By Philip Saal

Estate planning is about structuring your investments and personal assets to best provide for your family and to allow you to leave a legacy (if appropriate) according to your wishes.

The basic goals of estate planning should be:

• To preserve assets and provide security of residence and income for each other, your children and other dependents on death. This also includes the preservation of access to Centrelink benefits if necessary;
• To provide certainty but also flexibility to beneficiaries to allow them to manage their own entitlements under a Will so as to take full advantage of tax concessions and to preserve assets for the future;
• To make specific gifts and bequests to particular members of your family and friends, as desired by you; and
• To co-ordinate your estate planning with the ongoing management of assets (before and after death) that do not form part of your deceased estate, such as assets held by family trusts, or those assets held jointly.

Wills One of the most important estate planning documents is the Will. Despite a Will being a simple document to prepare, many people die without having made a Will, or die leaving a Will that is out of date and which does not accurately reflect their current circumstances.

A Will determines, among other things:

• Who will be in charge of the administration of the estate; and
• How the assets of the estate are to be distributed after death.

It is recommended you seek the professional advice and services of a solicitor to discuss your estate planning requirements.

Powers of Attorney A Power of Attorney is a document in which you appoint another person to act for you while you are unable to act on your own behalf, such as during periods of absence due to travel, or in the event of your illness or incapacity. Effectively a Power of Attorney is a legal arrangement that enables a person to make decisions on your behalf.

The person granting the Power of Attorney is called the donor or principal. The person receiving the Power of Attorney is termed the donee or attorney.

You need to decide which Power of Attorney would best suit your situation:

• General Power of Attorney; or
• Enduring Power of Attorney; or
• Enduring Power of Attorney (Medical).

Limited Powers of Attorney may be for a specific purpose such as to operate a bank account or to sell a property. A General Power of Attorney allows another person to act for you in all your legal and financial affairs. If non-enduring, these Powers of Attorney will be revoked and cannot legally be relied on if you become mentally incapable of looking after your affairs.

The distinguishing feature between a General Power of Attorney and an Enduring Power of Attorney is that the authority given by the donor to the attorney pursuant to an Enduring Power of Attorney continues beyond the donor’s own incapacity.

Unless there is a good reason for preparing a General Power of Attorney, the preparation of an Enduring Power of Attorney is usually the best option to consider.

An Enduring Power of Attorney empowers the person to be able to carry on the same duties as a Non-Enduring Power of Attorney, with additional powers in the event of your becoming mentally incapacitated. It allows your financial and legal affairs to be attended to if you are incapacitated, have an extended illness or you lose the capacity to make decisions for yourself.

Unlike the situation with a Will, where you have to die before it becomes effective, an Enduring Power of Attorney is a contingency measure for while you are still alive. Sometimes it is called a “living will” because it can give wide-ranging powers to conduct, in particular, financial business on your behalf.

Some further points to consider are:

• The person or persons that you appoint need to be trustworthy as they can deal with financial matters on your behalf.
• You can define the situations in which the powers can be brought into play.
• Under recent changes to the law, you may also include medical directives to guide loved ones and medical professionals as to how you would like to be treated in critical medical conditions.

What forms part of the Estate?

Estate Assets Generally, assets owned in the personal name of the will maker form part of the will maker’s Estate and are capable of being disposed of by the Will. This includes:

• Real property

• Personal chattels

• Shares

• Cash investments

• Loans by the will maker to the trustee of a trust

• Income or capital allocated to the will maker from a trust

• Interest in assets held as tenants in common.

Non-Estate Assets Assets that are controlled but not owned or wholly owned by the will maker are referred to as “non-estate assets”. Non-estate assets that cannot generally be disposed of by a Will include:

• Jointly owned assets that are held as joint tenants (eg. real estate and investments)

• Unallocated assets owned by a family trust

• Superannuation, subject to member direction and trustee discretion

• Life insurance proceeds

• Account-based pensions or annuities that have a reversionary beneficiary.

Please note we are not qualified to provide detailed legal advice. Our role is to set out the important issues you need to consider in this area so that you will be well informed when you talk to your solicitor.

References: CCH Financial Planning Navigator; Kaplan Master Financial Planning Guide