Tag Archives: Estate Planning

Understand estate planning

By Robert Wright /July 01,2019/

What is estate planning?

If you’ve got people in your life who you love and want to take care of, it’s wise to build an estate plan. This plan, which you can put together with the help of an estate planning specialist, will make sure loved ones are taken care of in the event of your death.

An estate plan is more than just drawing up a will. It also involves formalising how you want to be looked after (medically and financially) if something happens to you, or if you’re unable to make your own decisions later in life. Your estate plan will also clarify how you want your assets to be protected during your lifetime and distributed after your death.

How does an estate plan help?

You can make your wishes known

One of the benefits of a sound estate plan is the ability to formalise your wishes in writing. This can help if someone contests what you’ve said you want after you’ve passed away, or if you’re unable to speak for yourself.

You could minimise disagreements

Unfortunately, disputes often arise when unsettled assets need to be distributed among others—especially if there are no clear guidelines set. Being prepared with an estate plan could go a long way in preventing disputes should family members need to divide assets among themselves or make other hard decisions on your behalf.

You may improve tax consequences for your heirs

As the distribution of assets (including your income) can come with different tax obligations, a good estate plan might also minimise any tax that your heirs would need to pay. For instance, if they decide to sell something they’ve inherited, depending on the type of asset, they may need to pay capital gains tax. Estate planning, particularly with the guidance of estate planning specialists, could reduce these extra tax costs.

Key points when creating your estate plan

Consider drawing up a will and whether you want something legally binding

A solicitor or estate planning lawyer can help you draw up a will that is legally binding and covers what you’d like to happen with your assets, children (if you have any) and funeral when you die.

It’s important this document is kept up to date, and be sure any changes to your situation (marriage, divorce, separation or otherwise) are accounted for, so those who matter most are taken care of.

While it’s also possible to draw up your own will (there are various kits available online), these may not be adequate in complex situations, which is why engaging a professional is still worthwhile.

A word of warning: if your will is deemed invalid, your estate will be distributed according to the law in your state (which may not align with your wishes), and claims could be made by unintended recipients. This is why it’s a good idea to enlist the services of an estate planning specialist, even if you think your situation is relatively simple.

Review your nominated beneficiaries for any super or insurance you might have

When it comes to your super, you’ll need to do some planning in advance to make sure it’s distributed properly in the event of your passing.

During this process, take the time to nominate your beneficiaries with your super fund, and make sure you’re across how long different nominations are valid for. If you don’t make a nomination, the super fund trustee could use their discretion to determine who your super money goes to.

In addition, if you have insurance outside of super, make sure you’ve listed your beneficiaries on your insurance policy and that those beneficiaries are also kept up to date.

Consider appointing an enduring power of attorney to make decisions if you can’t

There may come a time when you’re unable to make legal or financial decisions on your own because of advanced age or medical issues. Granting power of attorney means you are designating an individual to make these decisions on your behalf if such a scenario arises.

For this reason, it’s important to choose someone you trust, as they’ll be responsible for looking after your bank accounts, ongoing bills, and even selling your house if you need to move into a care facility.

It’s also worth noting that you may be able to appoint a different type of power of attorney depending on what tasks you’d like this person to carry out on your behalf. For example, you may want your son or daughter to make general lifestyle decisions for you, while you appoint a financial adviser to make financial decisions.

Choose an executor to help carry out your wishes when you’re gone

Generally, an executor is the legal individual who manages and distributes the estate with the assistance of a solicitor, according to the terms you’ve set out in your will (which your solicitor should have a copy of).

When you nominate an executor in your will it’s important to let your family know, to avoid disputes after you die. Make sure the executor also has a good understanding of their duties and where your will and other important documents are kept. You may also want to let your family know where this information is stored.

The executor will typically be responsible for things like making funeral arrangements, ensuring your debts are paid and bank accounts closed, and collecting any life insurance.

