Expert Advice on Wills & Estate Planning

What is estate planning?

Setting up your own estate plan is a way of reducing some of the burden off others, however it is often left until it is too late and many people die without any estate plan in-place. In error, many people think that if they die without a Will their estate will automatically be distributed to their spouse and children; but this may not be the case.

An estate plan details how and when your assets will be distributed and who will be responsible for managing your affairs when you die or become incapacitated. These details need to be documented and, as they include legal documents, you need to be 18 years of age to prepare and estate plan.   

Estate plans should be reviewed and updated regularly; especially when there has been a major change in your circumstances or life (such as a change of partner or financial situation). 

As an estate plan involves legal documents, you must be over 18 years of age and mentally competent when you draw up an estate plan.

Estate plans

An estate plan sets out the details of how you want your assets to be distributed and who will be responsible for managing your affairs. 

At the time of your death your assets will consist of money, investments, property plus any other assets in your name, less any liabilities outstanding. You will want these to go to the people that have been important to you in your life. 

To make sure things happen the way you want them to, an important aspect of your estate plan is to document how you want your wishes to be carried out when you die or unable to make your own decisions. These documents include:  
 

• a will
• a testamentary trust
• superannuation binding nominations
• funeral arrangements

An estate plan also includes documenting how you want to be cared for if you are no longer able to make your own decisions. This documentation includes:  
 

• a power of attorney
• a power of guardianship (which gives someone the right to make decisions about your medical care and where you will live)
• an Advanced Care Directive (which sets out specific wishes in relation to medical treatment options and end of life care that the Enduring Guardian must follow provided the treatment providers agree it is valid and applicable to the specific circumstances.

Your Will 

A Will is an important legal declaration that outlines what you want to happen to your assets when you die. The rules relating to a Will can vary by State and Territory.  

A Will is part, but not all of your estate plan, containing details such as: 
 

• who you want to receive your assets 
• who you want to receive specific personal and heirloom items
• any religious or cultural arrangements for your funeral
• who you want as a legal guardian for any children under 18 years 
• who you choose to be your executor when you pass away
• how much money you would like to donate to charities 

Your Will would normally name someone who will be responsible for carrying out your wishes after you died; called an ‘Executor’. This should be someone who you trust (such as a friend or family member) or can be an appointed professional (such as a solicitor, or a trustee company).

Wills can be prepared by a solicitor, a Public Trustee or via an online will-kit. If you decide to use a will-kit, it would be recommended that you get a solicitor or a Public Trustee to check it.  

Unfortunately too many people die without a Will, or have a Will that is out of date and may not reflect their current needs. If you die without a Will, lawyers appointed by your local State or Territory will make decisions on your behalf on who will get your assets; which may not be what you wanted.  

Keep your Will updated 

It is important that you keep your Will up-to-date, especially if your circumstances have changed; for example:  

• Getting married
• A divorce or separation
• Additional children or grand-children
• A significant increase in your assets 
• Loss of a spouse, partner or someone named in your Will 

If you make a new Will you need to make it very clear that it replaces any previous Wills.

It is also important that your current Will is stored in a safe place and that someone other than yourself know where to find it.  

Items not included in a Will 

Wills only include assets that are in your personal name, however there may be other assets that need to be considered; such as: 
 

• Companies and trusts

If you are looking at passing on control of a company or trust you’re involved in, this would not necessarily be included in your Will. 

For example, you may hold a position as company officer or a trustee, so additional documentation may be required to ensure that the control of these entities and interests are passed on according to your wishes.
 

• Assets held as joint tenants

Where two or more people own assets together as joint tenants, if one of the co-owners dies, their interest in the asset passes automatically to the other owner/s. Therefore the property is not included in the Will.
 

• Assets held as tenants in common

Where two or more people own a property together as tenants in common, they are co-owners of the property, however their shares and interest over the property do not have to be equal and depend entirely on the agreed shares of the parties.  In a tenancy in common arrangement, if one of the parties dies their interest in the property forms part of the deceased’s estate and does not automatically pass on to any co-owner of the property. 

A testamentary trust

Trusts can be established for personal or business purposes. Trusts involve a trustee (an individual or an organisation) that is given the responsibility to hold  assets to be distributed to a ‘beneficiary’ (the person who is to receive the assets). 

A testamentary trust is a discretionary trust. In estate planning a testamentary trust is created under Will with the objective of a trustee (often the Executor of the Will) holding and managing the assets in your estate that are to be distributed after your death to the beneficiaries outlined in your Will. A testamentary trust does not come into existence until you have died. 

The way a Testamentary Trusts works is that the assets of your estate would not be not be transferred directly to the beneficiaries, but via a trustee. The trustee would look after your assets until they can be distributed to a beneficiary. 

A testamentary trust outlines the trustee (usually named in a Will) and allows them to decide which and how the nominated beneficiaries in a Will receive distributions after you die. 

Under a testamentary trust, when you die the assets of your estate would be distributed to the trustee of the testamentary trust that holds the assets for your estate and on behalf of the beneficiaries nominated in your Will. They are designed to provide flexibility and provide tax-effective distribution of assets from an estate. Examples include when the beneficiary:
 

• reaches a certain age
• has diminished mental capacity
• would not handle their inheritance in a responsible manner
• achieves a certain goal or ‘mile-stone’ (such as a marriage or qualification)

Testamentary trusts may also be considered in situations such as:
 

• a split as part of a divorce settlement
• part of bankruptcy proceedings

The advantages of a Testamentary Trusts include:
 

• Control: distribution of income and assets is flexible, with assets held in the testamentary trust controlled by the trustee rather than by individual beneficiaries.
• Asset Protection: insulating assets from potential third-party claims that have been made against individual beneficiaries or that are in disputed family law matters.

