Why you need a Will
With Andrew Morris, Business Advice Manager
COVID-19 has introduced significant health risks and changes to family life, and has brought matters of health and finances to the forefront of our attention. It’s now more important than ever to have an estate plan so you can make sure your family and loved ones are looked after should you become ill or die.
We can find it hard to face the fact that death is part of our future and that there may be a time when we won’t be able to manage our own finances due to poor health. However, the COVID-19 pandemic has made us all more aware of how life can change when we least expect it, and our health is something we shouldn’t take for granted. So there really is no better time than now to get your estate plan in order.
What is an estate plan?
Your estate plan is a set of arrangements that sets out what will happen to your assets when you die and/or if you become unable to manage your own affairs. Your Will is just one part of your estate plan. It can also include a Power of Attorney arrangement, giving someone else legal authority to manage your assets and finances if you become incapable of doing this yourself.
Andrew Morris, Business Advice Manager at Soundbridge, says, “Estate planning is an ongoing process and should be started as soon as an individual has any measurable asset base. As life progresses and goals shift, the estate plan should move to be in line with new goals. Lack of adequate estate planning can cause undue financial burdens to loved ones because estate taxes can run higher than 40%, so at the very least a will should be set up even if the taxable estate is not large.”
Why is a Will so important?
If you die intestate (without a will) there is no guarantee your assets will be distributed as you would like.
Preparing a will gives a clear guide of how you want your assets distributed and helps alleviate any stress and cost (or lengthy court battles) over who gets what after you’ve gone.
A will also gives you the opportunity to name guardians for your children, establish a trust or donate to a charity.
How do you make a Will?
You can take a DIY approach to making a Will with a Will kit. But not all your assets are covered in your Will. You super, for example is not an estate asset and you will need to make a separate arrangement – usually a binding nomination – to make sure your super death benefit is passed on according to your wishes.
Wills and estate plans can be fairly simple, but it depends on your particular family and financial situation. Owning a business, being married more than once, or having children are just some circumstances that can demand a more complex estate plan. While it may take a lot more detail and structure to ensure all your assets are properly distributed, it’s worth doing to take care of everything that matters to you.
One of the best ways to make sure your estate plan covers everything it should, is to seek advice from a financial planning professional and a solicitor who specialises in estate planning.
A solicitor can provide legal advice on your estate plan, and draw up the legal documents you need to make sure your Will and estate plan are legal and binding, but they cannot offer you financial advice. A financial planner can offer you guidance on growing and protecting your assets during your lifetime. They can also talk to you about what to consider as you decide how you want your assets to be distributed among your family and loved ones, both before and after you die. This includes the tax consequences of transferring assets to your beneficiaries, which can be significant, so it is important to get advice in this regard.
Do I need a Power of Attorney?
There are different types of Powers of Attorney you can nominate, but the two main ones are a Medical Power of Attorney (also known as a guardianship) and an Enduring Power of Attorney. A Medical Power of Attorney gives another person authority to make decisions about your medical treatment if you’re not physically or mentally able to choose for yourself. An Enduring Power of Attorney (PoA), on the other hand, gives someone the legal authority to manage your financial affairs when you’re unable to do so.
As you grow older, having a PoA organised is important in case you lose capacity to make decisions about your finances. If this were to happen, and you don’t have someone legally appointed to act on your behalf, your financial affairs and your personal wellbeing could both be affected. If you don’t have PoA arrangements in place with a trusted friend or family member, it can make it difficult for things to be done on your behalf, such as paying your bills or looking after your home.
In choosing the people or persons to nominate as your PoA, it should be someone you can trust to act in your best interests. And it also helps if they have some experience with finances and good knowledge of your assets so they can fully understand the consequences and results of any decisions or actions they take. With the current restrictions in place for interstate travel, it’s also worth thinking about having someone nearby to act on your behalf if you should become ill or lose capacity to manage your own affairs.
When should you update your Will?
Andrew advises that you should review your will every 3–5 years to ensure it still reflects your wishes. You may also need to change your will if any of the following occurs:
- you get married
- you get divorced, or separate from your partner
- you enter into a defacto relationship
- your children or grandchildren are born
- your executor or beneficiary dies
- there is a change in your financial circumstances.
“There are many things to consider, says Andrew. “For example, it’s important to note that your will is revoked or cancelled if you get married, unless it is made in contemplation of marriage. Divorce does not revoke a will, but it cancels any provision in favour of the former spouse.”
What happens if you don’t have a Will?
If you die without a Will, your assets will be distributed according to the intestacy legislation for your State or Territory. Assets will be shared among family members according to these legal requirements. This is why it’s important to have a Will to make sure that your estate is passed on according to your wishes.
Sources:https://www.moneyandlife.com.au/family-and-life-events/why-you-need-a-will/
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Posted on September 10th, 2020