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Estate Planning 101 – what is ‘estate planning’? What you need to do to put a plan in place to protect your estate and your family

Estate planning can help ensure you leave your estate to your intended beneficiaries

Attwood Marshall Lawyers Wills and Estates Partner, Angela Harry, discusses why estate planning applies to everyone. Careful planning of the distribution of your estate involves protecting the assets you have worked so hard to acquire and to ensure your assets end up in the hands of those you want to benefit. It is important to get the right professional advice to plan and structure your estate effectively, both to cover loss of capacity while you are alive and when you die (not if – when).

Everybody needs to have a Will and Enduring Power of Attorney

Many people think estate planning is simply writing a Will, but there is so much more involved. Estate planning is about putting in place documentation that directs how you want your affairs looked after if you cannot make decisions for yourself during your lifetime and how you want your assets to be distributed after you die. There are a suite of documents involved in this process which often includes your Will, Enduring Power of Attorney, Advance Health Directive, and superannuation beneficiary nominations, but can also involve a host of other documents, particularly when you have non-estate assets such as companies and family trusts to consider.

It is important that everybody, no matter their age or how modest their estate is, look at their estate plan and ensure they have the appropriate documentation in place. It is also essential that these estate planning documents are regularly reviewed and kept up to date with changing circumstances.

You never know when your number is up. Recent events with natural disasters, man-made catastrophic events and the Covid-19 pandemic are great reminders that life can be tenuous. We should all have our affairs in order so that the loved ones we leave behind can pick up the pieces and continue their lives. There is nothing worse than suffering the shock and grief of losing a loved one and then having to deal with complicated legal and taxation issues. Make sure you avoid this outcome and protect your family by getting these documents prepared.

What are the common myths associated with estate planning?

Myth 1: Estate planning is only for the wealthy

It is amazing how many people form the view that they do not have enough wealth to warrant putting in place the necessary estate planning documents.  Your estate is comprised of everything you own – when you consider the value of superannuation contributions, life insurance policies, the family home, shares, investments, motor vehicles and other personal belongings, people can often have more wealth than they realise. No matter the size of the estate, even a modest estate, it is important to have the documentation in place to determine how your assets are managed and distributed.

Many clients underestimate the value of their estate after they pass away. Quite often your life assurance policy amount in your Superannuation, plus your contributions, make it imperative for you to have your estate planning in place. There may also be substantial payouts to your estate or your dependants if you suffer fatal injuries at work. It is better to have the documents in order, rather than not.

Myth 2: I can just do it myself

With DIY Will kits available at the local Post Office, and access to the internet to download documents such as Enduring Powers of Attorney, many people assume they can complete these types of documents themselves. In reality, many DIY documents end up causing more problems than they solve.

With Will kits the main issue isn’t that the Will is ineffective or invalid but rather you end up with a valid Will that is legally binding but doesn’t achieve what you intended. There are so many errors we see in Will kits, whether it be the Will not being dated, the Will attempting to give assets that the individual does not own (e.g. superannuation or jointly held assets), or the Will being incorrectly witnessed, the list goes on. An incorrectly prepared Will can be disastrous and can result in costs that could have been avoided had it been prepared properly. A properly prepared Will should not only be correctly executed but should also give consideration to asset protection issues and tax considerations. You won’t get this in a DIY Will kit.

Similar problems can arise with Enduring Powers of Attorney prepared without the appropriate advice. Giving someone enduring power means that he/she is able to continue to act for you if you lose capacity to act for yourself. For example, if you develop a medical condition (such Alzheimer’s or dementia), suffer a head injury in a car accident or have a stroke which results in you being left in a vegetative state, you may still live for quite a long time but be completely unable to handle your own affairs or make any decisions. You can nominate different people to take control of financial matters and health related matters. With financial matters, you can also decide whether someone can step into this role immediately or only if you lose capacity. Given the far-reaching effects of the document, it is important to both appoint people you trust as well as tailor the terms of the document to suit your circumstances. The ‘tick and flick’ approach often applied to forms downloaded from the internet and prepared without legal advice can result in serious and often unintended consequences for the principal and attorney.