Superannuation nominations

Superannuation is not automatically part of an estate, so distribution of super following your death can be complex. Laws in Australia stipulate that members of a super fund can nominate who will receive their benefits when they die. 

An area of complexity is that death benefit nominations can also vary across superannuation funds, depending on the rules of the fund. So if you do not have a valid death benefit nomination at the time of your death, your super fund trustee will use their discretion to decide who will receive your death benefits; which may not be the way you wanted them distributed. It is therefore in your interest to nominate how you want your death benefits to be distributed. 

Types of death benefit nominations you can make to the trustee of your super fund, include:
 

• A binding death benefit nomination: Where you provide a written direction on how you want some or all of your superannuation death benefits to be distributed. If valid, the trustee is bound by law to follow this direction. 
• Reversionary beneficiary: If you receive an income stream you can nominate the beneficiary you want these to automatically revert to on your death. If valid, the trustee is bound by law to follow your instructions.  
• Non-binding death benefit nomination: Where you provide a written guide on how you want your superannuation death benefits to be distributed. However the trustee retains the right to distribute these at their discretion.  
• Non-lapsing binding death benefit nomination: Where you provide a written direction on how you want your superannuation death benefits to be distributed, which remain in place forever unless you cancel this nomination or replace it with a new nomination.

When someone else will need to make a decision on your behalf

An important part of an estate plan is to have the right documentation in-place to provide authority to someone to make decisions on your behalf, while you are still alive but not capable of making these decisions yourself. 

Some of the legal documents you should consider include: 

Power of Attorney and Guardianship

A Power of Attorney and a Guardianship are legal documents that gives a person or a trustee organisation the legal authority to act for you to manage your assets and make financial and legal decisions on your behalf.

It is good to have these documents in place in case something happens to you and you suffer as temporary or permanent loss of capacity and lude include:
 

• Enduring Power of Attorney: Which is a legal document that appoints a person to manage your financial and legal decisions on your behalf and continues even if you lose the ability to make decisions yourself.
• General Power of Attorney: Which is a legal document that appoints a person to manage financial and legal decisions on your behalf only while you have the ability to make your own yourself
• Enduring Guardian: Which is a legal document that appoints a person to make decisions about your health and lifestyle (including where you live) if you lose the ability to these decisions yourself. 

Getting your affairs in order 

In establishing your estate plan you should create a list of your assets, including: 
 

• Bank accounts and term deposits 
• Investments and property 
• Ownership in a businesses 
• Motor vehicles and other assets 
• Collectibles and heirlooms Life insurance policies 
• Superannuation savings

You will need to review your specific goals and preferences, such as how much would you would like to transfer to different people; such as family members, friends and charities. You may also need to consider:

• Excluded beneficiaries

Even though it is your money, you may not be able to exclude beneficiaries from your estate if they consider they should be entitled to receive a benefit.  

For example, an estranged child may still have a claim to some form of inheritance. Leaving them out completely out of your Will may be risky as they may make a claim for a higher amount or it may cause a delay in the distribution of the estate.
 

• Beneficiaries receiving government benefits

If you have a beneficiary that receives a government benefit, you may want to consider the impact that your inheritance may have on them. 

For example, a disabled child receiving government support may lose that benefit if they receive an inheritance, however there may be things you could do to pass on your assets that could limit this impact, such as a special disability trust.

Your estate plan will include a Will or a Testamentary Trust, outlining the beneficiaries of your estate and how you want your assets to be distributed. Additional considerations include reducing potential capital gains taxes that could be imposed on the assets sold after your death.  

You will need to nominate a person that will act as the Executor or Trustee of your Will; which would be someone that you trust, preferably with financial knowledge as they will be responsible for paying off debts and managing your estate according to the terms set out in your Will. 

If you have children, you will need to consider who you can trust to take care of them and who you can trust to manage their inheritances on their behalf; including whether they should be the same person or different people. 

Your estate plan should outline what you want to do or have carried out when you are no longer able to make decisions while you are still living; assigning responsibility to someone you trust. This would include creating a Power of Attorney and a Power of Guardianship.

Your instructions on how you want your affairs to be handled after your death need to be very clear; as you would not want your assets to pass onto unintended beneficiaries and you want to ensure the intended beneficiaries receive their entitlements. You will also want to ensure that the interests of the beneficiaries of your Will are protected, such as in the event of a divorce or bankruptcy.

Other documents that would assist others to manage your affairs include: 
 

• Your birth certificate 
• Your marriage certificate 
• Certificates of title and investment details 
• Bank accounts 
• Superannuation accounts 
• Life insurance policies 
• Medical insurance details
• Home and contents insurance details 
• Medicare card Pensioner card 
• Pre-paid funeral arrangements 
• Name of your accountant and tax adviser 
• Name of your financial adviser 

It will help your family and the Executor of your Will if you list all documents related to your Estate Plan and let them know where you have stored this list. 

Other considerations

You may want to consider protecting beneficiaries from their own vulnerabilities, such as being unable to look after themselves or if they are not in a position to handle an inheritance. This may be is situations such as their age or if they have addictions or have mental health issues. 

If you have a partner and a family, you may also like to consult with them, when planning your estate. 

Many of the aspects involved in Estate Planning can be quite complex and may be disastrous if you get it wrong. It is therefore important to consider getting professional advice when organising these matters; such as form a lawyer, tax consultant or financial planner. 


General Advice Warning
The above information may be regarded as general advice. It may not suit your personal objectives and your individual financial situation has not been taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice provided as part of this information, having regard to your own objectives, financial situation and needs.