Estate Planning involves much more than simply making a Will. It’s the creation of a plan to help navigate through unexpected events, providing certainty and security for you and your dependants when sickness, disability or death means you can no longer personally provide for your, or their, financial, health and emotional wellbeing.
A comprehensive Estate Plan incorporates a number of documents which are coordinated to provide you and your family with the optimal outcome when the unexpected occurs.
Powers of Attorney and Advance Care Directive
A Power of Attorney is a legal document appointing a person or trustee organisation of your choice, to manage your financial and legal affairs while you are alive. This person or organisation is then known as your attorney.
A Power of Attorney only deals with property and financial matters, and your attorney can sign legally binding documents on your behalf. You may, for instance, be travelling overseas and want to give your attorney access to your bank accounts to pay your bills or manage your finances. Alternatively, it can be useful to have a Power of Attorney if you become unwell and are no longer able to manage your financial affairs.
Making a Power of Attorney does not mean that you will lose control over your financial affairs. It simply gives your attorney formal authority to manage your financial affairs according to your instructions. Your Power of Attorney can be cancelled (revoked) at any time provided you have the capacity to do so.
An ordinary Power of Attorney is only legal while you have capacity. If you want to make sure your attorney can still operate if you lose capacity, you will need to appoint an Enduring Power of Attorney.
An Enduring Power of Attorney will continue to have effect after you have lost your capacity to self-manage. This is important for everyone, but particularly for elderly people.
A Power of Attorney does not relate to decisions about your lifestyle, medical treatment or welfare.
A reasonably new document Advance Care Directives can appoint who you want to do what you want or need by making your own decisions in advance for areas such as your accommodation, health and services, medical treatment and life support if you lose the capacity to make your own decisions at some time in the future. An Advance Care Directive covers three areas of care but cannot make decisions about your money or assets.
Firstly the appointment of your Enduring Power of Guardianship takes effect only if you lose the capacity to make your own major personal decisions. An Enduring Guardian can make decisions in the areas, or functions, specified in their appointment. The most common functions are:
• Accommodation including travel and nursing care
• Health care
There are some decisions an Enduring Guardian cannot make:
• Decisions that are against the law for example, euthanasia.
• Making or altering a Will
• Consent to medical or dental treatment when the person is objecting
Secondly a Medical Power of Attorney allows you to appoint who you want to control what medical treatment you need.
Thirdly an anticipatory direction allow you to stipulate what treatment you want if you are in a terminal phase of a terminal illness or in a persistent vegetative state and incapable of making medical decisions for yourself.
If you don’t have these documents the Guardianship Board can appoint the Public Advocate to control all of your personal and medical affairs.
This information is specific to South Australia. Other states will have similar documents but they may be referred to by different names and provide slightly different powers.
Superannuation Death Benefits
Superannuation policies do not automatically form part of an individual’s estate. Full planning is required to ensure that your superannuation is distributed in the most appropriate manner, taking into account not only taxation applied to death benefits, but your family situation as well.
Binding Death Benefit Nominations may be appropriate in situations where an individual does not wish for their superannuation to form part of their estate, or where they want absolute certainty that it will form part of their estate.
The form of the payment can be either a lump sum, or for eligible beneficiaries, a pension. Each form of payment has advantages and disadvantages which must be considered in depth.
Buy / Sell Agreements
A buy/sell agreement is a contract usually entered into between business partners pursuant to which the surviving partners are bound to buy out the other partner’s interest in the business should a specific event occur.
Specific events which may trigger a buy/sell agreement include death, divorce, long-term disability, retirement or bankruptcy.
The agreement is often linked to an insurance policy on each partner’s life. The policy provides the surviving partners with the money to be able to buy out the deceased/disabled/departing partner’s interest.
A will is a legal document in which a person chooses the controller of his or her estate (by selecting an executor) and sets out how and to whom his or her assets are to be distributed after death. If a person has young children, then that person can nominate a guardian in their will to ensure the children are properly cared for.
A deceased estate is essentially a trust, the trustee of which is the person’s nominated executor and the beneficiaries of which are the nominated beneficiaries under the will. The manner in which the deceased estate is to be administered and the powers that the executors have to do so are set out in the terms of the will.
A will may not cover all the assets owned or controlled by the deceased.
- all assets owned personally;
- shares in a company;
- share of any asset owned as tenants-in-common;
- any superannuation death benefit or life insurance policy proceeds paid to the estate;
- the interest in any partnership assets, unless agreed otherwise;
- the right to recover any funds owed; and
- any rights held under any contract or agreement.
Wills do not cover:
- assets owned as a joint tenant (these pass automatically to the other joint tenant(s));
- assets held in a trust (the trust deed governs what happens to these assets);
- assets owned by a company (only the company can deal with its assets); or
- superannuation death benefits or life insurance policy proceeds paid directly to a beneficiary
A testamentary trust is designed to provide maximum flexibility and allow for tax-effective distribution of capital and income as well as providing protection of your beneficiaries from third parties such as creditors and estranged spouses.
Trusts allow for optimum allocation of income and capital, which in turn may permit beneficiaries to qualify for aged, disability and sole parent pensions, for which they would otherwise not have qualified under a normal inheritance.
Your executors, with the assistance of an advisor, determine how best to manage your estate for the benefit of your beneficiaries, taking into account risk management, taxation and other issues.
The incorporation of testamentary trusts into a Will is not relevant to every situation but in many cases they offer valuable advantages over simple Wills.
This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication. You should also obtain and read a copy of the Product Disclosure Statement before making any decision to acquire a financial product. Jason Ellis of Southern Finance Solutions Pty Ltd, Authorised Representative of Politis Investment Strategies Pty Ltd, ABN 71 106 823 241, AFSL 253125.