Changing Enduring Powers of Attorney

If you want to change your Power of Attorney, you need to have the capacity to do so. The process to change who you have nominated as your Enduring Power of Attorney is to:

  • revoke the existing document
  • provide a copy of the revocation to the Attorney under the old document
  • complete a new Enduring Power of Attorney

What happens if you don’t have an Attorney to act for you?

Approximately 50% of people do not have a Will, and the number is far higher for those who do not have an Enduring Power of Attorney. We often get calls from clients wanting to draft an Enduring Power of Attorney for a relative, usually a parent, who has lost capacity (often after being diagnosed with a condition such as Alzheimer’s Disease). Unfortunately, we have to advise them it is too late.

When it comes to financial matters, if you don’t have an Enduring Power of Attorney in place, your family cannot automatically step in and make those important decision on your behalf (e.g. selling property to fund care or accessing your bank accounts to pay bills). This generally require a formal appointment – and to obtain this they need to make an application to the Queensland Civil and Administrative Tribunal (QCAT). The process is fairly involved and there is a lot of paperwork that needs to be put in place. QCAT will look at the circumstance of the person who has lost capacity, they will require medical reports, and they need to look at the person’s assets and liabilities and what the future plan is. A hearing will take place which will determine who should be appointed as financial administrator.

Where there is conflict between family as to who should be appointed or in the instances where no one puts their hand up to take on this role, the reality is it usually ends up in the hands of the Public Trust Office.

It is important to get the right legal advice to ensure these documents are properly prepared giving consideration to the circumstances of the individual and being tailored accordingly. Attwood Marshall Lawyers are trained and experienced to consider these documents and how they should be structured.

Read more: Appointing Guardians and Attorneys – what can happen if you make the wrong choice

Myth 3: I don’t need to plan my estate; I plan to spend it all

Whilst some people may have the attitude that they plan to spend it all, the reality is that this often does not happen.  Although our life expectancy is generally getting longer, life is not nearly as long as you expect it to be. Most people are conservative by nature and don’t want to be left penniless before they die. You cannot spend your Superannuation or your death cover insurance! It is always better to have your Will and binding nominations done.

Myth 4: Estate planning is too expensive

To save money people often choose to create a DIY Will and complete other estate planning documents on their own. Trying to save on the upfront cost of engaging with a professional can be counter-intuitive and ultimately cost more in the long run. The price for putting in place a proper estate plan differs based on individual needs and circumstances. For those who do not have an appropriate Will or estate plan, they may avoid upfront professional fees, but the estate administration process or unintended tax consequences that can arise after death can be significantly higher. It is amazing how much people spend each year on insurance for events that may never happen yet do not wish to invest in a properly prepared estate plan that, if done properly, can save their estate and their intended beneficiaries substantially in the long run.

What information should I take with me, or expect to discuss, at an estate planning appointment?

Many people come to an estate planning appointment unprepared. The information which needs to be discussed includes:

  • Family situation: We want to know who’s who in the family. Are there children or grandchildren, if so, what are their names, addresses, ages, and occupations. Often people are surprised when we ask about children’s occupations. This information is important to consider because it can help determine if a beneficiary may be at risk. For example, if you have a beneficiary who is a doctor, lawyer or accountant, they may not want assets in their names because they are at risk of being sued in their profession. There are ways to structure documents to protect a beneficiary who is at risk. Asking these sorts of questions helps to identify that risk.
  • Additional risk factors: This information allows us to identify any additional risks that need to be factored in, such as if a beneficiary has a disability, an addiction or substance abuse issue.
  • Assets and liabilities: Most people think that everything they own can be distributed by their Will. Assets that are jointly held, in superannuation, or trusts do not automatically form part of the estate to pass in accordance with the Will.  The ownership or control of these assets need to be considered so that the appropriate documentation can be prepared.
  • Superannuation details are something many people forget to bring to their estate planning appointment. It is not uncommon for an individual to have multiple superannuation accounts and have no idea who is named as beneficiary. Reviewing the superannuation information is important to determine if a beneficiary nomination is required and how that nomination should be structured.

