Estate planning involves developing strategies to deal with your assets. It is the process of planning and recording your wishes for the distribution of your wealth after death.
It can be said that the last will and testament forms the foundation of an estate plan and is the key instrument used to ensure that the estate is settled in the manner desired. There can be more to an estate plan than just a will, but it is the presiding document the probate court uses to guide the process of settling an estate.
The aim is to provide peace of mind for you and your loved ones when you die, ensuring that your assets are passed on to your beneficiaries in the most simple and effective way.
Checklist for estate planning:
Physical assets
You need to prepare a detailed list of all the physical items that you own that can be deemed as assets. This includes a house and any other property that you own such as cars and vehicles, as well as expensive art. Experts suggest that you should also make a list of any physical items that are greater than $100 in value. Hence, you should also list other items such as your laptops and computers, electronic devices such as televisions, home theatre systems etc, as well as an itemised list of all the jewellery that you own.
Non-physical assets
Once you have listed all your physical assets, you should move on to creating a list of non-physical assets. This includes all bank accounts that you may have; personal as well as business related. If you own shares in any company, then those should be listed too. Along with listing the necessary items, you should list the names of the respective banks and companies too, as well as all your detailed account information.
List your liabilities
You also need to make a list of all your liabilities so that they can be dealt with in the right manner from your estate income. Liabilities include any loans that may be pending such as a home loan, car loans, business loans etc. You should also make a list of all your credit cards along with the balances due on all of them. Once you have listed all your liabilities, you need to specify how you want them to be paid off in the event of your death.
Review all your retirement plans
Another vital aspect of estate planning is a review of all your retirement solutions. This includes pensions, superannuation funds, annuities, as well as insurance policies. You need to review each of these in turn to ensure that everything is up to date and all contributions and premiums are being paid properly. You should also check the nominations in each case to ensure that the right people are nominated to receive the benefits upon your death.
Make a will
Once you have made a list of all your assets and liabilities, you should get a formal will prepared. The distribution of your assets after paying off your liabilities should be clearly mentioned in the will. If you have any special bequests, you can include these in your will too.
Choose an executor
This is another vital aspect of estate planning. Since you will not be around to see your Will being carried out, it is necessary to appoint a person as executor of your will. This person will ensure that all your wishes are carried out as per your will. When appointing an executor, you need to choose a person who is responsible and who is extremely trustworthy. It is best to choose someone who is not a beneficiary under the terms of your will.
Setting up a trust
A Testamentary Trust is established in a person’s Will, it is activated after their death. Its purpose is to hold and safeguard some or all of the assets that you accumulate over your lifetime, for the benefit of the beneficiaries of the will.
The main benefits of testamentary trusts are their ability to protect assets and to reduce tax paid by beneficiaries from income earned from the inheritance.
Advance Care Directive
An advance care directive is a legal document made under the Medical Treatment Planning and Decisions Act 2016.
In an advance care directive, you can write either or both:
- an instructional directive with legally binding instructions about future medical treatment you consent to or refuse
- a values directive which documents your values and preferences for your medical treatment decision maker to consider when making decisions for you.
Power of Attorney
A power of attorney is a legal document in which one person nominates and gives legal authority to another to act on affairs on their behalf. A power of attorney allows you delegate the management of your affairs to someone you trust.
Ensuring proper documentation
One of the most essential parts of estate planning is proper documentation. Once you have prepared all the lists and documents as mentioned above, you need to sign them properly in the presence of witnesses and then send the documents to your executor or administrator for safekeeping. You should also keep one copy of all the documents with yourself and another certified copy with your lawyers if possible. In the event of your death, these documents will be used to carry out your wishes for your estate.
List of documents you should prepare:
- Birth
- Marriage Certificates
- Will
- Enduring Powers of Attorney
- Advance Care Directive
- Property Deeds and Titles
- Lease Agreement
- Taxation Records
- Personal Insurance Policies
- Home and contents insurance
- Life Assurance/Superannuation Policies
- Papers representing other assets: share, debentures, etc
- Details of bank accounts
- Investment documents
- Medicare Card
- Medical insurance details
- Pensioner concession card
- Any pre-paid information for your funeral
Periodic updating of documents
A person’s estate is forever changing when they are alive and working, and so is their family. You should review all your estate planning documents every few years and update them as and when required. By updating the important documents every few years, you can make sure that the plans for your estate always reflect your wishes.
Benefits of estate planning
- Peace of mind.The biggest benefit of estate planning is the peace of mind it provides, ensuring that your hard-earned assets will be distributed according to your wishes.
- Financial support for the people you care about.By developing a comprehensive estate plan, you can guarantee that your assets go to the right people.
- Eliminates disputes.A clear will and a good estate plan will help your loved ones avoid arguments, disputes and even messy legal battles about the fair distribution of your assets.
- Tax-effective. With help from legal and financial professionals, you can distribute your assets in a way that minimises the tax obligations your heirs will face.
More than just money. Estate planning is about much more than just dividing up your finances; it also allows you to ensure that you receive the medical care you want, that your children are properly cared for if you die unexpectedly, and even that you’re given the funeral you want.