An A – Z of Estate Planning
We’ve all heard of Estate Planning and we know that we’re meant to do it but what exactly is it? In short, it’s the process of arranging the management of your personal and financial affairs both during your lifetime and after your death.
There are four documents that we usually recommend people have in place for a complete estate plan:
- Enduring Power of Attorney;
- Appointment of Enduring Guardian;
- Will; and,
- Binding or Non-Binding Death Benefit Nomination.
Many people don’t understand the difference between these documents and when they come into effect so here is a breakdown:
Enduring Power of Attorney and Appointment of Enduring Guardian
The first two documents, an Enduring Power of Attorney and Appointment of Enduring Guardian, deal with the management of your affairs during your lifetime.
Your Enduring Power of Attorney appoints a person/s to manage your financial and legal affairs whilst you’re still alive. Your attorney is able to do almost anything with your property and finances that you are, for example, managing your bank accounts and selling your house. Although you may be capable of managing your affairs now, in the future you may not be able to do so - perhaps due to loss of mental capacity or an accident. Without an Enduring Power of Attorney, no-one is authorised to assist you with your day-to-day affairs which may mean your bills remain unpaid and you’re unable to access your own funds.
Your Appointment of Enduring Guardian appoints a person/s to make health and lifestyle decisions for you whilst you are still alive. Your Enduring Guardian is only authorised to make decisions for you if you’re incapable of making them yourself. The type of decisions your Enduring Guardian might make include consenting to medical or dental treatment on your behalf and deciding where you should live.
It is important to make an Enduring Power of Attorney and Appointment of Enduring Guardian whilst you still have capacity to do so. If you lose mental capacity, it is too late.
Your Will and your Binding or Non-Binding Death Benefit Nomination
These two documents deal with the distribution of your assets after you die.
Your Will sets out who inherits your assets upon your death. Your Will also appoints an Executor/s, the person/s authorised to deal with the administration of your estate and ensure that your assets are distributed in accordance with the terms of your Will. You can also appoint a Guardian for your children in your Will, in case you die before they reach the age of 18. If you die without having made a Will, you have no control over who receives your assets upon your death and they will be distributed according to rules set down by the government.
Perhaps surprisingly, any death benefits payable from your superannuation don’t automatically form part of your estate to be distributed in accordance with the terms of your Will. You will need to make a Binding Death Benefit Nomination in order to nominate who benefits from your superfund. However, depending on the rules of the Fund and your circumstances, it may not be possible - or appropriate - to make a Binding Death Benefit Nomination or any Nomination at all.
There are strict rules as to who you can nominate as a beneficiary so it’s important to take professional advice from an estate planning lawyer before completing your Nomination. This way you can ensure that you’re completing the most appropriate form of Nomination for your circumstances so that your superannuation ends up in the right hands and is distributed in the most tax effective manner. We like to work closely with your accountant or financial advisor as part of this important exercise.
If you would like to receive our regular legal updates, please subscribe here. For more information please read our Plain English Guide to Estate Planning or contact: