The rapid global onset of COVID-19 has forced many people to consider the “what if” scenarios that were previously unthinkable, or at least the situations that no one ever wants to talk about or deal with. Most of us have fortunately never dealt with anything like this – extended periods of isolation at home and long-term social distancing – in our lives. Many people are reaching out to execute Estate plans they have put off finalising and signing. Others are calling to start Estate plans they should have started years ago.
How does an Estate plan help?
You can make your wishes known
One of the benefits of a sound Estate plan is the ability to formalise your wishes in writing. This can help if someone contests what you’ve said you want after you’ve passed away, or if you’re unable to speak for yourself.
You could minimise disagreements
Unfortunately, disputes often arise when unsettled assets need to be distributed among others—especially if there are no clear guidelines set. Being prepared with an Estate plan could go a long way in preventing disputes should family members need to divide assets among themselves or make other hard decisions on your behalf.
You may improve tax consequences for the beneficiaries of your Estate
As the distribution of assets (including your income) can come with different tax obligations, a good Estate plan might also minimise any tax that the beneficiaries of your Estate would need to pay.
Key points when creating your Estate plan
Consider drawing up a Will and whether you want something legally binding
A solicitor can help you draw up a Will that is legally binding and covers what you’d like to happen with your assets, minor children (if you have any) and funeral when you die. It’s important this document is kept up to date, and be sure any changes to your situation (marriage, divorce, separation or otherwise), or of your children’s, are accounted for, so those who matter most are taken care of. While it’s also possible to draw up your own Will (there are various kits available online), these may not be adequate in complex situations, which is why engaging a professional is still worthwhile.
A word of warning: if your Will is deemed invalid, your Estate will be distributed according to the law of intestacy in your state (which may not align with your wishes), and claims could be made by unintended recipients. This is why it’s a good idea to enlist the services of an Estate planning specialist, even if you think your situation is relatively simple.
Choose an executor to help carry out your wishes when you’re gone
Generally, an executor is the legal individual who manages and distributes the Estate with the assistance of a solicitor, according to the terms you’ve set out in your Will (which your solicitor should have a copy of). When you nominate an executor in your Will it’s important to let your family know, to avoid disputes after you die. Make sure the executor also has a good understanding of your circumstances, assets, liabilities and their duties, and where your Will and other important documents are kept. You may also want to let your family know where this information is stored.
The executor will typically be responsible for things like making funeral arrangements, ensuring your debts are paid and bank accounts closed, and collecting any life insurance. They will also usually need to apply to the court for a grant of probate, which is a required legal step before your Estate can be distributed. A grant of probate certifies that your Will is valid.
Consider appointing an Enduring power of attorney and guardianship to make decisions if you can’t
There may come a time when you’re unable to make legal or financial decisions on your own because of advanced age or medical issues. Granting an Enduring power of attorney which endures incapacity means you are designating an individual to make these decisions on your behalf if such a situation arises. For this reason, it’s important to choose someone you trust, as they’ll be responsible for looking after your bank accounts, ongoing bills, and even selling your house if you need to move into a care facility.
You are also able to appoint an enduring power of guardianship which allows that person to carry out general health and lifestyle decisions on your behalf.
Review your nominated beneficiaries for any super or insurance you might have
When it comes to your super, you’ll need to do some planning in advance to make sure it’s distributed properly in the event of your passing. During this process, take the time to nominate your beneficiaries with your super fund, and make sure you understand how long different nominations are valid for (eg. a maximum of 3 years for particular nominations). If you don’t make a nomination, or it is no longer valid, the super fund trustee could use their discretion to determine who your super money goes to.
In addition, if you have insurance outside of super, make sure you’ve nominated a beneficiary on your insurance policy.
Do you need help planning your Estate?
Estate planning can be a complex process, and there could be legal and tax implications if you don’t set things up correctly. For these reasons, it’s very important to speak to a legal professional and your financial adviser before making any decisions.
We recognise that this is extremely difficult time for you from both a health and financial perspective. If you would like further information or would like to discuss your Estate planning options in detail, please let us know.
If you have any questions about the information above please contact the team at Abbotts, we will be happy to assist you. You can find details to get in touch with us on our contact us page.
