Estate Planning Essentials: Who Needs a Will?

With Andrew Morris, Business Advice Manager

“I’m always surprised by the number of clients who engage our firm for Financial advice who haven’t contemplated the importance of preparing an Estate Plan as part of their overall Financial Planning Strategy,” says Andrew Morris, Business Advice Manager at Soundbridge. “During my thirty-seven-year career as a Financial Planning Professional, I have had to deal with multiple disturbing cases involving clients who have passed away Intestate (passing away without a will) leaving their loved ones to deal with legal and financial complexities, adding undue stress at a time of grief.”

I can’t stress enough the importance of preparing a well-constructed Estate Plan that includes:

• Your Will
• An Advanced Health Directive
• Election of a Power of Attorney
• Inclusion within your Will of a Testamentary Trust (Will Trust), if required

By implementing a comprehensive Estate Plan, you are clarifying how you wish to distribute your assets in the event of your death. You are also giving certainty to your own future and wellbeing by completing an Advanced Health Directive and Powers of Attorney to  whom you wish to manage your affairs on your behalf if you lose capacity through illness or injury.

Your Will:

A will is a legal document that sets forth your wishes regarding the distribution of your property and the care of any minor children. If you die without a will, those wishes may not be carried out. Further, your heirs may be forced to spend additional time, money, and emotional energy to settle your affairs after you’re gone.

Failure to prepare a Will typically leaves decisions about your estate in the hands of judges or state officials, and may also cause family disharmony. Not preparing a Will has many unforeseen consequences, some of which are:

• Financial burdens for your family while assets are in probate
• Unintended distributions of assets
• The Court having to determine childcare
• No guarantee of allocation of assets to minimize taxation
• A contested estate could delay distribution of assets

Remember that all states and territories have different legislation dealing with intestacy and probate. The diagram below is indicative of Intestacy Rules.

Health Directives:

A health directive is a formal way to give instructions about your future health care. It comes into effect only if your cognitive health deteriorates and you become unable to make your own decisions, and outlines what medical treatment or health care you want. It also enables you to appoint an attorney for health and personal matters, and includes information that health professionals should know, including health conditions, allergies, and religious, spiritual or cultural beliefs that could affect your care.

Consequences of not preparing a Health Directive can include:

• Medical care costs could wipe out assets
• Your life could be prolonged beyond what you would desire

Power of Attorney

A power of attorney is a formal document giving another person the authority to make personal and/or financial decisions on your behalf. These personal decisions relate to your care and welfare, including your health care, and are an important part of your estate plan.

The common categories of power of attorney are:

• Enduring – You would use an enduring power of attorney to appoint someone to make financial and/or personal decisions on your behalf. For financial decisions, you can nominate whether you want the attorney to begin making financial decisions for you straight away or at some other date or occasion, such as once you’ve lost capacity to make these decisions. For personal decisions, your attorney’s power only commences when you lose capacity.
• Limited – a limited power of attorney is an authorization that permits a portfolio manager to perform specific functions on behalf of the account owner. It allows the manager to execute an agreed-upon investment strategy and take care of routine related business without contacting the account holder.
• Specific – you would use a specific power of attorney when you are unable to be physically present to sign important documents. The authorised person can only act on your behalf as outlined in the power of attorney document.
• General – you would use a general power of attorney to appoint someone to make financial decisions on your behalf for a specific period or event, such as if you’re going overseas and need someone to sell your house or pay your bills.
• Power of Guardianship – powers of guardianship are used to alter a family member’s priority in the decision making process. They do so by taking members of a particular category, or class, and giving them higher priority than someone of another category, and only come into effect if you lose capacity to make certain decisions.

Testamentary Trusts (Will Trusts):

A testamentary trust is a trust set up within your Will. Testamentary trusts are designed to hold assets, and are overseen by a nominated trustee, who eventually distribute the trust’s assets to beneficiaries. The manner in which this can be done depends on the type and purpose of the testamentary trust. Two of the most common are:

• Discretionary testamentary trusts, which can be used in some cases for certain tax outcomes and asset protection
• Protective testamentary trusts, which are generally established for the benefit of someone who is otherwise unable to manage their own affairs.

Common reasons to implement a Testamentary Trust (Will Trust)

• Creditor Protection
• Income Splitting
• Education for grandchildren and children
• High risk beneficiaries

“I can’t stress enough the importance of Estate Planning and how it provides certainty for your loved ones in the event of your death,” says Andrew.

If you have a Will, how long is it since it has been updated and is it still relevant to your current circumstances?  Do you know where the original is for safe keeping and informed your family of its location?

If you would like further information, please call your Soundbridge Adviser for General information and introduction to our preferred legal advisers.

WARNINGS, DISCLOSURES & DISCLAIMERS

While every care has been taken in the preparation of this article, Soundbridge Pty Ltd (ABN 40 151 134 146) and AFTA Pty Ltd (ABN 18 624 984 550, AFSL 507423) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts.

The information and any advice provided in this document is general and has been prepared without taking into account your objectives, financial situation or needs, and might not be appropriate to your situation. Because of that, you should, before acting on the advice, consider the appropriateness of the advice, having regard to those things. Past performance is not a reliable indicator of future performance.  AFTA Pty Ltd does not warrant that future forecasts are guaranteed to occur.

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases, the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

Soundbridge Pty Ltd (ABN 40 151 134 146) is a representative of AFTA Pty Ltd (ABN 18 624 984 550), Australian Financial Services License (507423), Registered office at 166 Quay Street, Rockhampton QLD 4700.

Any advice on this website is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

Posted on October 28th, 2020