Estate planning: more than just a will
Estate planning is something everyone should consider.
Since no one knows when they will pass away, estate planning should be on everyone's agenda.
If you pass away without a valid will, state laws determine how your estate will be administered. And it may not necessarily be as you would expect.
Early estate planning is even more important for people who have a blended family, have been divorced or have children from more than one relationship. In these situations, there are a range of competing interests. You may want to make different provisions for family members and those family members may have quite different expectations
Whilst not always easy, it may help to discuss your plans with members of your family. Later disputes may be overcome by setting expectations in advance.
Not just a will
An effective estate plan includes more than a will. A substantial part of your estate may not be subject to your will. If you do not allow for this then distribution of your estate may be very different from what you expected.
Jointly owned properties go to the last surviving owner, so it's important to understand how such assets are held. Assets held in trusts and superannuation funds are not included in the estate that is covered by a will and need to be dealt with separately.
There are about 600,000 family trusts in Australia. People who have a family trust need to understand who takes control of the structure after their death. Often the key here is who is the appointor of your Trust?
And now with more than 570,000 SMSFs, controlling more than $600 Billion in assets there is a huge build up of wealth in these funds. So a smart estate plan will include your will and a plan to manage and deal with your interests in Family Trusts and superannuation.
Many superannuation funds carry life insurance policies, causing even funds with relatively low member balances to have significant value in the event of death. People need to approach their superannuation fund and complete the right paperwork to identify who should receive the fund's assets when they die. For self-managed superannuation funds, a death benefit nomination form must be completed to direct how assets will be distributed.
Insurance can be used as an estate planning tool.
People with a policy outside of superannuation should check with their financial adviser to make sure the payout will be directed to the intended beneficiaries. Life insurance payouts from policies held outside of a superannuation fund may go directly to the person named in the policy, bypassing the estate.
An estate plan can also include an enduring power of attorney or living will, which appoints someone to make financial decisions for you if an illness or accident renders you incapable of making those decisions.
Some people might want to consider leaving a charitable legacy in their will, while business owners should address succession planning issues in an estate plan.
Each person's situation is different and estate planning is a complicated area. It pays to seek specialist advice on what will work best in your personal circumstances.