What’s an estate?
Your estate is the sum of your assets including cash, property, cars, boats, furniture, jewellery, family heirlooms, art, shares etc. Estate planning is basically the process of making a plan in advance and documenting how you want your assets divided when you die.
The importance of estate planning
Estate planning isn't only for the rich. Without a plan in place, there could be a long-lasting impact on your loved ones, even if you don’t have an expensive home, large investment account or valuable art to pass on.
You should have an estate plan so that:
- Your assets don’t end up with unintended beneficiaries.
- If you have small children, you decide and not the courts, who and how they’ll be cared for.
- You minimise the tax your beneficiaries (the people entitled to receive funds or property) may pay when they inherit your assets.
- Family members don’t end up fighting unnecessarily about who gets what.
Writing a will
A will takes effect when you die. It’s a legal document that gives instructions about how you want your estate to be managed and distributed once you’re gone.
If your estate is fairly straightforward, it’s possible to write your own will. Will packs can be bought at Australia Post offices and many newsagents, or downloaded online.
For more complex estates or distributions, it’s wise to get help from a solicitor or the Public Trustee in your state. In such cases, you can appoint them to be your executor. You’ll need to pay for their services though.
The Financial Planning Services also have expertise to help you get things sorted.
Who you name as beneficiaries, and how you choose to distribute your estate is entirely up to you. But make sure your will includes the following:
- clearly identifies your beneficiaries ( the people entitled to receive funds or property)
- clearly identifies your executor (the person who carries out the terms of the will)
- is dated correctly
- is signed correctly
- is witnessed correctly
- lists exactly how you want your estate to be distributed amongst your beneficiaries (including contingencies if they die before you)
- is up-to-date.
Types of Powers of Attorney
Appointing someone as your power of attorney gives them the legal authority to look after your affairs on your behalf. There are different types of powers of attorney.
- General power of attorney – makes financial and legal decisions for you for a specific time period, like if you’re on holidays overseas. This person becomes invalid once that time period ends.
- Enduring power of attorney – makes financial and legal decisions for you if you lose the capacity to make decisions yourself.
- Medical power of attorney – makes decisions about your medical treatment if you become mentally or physically unable to make decisions for yourself.
Reviewing your estate plan when life changes
You should update your estate plan any time there’s a change in your financial or family circumstances or at different life stages like: marriage, children, divorce, death of a spouse or dependent.
Other things to consider
Organising life insurance and a funeral plan can also help alleviate some of the stress your family may face after you’re gone. Read our life insurance article to find out more.