They will also usually need to apply to the court for a grant of probate, which is a required legal step before your estate can be distributed. A grant of probate certifies that your will is valid.

Source: AMP, May 2019

Could a family dispute erupt over your will, or lack of one?

By Robert Wright /April 05,2019/

The thought of dying isn’t a pleasant one, which is why considering how you’ll distribute your assets after you’ve gone may be something you’ve always put off for another day.

While this is understandable, you also probably don’t want inaction leading to family members becoming embroiled in a nasty inheritance dispute if you leave it too late.

On top of that, without a valid will, you run the risk of your estate being distributed according to state law, which may not align with what you had in mind either.

What Aussie seniors said on the matter of inheritance

Almost one in five Aussie seniors said in a survey they had concerns that their family would argue over their estate should they pass away, particularly in regard to property and money, with people feeling less worried there’d be arguments over sentimental items or things like cars and jewellery.

Among seniors, who were concerned that family members would argue over their estate upon their passing, about 70% were worried that disputes would negatively impact their family’s relationships.

By far the most popular strategy to minimise the risk of families fighting over estates was drawing up a will that specified in writing how an estate would be distributed.

The benefits of documenting things formally

Drawing up a will allows you to document how you want your assets to be distributed after you die.

• This can help in the instance someone contests what you’ve said you want to happen if you’re no longer around.
• It could go a long way in preventing disputes from arising should family members be made to divide assets among themselves.
• You may also be able to improve tax consequences for your heirs. For instance, if they have to sell something they’ve inherited, depending on the asset, capital gains tax may be payable.

Things to consider and why communication can be beneficial

You may or may not want to distribute your assets evenly. You may have given cash advances to help people out earlier in life. There may be family members who are better off than others. There may be some getting assistance via other means, while others may be less likely to use the money wisely.

At the end of the day, how you want to distribute your assets will be up to you but communicating why you’ve made certain decisions could go a long way. Sure, it might be a hard pill to swallow, but not talking about it could cause far bigger feuds (and sadly to say, even legal battles) down the track.

Talking openly and honestly will hopefully help your family understand why you have made the decisions you’ve made and ensure everyone is on the same page.

How to formalise what you want to happen

A solicitor or estate planning lawyer can help you draw up a will that’s legally binding. It’s important this document is kept up to date to also ensure any changes to your situation (marriage, divorce, separation or otherwise) are accounted for, so those who matter most are taken care of.

While it’s also possible to draw up your own will (there are various kits available online), these mightn’t be adequate in complex situations, which is why engaging a professional may be worthwhile.

After all, if your will is deemed invalid, your estate will be distributed according to the law in your state (which may not align with your wishes) and claims could be made by unintended recipients.

Do you need help?

Your will and broader estate plan can be a complex area and there may be legal and tax implications if you don’t set things up correctly and understand the fine print.

For these reasons, it’s very important to speak to a legal professional and your financial adviser before making any decisions and signing on the dotted line.

Source: AMP, March 2019

How to protect your loved ones after you’re gone

By Robert Wright /February 19,2019/

As the old saying goes, there are only two things certain in life: death and taxes. Unfortunately, most of us spend too much time worrying over the latter and not enough discussing the former, uncomfortable though it may be.

But while no one enjoys contemplating the end of their life, planning for your death is just as important as managing your finances, if not more so.

It’s difficult enough for families to cope with the loss of a loved one, but the added burden of dealing with the remaining estate can make an emotional time even more traumatic – which is why drawing up a will is essential, regardless of your age and the state of your finances. Here’s what you need to know.

What happens if you don’t have a will?

If you pass away without a will, the law will determine who can be appointed to administer your estate and how it will be distributed once debts are paid out.  Administrators have the right to make allowances for persons who might have been left out, which could result in a smaller share being provided to those you love the most. Similarly, others may receive more than you would have otherwise wanted.

If you do have a will

Where is it?

