise your estate plan?

Once you have devised your estate plan which may suit your circumstances at a current point in time, how often you should revise that plan and what needs to be changed within that plan depends on your circumstances at the relevant time.

As a rule of thumb, you should get advice about your plan every 3 or 5 years.

If your personal circumstances change, for example, marriage or separation, the birth or death of a child, etc this should immediately trigger the need for a change to your plan.

If your assets or liabilities change, either by increasing or decreasing, then this may call for a need to modify some elements of your plan.

Similarly, if there is a significant change in the law, for example, superannuation, this may necessitate a change but clearly you will not know what to do unless you seek legal advice.

5. Why do you need professional advice?

Which brings us to the next important issue in relation to estate planning and that is why you should seek professional advice.

Firstly, because your adviser will be assumed to have the requisite professional qualifications to give you the advice be it legal advice, financial advice or accounting advice or a combination of all three.

Secondly, a professional adviser will have the necessary experience to deal with your situation and provide solutions in an impartial manner.

Thirdly, a professional adviser, in the course of advising you, considers that an issue is outside their field of expertise or experience, they will have access to a network of other trusted professionals who can assist.

Fourthly, professional advice will likely cost you a lot less than you lose if you don’t get proper advice from time to time. The larger or more complex your assets or your personal circumstances, the more costly the advice and plan implementation will likely be but so is the potential for loss if you don’t get professional advice in the first place. It’s best to trust the experts who are qualified (and insured!) to give you all the relevant advice and should do so in a cost effective manner.

6. What happens if you don’t have an estate plan?

If you don’t have an estate plan at all, or if you have an inadequate or out of date or incomplete estate plan, then you and your assets may be at the mercy of members of your family you do not wish to benefit, or your creditors, or the Government – or all of them!

If you die without a valid will the law decides who gets your assets. This is called ‘dying intestate’. These rules apply to everyone and do not take into account an individual’s wishes or situation.

If you don’t have a Power of Attorney and you lose the “capacity” to enter into a new document, then your loved ones will not be able to make decisions on your behalf. This can be an extremely stressful time for your loved ones as they will need to apply to the SA Civil and Administrative Tribunal to be appointed as your administrator.

This can also be an expensive process and one which could have been avoided by simply executing a valid Enduring Power of Attorney in the first place.

If you don’t have an Advance Care Directive in place and you are unable to make or communicate decisions about your own healthcare then a hierarchy of people including your spouse or partner, carer or nearest relative may be consulted on your behalf but none of them are legally authorised to make decisions for you so again you may be at the mercy of other people making decisions which may not necessarily be in your best interests.

If you are looking to make or update your estate plan, contact Di Rosa Lawyers on 8237 0559 or send us an email at admin@dirosalawyers.com.au.

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