What you need to know about estate planning

May 2016

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Written by Edward Skilton, Special Counsel – Private Advisory, Mills Oakley Lawyers

Estate planning is the process of protecting the interests of your beneficiaries by organising how and to whom your money, property and other personal assets will be distributed after you die. It also includes making plans for someone to look after your affairs if you’re unable to make decisions for yourself.

By organising your legal and financial affairs you can help protect the wealth you've accumulated over a lifetime and ensure it’s transferred smoothly, in a tax-effective manner and according to your wishes—just as you planned.

Not sure where to begin? The central parts of an estate plan are usually a well drafted Will, Powers of Attorney,  and nominated beneficiaries for super. Structures such as trusts, companies and self-managed super funds (SMSFs) bring a greater level of complexity as does the increasing use of cloud-based services and social media. This means we need to think carefully about how emotionally valuable information is used and stored.

Having a Will in place

I believe there are three good reasons to make a Will:

  • A Will makes sure that your estate is distributed according to your wishes, not according to a legal formula where your instructions aren’t taken into account
  • A Will enables you to appoint your preferred person to administer your estate (the Executor(s)). This should be someone you –can trust to look after your estate and distribute your assets in the manner you specify.
  • Guardians of infant children (under 18 years) can also be appointed through your Will. If both you and your spouse die together, who is going to make important decisions for your young children? For instance, where are they going to live and go to school? Surviving adult family members often squabble over these issues. Appointing guardians helps to overcome these problems.

If you have beneficiaries under the age of 18, it’s possible to prepare your Will with trust provisions so income from any money invested in your estate can be left to them (via a surviving parent or guardian). This may save on income tax until the beneficiary turns 18.

Similarly, if you want to exclude or limit someone’s interest in your estate, some careful planning is generally required separate to your Will. This is quite a complex area generally needing specialist legal advice.

Powers of Attorney (POA)

A POA is a legal document authorising another person (the Attorney) to execute documents or make decisions on your behalf. There are two types of POA:

  • general non-enduring POA or specific purpose POA, and
  • enduring POA.

The Enduring POA continues to have effect if the donor of the power loses capacity. The Enduring POA can cover powers relating to finances, medical decisions (through a Medical Enduring Power of Attorney) and even personal decisions such as where you live and lifestyle matters.

Most UniSuper members can choose from two types of nominations – preferred nominations and binding death nominations. No matter what type of nomination you choose, it’s important to keep it up to date so your wishes are taken into account if your circumstances change.

Super entitlements

Your super entitlements won’t necessarily form part of your estate to be distributed in accordance with the terms of your Will. Firstly, not all super funds permit the member to make a binding death benefit nomination which ensures the fund’s trustee pays the death benefits to the nominated dependant/s. If you can’t make a binding nomination, your fund’s trustee generally decides how they will pay your death benefits in accordance with super law. It’s also important to consider the tax consequences of paying a particular beneficiary. Tax can be up to 30% plus the Medicare Levy on a lump sum paid to a non-dependant, and only certain beneficiaries are permitted to receive a tax-efficient income stream.

Social media and digital assets

Many people have a great deal of important information held in the digital world, in emails and in their social media accounts. However not everything you have or use online is your ‘asset’. For example, iTunes provides a music service for your lifetime, not for you to pass to your beneficiaries – it is your resource as opposed to your ‘asset’. Different rules apply to different social media and it is important to make sure that the right people have access to and control of your personal information.

More information

Planning how you’d like your estate to be distributed when you’re gone can provide real peace of mind. To help our members with their estate planning needs, UniSuper Advice has referral arrangements in place for estate planning and tax services, including Mills Oakley Lawyers for estate planning. Contact us to find out more.