Estate planning is not just the preserve of the elderly or the sick. Every Australian, regardless of their age or health, should consider an estate plan that takes into account their assets and family situation.
While there isn’t one single answer or solution that Will suit every individual, one thing that is true is that an estate plan is more than just a Will; it's a strategy that ensures not only that assets are directed to chosen beneficiaries but that someone else can make financial, medical and legal decisions on a person’s behalf if they lose the capacity to do so themselves.
Financial advisers and estate planning practitioners are key in helping ensure a person’s wishes can be carried out the way they require.
What estate planning means
Developing an estate plan involves ascertaining a client’s estate, determining their wishes and intentions and how they can be fulfilled, and advising about the implications of their intentions.
Estate planners do not simply ask what a client wants and prepare a Will without providing advice – the advice is the important part of the estate plan and without it, the documentation may not be as effective as otherwise.
There is also the importance of considering what the client’s wishes are during their lifetime as, with an aging population, it is becoming increasingly common for people to lose capacity and require another person to act as their attorney or be appointed as their administrator. Unless this is sorted out when they still have capacity, this may not be the person they would prefer and will be decided by VCAT/QCAT/the Guardianship Board.
Different needs at different stages
People will have different requirements for an estate plan depending on what life stage they are at.
Young, single, no dependants
While people who are young and independent like to think they are invincible, they are of course as prone to illness or accidents as anyone else
Furthermore, this category is increasingly likely to be accumulating wealth in their own right. Therefore, it is important for young singles to prepare a Will, enduring power of attorney and appointment of enduring guardian.
This will help ensure that during their lifetime, someone has the power to make financial, legal, medical and healthcare decisions on their behalf if they lose the capacity to do so, and that on their death, assets will pass in accordance with their wishes.
Single but committed
People who are in a serious committed relationship – whether defacto or not – should consider what will happen to their partner if they die or lose the mental capacity to handle your own affairs.
Will they lose their home? Will they inherit all possessions, or will other family members take everything away?
Likewise, what will happen if the partner dies or loses capacity?
Unromantic though it may seem, getting married is an important trigger for reviewing existing estate planning documents. For example, marriage can automatically revoke a Will so this will need checking.
Some points to consider include:
- Has the marriage revoked the current Will?
- Has the marriage revoked an existing enduring power of attorney or appointment of enduring guardian?
- What is the effect of any superannuation nominations? For instance, is a nomination of a previous partner still valid? If so, is this still desirable?
- How has life insurance been affected – are beneficiary nominations still appropriate?
Married with children
Having children is also an important life stage for reviewing an estate plan.
Does the Will provide for the appointment of guardians? It may need to be updated to nominate testamentary guardians to take care of the children if both parents die at the same time.
Does the current Will allow the children to inherit their share of the estate as soon as they reach 18 years of age? If so, is this appropriate? It might be worthwhile thinking about including testamentary trust provisions in a Will so that children do not inherit everything at a young age.
What if both parents become incapacitated at the same time? Who would look after the children then, and what financial arrangements are in place to look after their schooling, maintenance, and so on?
Divorce and property settlement
Unlike marriage, divorce does not automatically revoke a Will, so a review of estate planning is crucial at this stage.
Many couples go through a separation period before getting divorced. In the absence of proper estate planning, a now ex-partner may still inherit if a person dies after separation but before divorce is finalised.
Revise any enduring power of attorney documents – people usually don’t want their ex having a say in their finances and health and medical decisions!
Also revise any trust documents because an ex-spouse may be able to take control of the trust.
Remarriage and blended families
Blended families are increasingly a factor in today’s society, and can cause a number of complications.
Some crucial considerations include:
- Revise a Will and trust documents to reflect the proper beneficiaries
- Consider whether the new spouse will be provided for in the Will
- Consider whether any children of the new spouse from a previous relationship will be provided for
- Be aware of the Family Provision Legislation which in most states of Australia extends to stepchildren – they may be able to claim against an estate
- Determine which assets will be left to the new spouse and which to leave your children, and if any will go to a previous spouse
- Consider a Binding Financial Agreement with the new spouse.
The crucial documents
Regardless of the stage of life, the most crucial documents to include in an estate plan are:
- Wills (and Memoranda of Wishes), instructions to Guardians of minor children
- Superannuation Death Benefit Nominations
- Powers of Attorney and Appointment of Guardians
- Trust Deed
- Superannuation Trust Deed
- Company Constitution
- Shareholders and Unitholders Agreements and Partnership Agreements
- Binding Financial Agreements
To find out more about Estate Planning, please contact Australian Unity Trustees or call 1800 878 783.
This information is provided by Australian Unity Trustees Ltd ABN 55 162 061 556, of Level 7, 189 Flinders Lane, Melbourne, VIC 3200, AFSL, 483220. Australian Unity Trustees Ltd is a wholly owned subsidiary of Australian Unity Limited.
Any advice in this article is general advice only and does not take into account the objectives, financial situation or needs of any particular person. It does not represent legal, tax, or personal advice and should not be relied on as such. You should obtain financial advice relevant to your circumstances before making any decisions. You should seek specialist advice from a tax professional to confirm the impact of this advice on your overall tax position.
Australian Unity Funds Management Limited ABN 60 071 497 115, AFSL 234454, and Australian Unity Property Limited, ABN 58 079 538 499, AFSL 234455 and Australian Unity Investment Real Estate Limited, ABN 96 606 414 368, AFSL 477434 grant to professional financial advisers who have received this article from Australian Unity a non-exclusive, limited licence to reproduce content from the article, strictly on the following conditions: The reproduction must only be for use in the financial adviser's practice newsletters and similar publications. The content must not be altered in the reproduction, in any manner which may change or has the potential to change its original meaning or message, or in any manner which may, in Australian Unity's opinion, reflect unfavourably on, or misrepresent, Australian Unity. Australian Unity must be acknowledged in the reproduction by using the following notice: ‘This article originally appeared in Australian Unitys’ Insights newsletter dated May 2017. Reproduced with permission of Australian Unity. For further information, visit australianunity.com.au/wealth. If any of these conditions are not in Australian Unity's opinion complied with, then Australian Unity may terminate this licence by written notice to the financial adviser.