How Estate Planning Works in Australia
Estate planning is about more than just deciding who gets what when you die – it’s really about developing a holistic plan that sets out how your assets will be dealt with at that time. Find out How Estate Planning Works in Australia below.
Preparing a Will is a key task in this process and it’s important to have a Will that ensures assets are distributed in the most effective way.
A Will takes effect when you die and can cover things like how your assets will be shared or distributed, who will look after your children if they are still young, what trusts you want established, how much money you’d like donated to charities and even instructions about your funeral.
It is important that you keep your Will valid and up to date, as your legal rights change – specifically, if you marry or re-marry, divorce or separate; have children or grandchildren; if your spouse or beneficiaries die; or if you have a significant change in financial circumstances.
If you die intestate or your Will is invalid, an administrator appointed by the court will pay your bills and taxes from your assets, then distribute the remainder based on a pre-determined formula, which may not be how you intended your assets to be distributed. Furthermore, this process may take a significant amount of time before your beneficiaries receive their share of the estate.
A Testamentary Trust is a trust set out in your Will that only takes effect when you die. Testamentary trusts are usually set up to protect assets and will be administered by a trustee who is usually appointed in the Will.
Some reasons why you would create a testamentary trust include if:
- The beneficiaries are minors (under 18 – 21 years old);
- The beneficiaries have diminished mental capacity;
- You do not trust the beneficiaries to use their inheritance wisely;
- You do not want family assets split as part of a divorce settlement; or
- You do not want family assets to become part of bankruptcy proceedings.
Appointing someone as your Power of Attorney gives them the legal authority to look after your affairs on your behalf. Powers of Attorney depend on which state or territory you are in and can refer to just financial powers, or they might include broader guardianship powers.
The different types of power of attorney are:
- General power of attorney is where you appoint someone to make financial and legal decisions for you, usually for a specified period of time; for example if you’re overseas and unable to manage your legal affairs at home. This person’s appointment becomes invalid if you lose the capacity to make decisions for yourself;
- Enduring power of attorney is where you appoint a person to make financial and legal decisions for you if you lose the capacity to make your own decisions; and
- Medical power of attorney can make only medical decisions on your behalf if you become unable to do so yourself.
Our team at Gerard Wilkes & Associates are here to help. If you have any questions regarding this article, or would like to discuss your taxation matters further, please contact us at https://www.wilkes.com.au/contact-us/ or call our office 07 5532 1733.
General Advice Warning
This information may be regarded as general advice. That is, your personal objectives, needs or financial situations were not 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.