How does superannuation fit in to my estate plan?

A common misconception is that you can leave your superannuation in your Will.  The treatment of superannuation upon your death is not the same as the treatment of other assets.  Technically, you do not own your superannuation balance until it is paid out to you.  In the meantime, it is held by the superannuation fund upon trust for the members.  What happens to your account when you die depends upon the terms of the trust deed governing the superannuation fund, the superannuation law, and the terms of any binding or non-binding nomination you have made to your superannuation fund.  This means that your superannuation entitlements may not be treated in the same way as your directions given in your Will, and you should give consideration to giving directions to your superannuation fund as to how you want your superannuation entitlements paid in the event of your death.  Note that there can be significant tax implications of any nomination you make and you should get appropriate advice from your accountant and financial advisor.  Any binding death benefit nomination will lapse 3 years after the date it was made unless it is a non-lapsing binding death benefit.

What should be considered when nominating an executor?

A Will is designed to distribute the assets that you own to your intended beneficiaries on your death. To ensure the estate passes to those you intend one of the most important considerations is who to appoint as the Executor. The role of the Executor in the will is a crucial one. The role of the Executor is to ensure that the terms and conditions of the Will are carried out, including calling in all assets, paying all expenses, and distributing the estate in accordance with the Will, including the set-up of the Trusts under the Will.

If you have included minors as beneficiaries, then the function of the executor may also extend to holding certain assets on trust until the minors reach the age nominated in the Will.  In holding those assets on trust the role then extends to controlling the day to day operation of the trust including investment of trust assets and distribution of income and capital to the intended beneficiary.

It is common for people to nominate family members or friends to take on this role. It is important that those nominated are going to be both willing and capable to take on that role (often for years to come).

What should be considered when nominating an executor?

A Will is designed to distribute the assets that you own to your intended beneficiaries on your death. To ensure the estate passes to those you intend one of the most important considerations is who to appoint as the Executor. The role of the Executor in the will is a crucial one. The role of the Executor is to ensure that the terms and conditions of the Will are carried out, including calling in all assets, paying all expenses, and distributing the estate in accordance with the Will, including the set-up of the Trusts under the Will

If you have included minors as beneficiaries, then the function of the executor may also extend to holding certain assets on trust until the minors reach the age nominated in the Will.  In holding those assets on trust the role then extends to controlling the day to day operation of the trust including investment of trust assets and distribution of income and capital to the intended beneficiary.

It is common for people to nominate family members or friends to take on this role. It is important that those nominated are going to be both willing and capable to take on that role (often for years to come).

What happens if you do not have a Will?

If you do not have a Will you are said to die intestate. Intestacy may occur not only where a person fails to make a Will but also for other reasons including that the will fails to distribute all of their assets, the Will is invalid, the person did not capacity to make the Will, the Will has been poorly drafted. When our estate falls under the laws of intestacy your assets will be distributed according to a pre-determined statutory formula. This means that certain family members will receive a defined percentage of your estate. Each State and Territory has different legislation which deals with the distribution of an intestate estate with the legislation being slightly different.

In circumstances where there are no relatives alive who fall within the class of beneficiaries on intestacy, the estate can end up in the hands of the State Government.

How can Attwood Marshall Lawyers help?

Attwood Marshall Lawyers is a leading estate planning firm with one of the largest and most experienced teams in Australia. We have a holistic approach to estate planning. We can help mitigate the risk of someone challenging your estate and will look at what assets there are and how they can be structured to ensure the wealth you have built up goes to who you intend after you die.

Read more: A Binding Death Benefit Nomination can determine how your self-managed superannuation funds are dealt with upon death
Read more: Don’t get complacent about your Will – now’s the time to get it done

For a complimentary 20-minute estate planning review please call anytime on 1800 621 071. Contact Wills and Estates Department Manager, Donna Tolley, directly on 07 5506 8241, mobile 0423 772 555 or email dtolley@attwoodmarshall.com.au

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Angela Harry

Angela Harry

  • Partner
  • Wills and Estates
  • Direct line: 07 5506 8211
  • Mobile: 0423 773 686