A good estate plan will help make sure your wishes are carried out when you die. It can also help if you become unable to make your own decisions.
An estate plan records what you want done with your assets after your death. It can include documents such as:
- your will
- a testamentary trust (as part of your will)
- superannuation binding nominations
It also covers how you want to be cared for — medically and financially — if you can no longer make your own decisions. This part of your estate plan may be in documents such as:
- any powers of attorney
- a power of guardianship (giving someone the right to choose where you live and to make decisions about your medical care)
- an advance healthcare directive (your needs, values and preferences for your future care)
The documents you choose will depend on your situation and what you’re comfortable to trust others with.
You must be over 18 and mentally competent when you draw up your estate plan.
A will is a legal document stating what you want to happen to your assets when you die. It is part (but not all) of your estate plan.
Your will can cover things such as:
- how you want your assets shared
- who will look after your children if they’re still young
- any trusts you want to set up
- how much money you’d like to give to charities
- plans for your funeral
Smart Tip: It’s important to have an up to date will. If you die without one, the law decides who will get your assets — and this may not be who you wanted.
Making your will
It is usual to have your will drafted by a solicitor. They will spend time understanding your situation and how you want your assets to be distributed before coming up with a bespoke document. We often work with our clients and their solicitor to help manage the process more smoothly.
Whilst we would not recommend it, if you use an online will kit, have it checked by a solicitor or Public Trustee. They can make sure it’s been done properly. If your will isn’t done properly, it will be invalid.
Make sure you put your will in a safe place and tell someone close to you where it is.
Updating your will
It’s important to update your will as your situation changes — for example, if you:
- get married
- divorce or separate
- have children or grandchildren
- have a significant financial change
- lose your spouse (or someone else who is named in your will) through death
Super and your will
Superannuation is a non-estate asset and is dealt with independently of your will. A death benefit nomination directs who your super fund trustee gives your super benefit to when you die. Nominations can be binding or non-binding, and there are pros and cons that need to be considered. If you don’t nominate someone, the super fund trustee will decide who your money goes to.
Family trusts and your will
If you have a family trust, it continues after your death. The trust determines who gets your assets, even if your will says something different.
A testamentary trust is a trust that is written in your will. It takes effect when you die, and it’s administered by a trustee, who you usually name in your will.
The trustee looks after your assets until your beneficiaries can get them. This is set out in your will and is either when:
- a child reaches a certain age, or
- a beneficiary achieves a specific goal (for example, they get married or earn a particular qualification)
You may want to consider setting up a trust if your beneficiaries:
- are minors (under 18), or
- have diminished mental capacity, or
- may not use their inheritance well
Another reason to consider a trust is to avoid family assets being:
- split as part of a divorce settlement, or
- part of bankruptcy proceedings
Powers of attorney
A power of attorney is a document where you give someone else the legal right to look after your affairs for you. It’s important to nominate someone that is trustworthy, financially responsible, and likely to be around when you need them.
Find more information from each state or territory to appoint a power of attorney.
There are different types of powers of attorney:
General power of attorney
This allows someone to make financial and legal decisions for you. It’s usually for a specified time — for example, if you’re overseas and can’t manage your affairs at home.
If you become unable to make decisions yourself, a general power of attorney becomes invalid.
Enduring power of attorney
An enduring power of attorney (or EPA) allows someone to make financial and legal decisions for you. If you become unable to make decisions yourself, an enduring power of attorney will still be valid.
Medical power of attorney
This allows someone to make medical decisions for you if you ever become unable to do so yourself. It doesn’t allow them to make other kinds of decisions.
Legal and financial housekeeping
It will help your family and your executor if you list all your documents and where they’re kept.
As well as the documents talked about above, other key documents to keep handy are:
- birth certificate
- marriage certificate
- life insurance policy documents
- medical insurance
- Medicare card
- pensioner concession card
- house deeds
- home and contents insurance
- deeds and insurance policies for any other real estate you own
- bank account details
- superannuation papers
- investment documents (securities, share certificates, bonds)
- prepaid funeral plans
Discussing your estate plan can be a sensitive conversation; reach out to the Sherlock Wealth team here for guidance.
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/wills-and-powers-of-attorney.
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