Updated November 12th 2013

If you haven’t started yet, it’s not too late to begin your estate planning. Most people haven’t made even a simple will, let alone a comprehensive plan to make sure that the right people receive the right assets in the most tax effective manner. Yet ignoring the inevitable can have dire consequences that can end up being very expensive and even result in irrevocable rifts among family members.

It is very important to know what is an ‘estate asset’ and a ‘non-estate asset’, as only estate assets are dealt with by a Will. Examples of non-estate assets include a self-owned insurance policy with a beneficiary listed, and a residential home held as ‘joint tenants’.

A Will is a legal document. It allows you to choose who will receive your assets and belongings after you die and who will be responsible for managing your estate.

A Will ensures that your estate will be distributed tax effectively and according to your wishes in the event of your death.

Wills should be reviewed regularly or following a major change in personal circumstances such as marriage or divorce (a Will is invalid following marriage or remarriage), the birth of children and so on.

You should review your Will every few years or whenever your personal or financial circumstances change to the extent that the Will does not reflect your current wishes.

A Power of Attorney is sometimes referred to as a ‘Living Will’. Enduring Powers of Attorney (generally made in favour of a spouse or a trusted family relative or friend) empowers your chosen Attorney to act on your behalf in managing your affairs in the event of you becoming disabled and losing the capacity to make decisions. A secondary Power of Attorney will act on your behalf, should both of you lose the capacity to make decisions.

Points to consider when arranging a Power of Attorney:

  • The power of the attorney can be limited to what you want your attorney to do.
  • You limit the decisions that the attorney can make by simply writing your limitations on the document, in accordance with each state or territory’s rules.
  • You need to appoint somebody you can trust. If you can’t be certain, then you’re probably better off without one. After all, you’re giving your attorney a lot of power – the power to make legally binding decisions on your behalf.
  • If you find it difficult to choose, you can give more than one person a Power of Attorney and stipulate that any decision must be unanimous before it is acted upon. This provides an extra safeguard.
  • You need to consider Power of Attorneys now when you are fit and well as, once you are mentally incapacitated, it’s too late.

Other areas of Estate Planning to consider include:

  • Enduring Guardianship.
  • Joint Tenants vs Tenants in Common.
  • Insurance Policy ownership and beneficiaries.
  • Buy/Sell agreements.
  • Inter Vivos Trusts and Testamentary Trusts.
  • SMSF Beneficiary nominations.

Estate Planning can be an extremely complex area, but should be thoroughly reviewed and considered as part of any good financial plan.