It’s important that your original documents are stored somewhere that’s both safe and accessible. Most solicitors will store your will for you and provide you with a certified copy, which should ideally be safely filed both digitally and in hard copy.

Executors and Powers of Attorney

An executor is the person appointed to administer the estate according to your wishes, and is an essential part of making a will. An executor may be required to sell assets, invest money, complete tax returns and pay debts. Your executor should be someone responsible and capable of undertaking such an important role, especially in complicated cases where the appointment could be long term.

A Power of Attorney is not essential and is appointed in a separate document to your will, as this person’s duties are only relevant during your living years. A Power of Attorney is authorised to act on your behalf in financial or health matters, if you are otherwise unable to do so.

What happens after a death?

Your executor will need to apply for a Grant of Probate in order to begin administering your estate in accordance with the will. An executor is entitled to obtain legal and accounting advice to assist them throughout the application process and dealing with any tax implications for the estate.

Accessing the will

It is crucial that your executor knows where and how to access your will. It’s a good idea to provide your executor with a copy of your will which will include the contact details of the solicitor storing it.

What about super?

Superannuation is usually not included in the distribution under a will, but rather the superannuation legislation and requirements of individual funds dictate how it will be distributed. Special clauses can be included if you wish to bring superannuation into the will but it’s a good idea to seek financial advice first to ensure there are no tax implications.

Disagreements

If there is a disagreement over the will which can’t be sorted out between the parties, then legal representation will be required. The best way to reduce the chances of a disagreement is to ensure your will is carefully drafted and regularly reviewed and updated to reflect your current circumstances.

Whether you’re young and single or have children to consider, creating a will not only ensures your estate is distributed according to your wishes, it drastically reduces the stress and trauma for the family you leave behind.

Without a will, there’s no guarantee your loved ones – and your affairs – will be taken care of in the manner of your own choosing.

 

Source: Macquarie Group Limited

Make sure your super goes to your loved ones

By Robert Wright /November 16,2018/

While a Will states how you would like your hard-earned assets to be distributed, it doesn’t automatically include your super. That’s because, unlike directly owned property or shares, super doesn’t necessarily form a part of your estate. The super fund trustee will distribute it in accordance with super law and the fund’s trust deed and those decisions may not be what you had in mind.

That’s why it’s important to let your super fund know your wishes. Creating a valid binding death benefit nomination will bind the trustee to pay the death benefit according to your wishes.

A binding death benefit nomination is one of a variety of nominations – outlined below – which legally allows you to advise or bind the trustee to pay your super benefit to who you want when you die, provided the nominees meet certain eligibility criteria.

1. No nomination

If there is no nomination, the trustee has discretion and often pays the super benefit to the estate. In this situation there is a chance your super benefits could go to someone you didn’t intend them to go to.

2. Non-binding death benefit nomination

When there is a non-binding death benefit nomination you can tell the trustee who you want your super benefits to go to. It will be considered by the trustee, but is not binding.  The trustee can still exercise discretion which may suit you if your situation has changed. Ultimately, the trustee will make the decision as to who to pay your super benefits to.

3. Binding death benefit nomination

With a binding death benefit nomination the trustee must pay super benefits to the nominated dependants and in the proportions you set out. However your nomination must be renewed every three years to remain valid.

Who can you nominate as a beneficiary?

There are government regulations around who can receive a superannuation benefit – it’s not whoever you wish. The beneficiary must be a ‘dependant’.

A dependant is:

• a spouse or de facto spouse
• children of any age, including step-children, adopted or children from previous relationships
• someone who is financially dependent on you
• someone in an interdependency relationship with you, such as a close living arrangement where one or both provides the financial, domestic, and personal support of the other.

In a situation where there is no nomination made, either binding or non-binding, then the super fund trustee will distribute your benefit in accordance with super law and the trust deed. In practice, this generally means the member’s spouse or other dependants such as their children. In cases where the member doesn’t have any dependants then it will most likely be paid to your personal legal representative.

 

Source: IOOF