Estate Planning is the organising and structuring of your financial affairs during
your lifetime to preserve your assets, provide for your family’s continuing personal
and financial well-being and reduce any unnecessary tax liability by allocating
your assets in the most tax-effective manner upon your death. Important and essential
components you need to consider in order to achieve good estate planning are up-to-date
Wills and Powers of Attorney for each of you.
Wills
At present you have indicated that both your Wills have each other listed as beneficiary,
which means you leave everything to each other in the event of your respective deaths.
There is however no provision should you both die as to where your combined estate
will go. You prepared your Wills in 2001 (8 years ago) therefore we would recommend
that after implementation of our recommendations you review your Wills to ensure
that they are accurate and reflect your current positions.
If your Wills are invalid upon death, you will have been deemed to die intestate
in which case your assets will be distributed according to the laws of the sate
you live in. You have also stated that your executor died 8 years ago and this has
not been updated.
Who should draw up your Wills?
It is important to point out that we are not experts in law, and that your Wills
should be drawn up by a specialist solicitor or legal adviser. If you do not already
have someone who can do this for you, we can recommend a suitable person.
What issues do you need to discuss with the Will specialist?
It is extremely important to discuss the appointment that you appoint and executor
and update your will in line with recommendation proceeded with in this SOA.
It is important to note which assets can be transferred by the Will (estate assets)
and which cannot (non-estate assets). In your situation your assets fall into the
following categories:
- Non-estate assets
- Home (owned jointly so will pass to surviving owner)
- Contents (these are jointly owned and automatically pass to the surviving owner)
- Bank Account (owned jointly so will pass to surviving owner)
- Superannuation (the trustees of the superannuation fund have total discretion who
receives your superannuation assets unless there is a valid binding nomination in
place in which the trustees are bound to distribute your superannuation assets in
line with your binding nomination)
- Life Insurance Proceeds (Endowment Policy & Insurance Bond)
- Estate assets
- Motor Vehicle (owned jointly so will pass to surviving owner)
- Shares (owned by Ann, therefore will form part of her estate)
- Bank Account (owned jointly so will pass to surviving owner)
- Superannuation (the trustees of the superannuation fund have total discretion who
receives your superannuation assets unless there is a valid binding nomination in
place in which the trustees are bound to distribute your superannuation assets in
line with your binding nomination)
Who should you appoint as your executor?
You should consider carefully who you will appoint as executor, after the death
of the last executor. You may wish to consider a back-up executor as well. This
is a good strategy to have a back-up executor in place. As you have not updated
your Wills in 8 years it is a good time to review your executor strategy and ensure
the person you nominate is informed and up to the task. If there is no executor,
or the person you appoint declines/waives their right to manage your estate, the
court will appoint an administrator. The relatively small cost of having a Will
prepared professionally far outweighs the potential cost and inconvenience of court
hearings and family disputes that can arise from dying without having made a Will
or having made inadequate provisions.
Power of Attorney
A Power of Attorney is a document which allows you to appoint another person (called
the attorney) to act on your behalf. The attorney then has legal authority to conduct
your affairs in the event of your inability to do so. Preparation of Powers of Attorney
can be prepared at the same time your Wills are prepared, and by the same solicitor
or legal adviser.
A Power of Attorney may be general in nature or may be restricted to the performance
of a specific function.
A General Power of Attorney enables you to appoint someone you trust to manage your
affairs, for example, while you are away on holidays. This includes making financial
decisions of your behalf. It is therefore vital that you trust your Attorney in
all matters. An attorney is not allowed to make personal life decisions (eg enter
into a marriage or determine whether the power giver will live).
Therefore a General Power of Attorney is usually prepared when you wish the attorney
to perform a specific function or act for a fixed period of time. A major restriction
in relation to General Powers of Attorney is that they cease to be effective immediately
should the donor become mentally incapacitated, which means they cease to be effective
just when they are often needed most.
We do not believe there is an immediate need for either of you to have a General
Power of Attorney at this time. However, it would become useful in such instances
as if you decide to travel in retirement.
An Enduring Power of Attorney, on the other hand, continues to be effective beyond
the donor’s own incapacity. This enables the attorney to continue to manage the
donor’s affairs after the donor has lost the ability to handle their own affairs.
Once the power giver is incapacitated, it can not be revoked except by death or
bankruptcy. The Enduring Power of Attorney can be activated at any time, and revoked
if you recover.
We would strongly recommend that you each appoint each other as your Enduring Power
of Attorney. As with your Will, it is also important to have a back-up person who
will be your Enduring Power of Attorney. An Enduring Power of Attorney is critical
to have for each other in the event there is an illness or injury that incapacitates
one or both of you. It will allow the other spouse (or back-up Attorney) to act
in your financial matters as required.
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