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Estate Planning

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Estate Planning and Wills

What is Estate Planning ?

Estate planning is the planning and documentation of the wishes of a person for the distribution of all their assets that the person owns after their death.

What assets form the estate?

Basically, assets owned individually by the deceased forms part of the estate. This can include:

  • Shares;
  • Assets that are held as tenants in common;
  • Cash investments;
  • Any debts held by the individual.

Assets that usually do not form part of the estate include:

  • Superannuation (if a beneficiary is noted);
  • Life insurance proceeds;
  • Income streams that had a reversionary beneficiary noted.

What is a will?

The will is the most important document in the estate planning process. The main two aspects that are covered in the will are:

  1. Who will be in charge of your estate upon death; and
  2. How are your assets to be distributed upon death.

Unfortunately, if you pass away before executing a will, your assets may not be distributed in accordance to your wishes.

What is an Executor?

If you have a will, an executor/executrix will be nominated within it. Amongst their many responsibilities, this person is responsible for the funeral arrangements, distribution of assets and any tax liabilities of the estate.

Being an executor is quite a responsible role, so care should be taken when deciding whom this person should be. The particular person needs to be trustworthy, competent and most importantly, prepared to take on the role.

What happens if I die without a will?

If you pass away without a will you are said to have died "intestate". Under this situation statutory provisions in each state and territory within Australia operate to determine who will inherit the assets.

Under this situation, the next of kin who is entitled to the largest share of the estate applies for Letters of Administration. This means that the person is applying to be appointed by the Court as the administrator responsible for the administration of the estate.

The fundamental rule of intestacy is that the estate will pass to the next of kin of the deceased. Most states prefer spouses and children of the deceased, with no regard for the deceased's wishes.

Contact Us for more information and to discuss the most suitable solution for your unique situation.

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Power of Attorney

What is an Enduring Power of Attorney?

Although this area is not directly involved with estate planning, this is still a very important topic and should be looked into at the same time as preparing a will.

An enduring power of attorney is a legal agreement giving someone else the power to make personal, health and/or financial decisions on your behalf. Importantly, the power of attorney ceases when the person passes away.

"Enduring" simply means that the power continues even if you lose the capacity to make the decisions yourself. These decisions include:

  • Personal matters (including health care);
  • Financial matters;
  • Where you live, and with whom;
  • Day-to-day issues like diet and dress;
  • The type of health care you will receive;
  • Doing your banking;
  • Paying bills;
  • Deciding how your income should be invested.

Exactly what powers would the attorney have?

The individual can specify the sorts of decisions that they want the attorney to make. Within those limits, the individual's attorney would have the power to do, on the individual's behalf, anything that the individual could do in relation to either personal , health or financial matters. There is one important exception: your attorney does not have the power to make decisions about "special" personal matters (such as voting), or " special " health matters (such as withdrawing or withholding life – sustaining medical treatment).

What are the attorney's responsibilities?

A person who accepts a power of attorney has both general and specific responsibilities. Attorneys must exercise the power given to them with honesty and care, and it is an offence not to do so.

In general, your attorney must:

  • Encourage self-reliance. An attorney must only make decisions when there is conclusive evidence that an individual is unable to do so;
  • Recognise your right to confidentiality and dignity;
  • Take into account your existing supportive relationships, values and culture.

Contact Us for more information and to discuss the most suitable solution for your unique situation.

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Superannuation, Tax and Estate Planning

Superannuation and estate planning

Superannuation benefits can be paid either to the estate or to a dependant directly. If you want to have the benefits paid directly to a person, the superannuation fund will usually require a nominated beneficiary form (which can be either binding or non-binding upon the trustee) to be completed.

The superannuation legislation defines a dependant as :- "any person who is or was the spouse of the person and any child of the person".

Death benefits may also be payable to those financially dependent on the deceased at the time of death. Unlike spouses and children who are explicitly named in the legislation, financial dependants fall clearly within the normal meaning of "dependant".

It is important to make sure you update your nomination form with your superannuation fund when there are any changes in personal circumstances.

If the super fund has a binding system in place and you don't inform them of a change, then the superannuation fund is legally obliged to pay the benefits to the person nominated, even though you may not have wanted this particular person to receive the benefits.

Tax consequences of superannuation death benefits

The taxation treatment of the benefit is dependent upon whether or not the recipient is a dependant or non-dependant and whether the benefits are in accumulation or pension phase.

There is a difference between the definition of a dependant for superannuation and taxation purposes. The taxation definition defines a dependant as a spouse, a child under the age of 18, and a person who was financially dependent upon the deceased.

Dependants:

From 1st July 2007, all lump sum death benefit payments made to a dependant are tax free.

Non-dependants:

From 1st July 2007, death benefit payments made to a non-dependant are to be made as a lump sum and taxed at 15% (+ 1.5% Medicare Levy) irrespective of their age.

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