I’m sure you’ve heard many a great person say:
A failure to plan is a plan to fail…
…and one area I often come across that people fail to plan is their own estate plan.
What is estate planning?
Estate planning involves developing a strategy to deal with your assets and investments when you pass away. Its aim is to provide peace of mind for you and your loved ones when you die, ensuring that your assets are passed on to your beneficiaries in the most simple and effective way.
One of the key tasks of estate planning is preparing a will. Your will provides instructions on how your estate is to be distributed amongst your nominated beneficiaries, but it’s far from the only aspect you need to consider.
A thorough estate plan will also deal with a range of other matters, including:
- Superannuation death nominations (who gets your super benefits when you die)
- The creation of testamentary trusts to distribute assets to your beneficiaries
- Powers of attorney (appointing someone else to conduct your affairs if you are unable to do so)
- Power of guardianship (giving someone else the power to make personal and lifestyle decisions for you if you lose your mental capacity)
- Anticipatory direction or advance health directive (instructions on your wishes regarding medical treatment if you’re unable to communicate)
Why do you need to?
Many, many reasons but the very basic estate planning strategies are not only related to the eventual distribution of your wealth but should be viewed as part of the ongoing administration and management of your financial affairs during your working life and retirement.
…and if that doesn’t prompt you to consider whether your estate planning is in shape think about this reason….there are significant additional costs involved where people have not considered and attended to their estate planning needs and this can mean there is less in the estate to distribute to loved ones because of the extra costs due to a lack of or poor estate planning.
How do I start estate planning?
The estate planning process can be broken down into a few simple steps:
- Take stock of your assets. Create a list of all your personal assets, as well as other assets that form part of your estate (trusts, superannuation, life insurance etc.).
- Identify risks. Identify any potential risks you want to plan around before and after your death, such as divorce, mental incapacity or your early death.
- Creating a plan. You can now work with your solicitor, accountant and financial planner to work out an estate plan that is tailored to your needs and incorporates all your assets.
Preparing a will
A will is a critical legal document that outlines your wishes for the distribution of your assets after your death. By creating a clear and unambiguous will you can:
- Ensure that your assets are distributed to the right people
- Provide instructions on who will look after your children
- Establish trusts to distribute assets among your beneficiaries more effectively
- Donate money to charity
- Provide instructions for your funeral
If you die without a will or with an invalid will, this is known as dying intestate. When this happens, each state and territory has its own laws regarding how your assets will be distributed. Though those assets will usually be distributed to your family members, this allocation may go against your final wishes.
With this in mind, it’s essential that you create a will and update it regularly to reflect any changes to your legal rights.
How can a will or estate plan benefit me?
There are several important benefits of estate planning, including:
- Peace of mind. The biggest benefit of estate planning is the peace of mind it provides, ensuring that your hard-earned assets will be distributed according to your wishes.
- Financial support for the people you care about. By developing a comprehensive estate plan, you can guarantee that your assets go to the right people.
- Eliminates disputes. A clear will and a good estate plan will help your loved ones avoid arguments, disputes and even messy legal battles about the fair distribution of your assets.
- Tax-effective. With help from legal and financial professionals, you can distribute your assets in a way that minimises the tax obligations your heirs will face.
- More than just money. Estate planning is about much more than just dividing up your finances; it also allows you to ensure that you receive the medical care you want, that your children are properly cared for if you die unexpectedly, and even that you’re given the funeral you want.
While estate planning might seem like a morbid and gloomy task, don’t put it off. If you think about it and take action now, you can save your loved ones plenty of stress and heartache in the future.
Help is here…catch up with Simon, our Financial Advisor, for a coffee and find out more about what you and your family need to do to start on your estate planning or how to review it if you started or did it some time ago (08) 94810746.