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What is an Estate Plan?

It really depends on your personal circumstances as to how your Estate Plan is structured, but there is consensus that having one, is worth doing to ensure you take care of everything that matters to you. We outline some basic documents that should form part of your Estate Plan.

Will
This forms the centrepiece of your Estate Plan and is a legal document that sets out whom you’d want to receive or benefit from your assets when you die. 

Your Will ensures your assets will be distributed to your nominated beneficiaries, according to your wishes. 

For your Will to be valid it needs to comply with certain criteria: 
• you must be over 18 years old (the Supreme Court can approve a Will for people under 18 in limited circumstances) 
• it must be in writing – it can be handwritten, typed or printed 
• it must be signed by you (or by someone at your direction, if you are unable to sign) and witnessed by two or more witnesses (beneficiaries should not be a witness as it may cancel out their entitlement) 
• you must have ‘testamentary capacity’ i.e. he/she must understand the nature of making a Will, have a general idea of what he/she possesses, and know who are members of the immediate family.

Testamentary Trust
A Testamentary Trust is any trust established within the context of a Will.  It’s usually used to describe a discretionary family trust established as part of a Will. 

Testamentary trusts are a useful Estate Planning tool.  When combined with a memorandum of wishes this type of trust can be very flexible as well as providing a highly effective tax vehicle for future years.

Significant advantages of a testamentary trust include minimising the tax paid by your beneficiaries on the income accrued from their inheritance.

– Capital Gains Tax
– Income Tax
– Trustee flexibility
– Asset protection
– At-risk beneficiaries 

The ability to protect your assets is a further crucial advantage. This may provide greater flexibility and control over the distribution of your assets to your beneficiaries.

Establishing a Testamentary Trust can be useful to your beneficiaries in multiple ways including the fact that although assets of the trust may be controlled by the intended beneficiary, they do not form part of that beneficiary’s Estate.  

Power of Attorney (POA)
A Power of Attorney is a crucial component of your Estate Plan. Many people prepare a Will but do not give the same consideration to appointing an attorney until it is too late. Your attorney will have the legal authority to look after your financial affairs on your behalf. 

You can appoint an attorney to act for you in a variety of circumstances such as an extended interstate or overseas trip, or for a time when you are no longer able to manage your own affairs.

Some reasons to consider using a Power of Attorney:
– wish to be free of the day to day demands of financial paperwork and record-keeping
– want to place funds in a secure account with interest calculated daily and flexible access
– going overseas or around Australia and don’t want to deal with these affairs while you’re away
– don’t wish to burden a family member or friend with the responsibility of looking after your financial affairs
– find the demands of financial management have become too much for you to handle on your own.

Enduring Guardianship
An Enduring Guardian is someone you appoint to make lifestyle, health, and medical decisions for you when you cannot do this for yourself. Your Enduring Guardian may make decisions such as where you live, what services are provided to you at home and what medical treatment you receive.
 
Enduring Guardianship only comes into effect if or when you lose capacity and will only be effective during the period of incapacity, therefore, it may never become operational. However, it is a good way to plan for the future, particularly for unforeseen situations. 
An Enduring Guardian and Power of Attorney are complementary documents. They can be made separately or together giving you the choice as to who you want to have the authority to make decisions across all areas of your life if you are unable to make these decisions for yourself.

In summary
These documents form the basis of an Estate Plan. In the event of your death, careful consideration needs to be given to what you have, who you want to give it to, their personal needs and circumstances, potential claims, who is an appropriate executor and trustee, and most importantly what you want to achieve with the transfer of your wealth.

By having a plan in place, your wishes will be clearly articulated in the documentation that forms your comprehensive Estate Plan.
If you’d like further information or advice on setting up your Estate Plan, contact us today.