Top ten estate planning tips

4 mins read  
Date: 19 October 2016

1. Make a will - don't die interstate as this can often result in unexpected and undesirable outcomes.

  1. Without a will, assets will be distributed according to a statutory formula which varies from State to State;
  2. It can be possible to die with multiple spouses or dependents, even those that the deceased did not necessarily recognize. This can mean assets going to people for whom they were never intended;
  3. Not having a will can undo the best enacted financial estate planning strategies.

2. Understand the different powers of attorney (POA) that are required depending on the State or Territory concerned:

  1. General PoA - for temporary use while away or unable to attend to own affairs but expires upon loss of legal capacity;
  2. Enduring PoA - for on-going use including that period where one loses legal capacity. Allows the attorney to do anything the donor could do but expires upon death;
  3. Enduring Financial PoA - Allows one to make and affect financial decisions for the person concerned;
  4. Enduring Medical PoA - Allows one to make medical decisions and sign treatment papers on behalf of the person concerned. The "attorney" cannot 'switch off the machines' to allow the person to die, but they could sign a 'do not resuscitate' form on their behalf;
  5. Enduring Guardianship PoA - Allows the "attorney" to make life style and accommodation decisions on behalf of the person concerned.

3. Identify all the assets and who controls them:

  1. It's important to know what is available to distribute upon death before deciding who gets what;
  2. Most people have more assets than they think;
  3. Only assets personally owned and control actually go to the deceased's estate:
    1. Personal assets controlled by the deceased flow to the estate and are controlled by the will;
    2. Joint assets go to the survivor - they are not included in the estate;
    3. Superannuation does not form part of deceased estate UNLESS there is a binding nomination specifying that the member death benefit should be paid to the estate, or the trustee uses their discretion to pay it to the estate;
    4. Family trusts - the Appointer with the power to appoint and remove the trustee;
    5. Business assets and structures - may involve partners, their rights, their control, and combined money or value in the business.

4. Is it realistic to think a simple three page will can cover modern lifestyle situations?

  1. With second marriages, separated and de facto partners, blended families etc. one needs to be realistic about the family situation, who is to get certain assets and how this might be achieved. For example, in a second marriage there might be a delay between when death occurs and when surviving children are able to inherit any major, jointly held assets such as the family home. Where there is a second spouse with their own children or the surviving spouse remarries, complications can easily arise;
  2. Beneficiaries have different circumstances - should everyone get the cash or assets? A beneficiary heavily dependent on Centrelink, for example, might need different arrangements to help preserve their Centrelink benefits;

5. Think about who should be in charge of carrying out the deceased's instructions:

  1. Is the current executor the deceased's age? If so, will they still be around or have full mental capacity at the time of death? Will they want the stress of managing the estate?
  2. Are the children executors? If so, can they all be relied upon and are they all in a stable situation - no divorce or bankruptcy or habit issues? What about problems with their spouses?

6. Not everyone wants to be an executor as it is a very responsible role:

  1. Make sure the parties understand the nature of the role;
  2. Executors have a number of legal and financial (tax) issues to manage;
  3. Executors can only carry out the instruction in the will - not change it;
  4. Executors may have to deal with challenges from an unhappy family;

7. Be realistic about what can and cannot be controlled:

  1. It is often better to provide for someone rather than ignore them and trigger a challenge to the will;
  2. Being too general or too specific can cause problems. For example, use percentages for monetary bequests rather than absolute $ amounts;
  3. Beneficiaries' lives, needs and wants change over time - it's best to try and cater for this with a well-crafted will.

8. A good will is about flexibility and minimizing the potential for being challenged;

  1. Not all future events can be foreseen - professional help and flexibility are key to being able to achieve intended outcomes;
  2. A good will can allow the executor the flexibility to deal with changes to individual situations within the parameters of the deceased's wishes at the time;
  3. The estate and beneficiaries rarely benefit from challenges - it is a good idea to do everything possible to avoid them;

9. Things change between now, when the will is made, and later when it needs to be executed:

  1. Review the will on a regular basis to ensure that it is still relevant to the circumstances;
  2. Think about the impact of decisions on children, grandchildren and other beneficiaries;
  3. Keep the family appraised of any wishes;

10. Start estate planning now - don't leave it to the last minute:

  1. With enough time, legal and financial professionals can achieve many outcomes. With little time, options become very limited!
  2. Estate planning is a marriage between financial planning and the smooth operation of the will. They work together rather than separately;
  3. Alzheimer's and dementia are our fastest growing diseases - don't leave estate planning too late.

Final thought:

A will is really nothing more than a delivery device. It is there to ensure that the deceased's assets are delivered to desired recipients. A good will cannot replace good financial planning but, good financial planning can be for naught if there is not an appropriate will. The two must work hand-in-hand to ensure an optimal solution.