Estate Planning in Australia

What is estate planning?

Estate planning is the process of deciding how your affairs will be handled when you die or become incapacitated. Your estate is made up of money, property, possessions and any other assets or liabilities under your name.

An estate plan details how and when your assets will be distributed and who will be responsible for managing your affairs. It could include a Will, Testamentary Trust, Power of Attorney and details around life insurance, superannuation or death benefit nominations. Estate planning also involves working through potential ways to minimise taxes on your assets for the sake of your beneficiaries.

What is the difference between writing a will and estate planning?

A Will is a standalone document which outlines how your assets will be distributed when you die. Estate planning is more about the big picture when it comes to end of life matters. One of the main differences is it includes safeguards to guide what happens if you get sick or lose the mental capacity to make decisions. It also organises how assets will be managed which are not covered by a Will, like retirement savings or life insurance.

An Estate plan can include:

• A Will
• Testamentary Trusts
• Powers of Attorney
• Guardianship decisions
• Advance care directives
• Life Insurance
• Superannuation death benefit nominations
• Burial arrangements

Step by Step Process

Creating an Estate plan can be more complicated and time-consuming than creating a Will because it takes into consideration more than just your assets and liabilities. A big part of estate planning is about informing your loved ones how you want to be taken care of if you lose your mental faculties. Setting up your own estate plan is another way to reduce some of the burden on your family during the grieving process. Safewill has created the following instructions to get you started on the Estate planning process

1. Create an inventory of all your assets and liabilities

Compile a list of everything you own in your name and assign a value to the Estate. The inventory should include:

• Savings accounts or debts
• Shares or bonds
• Businesses
• Properties
• Vehicles
• Collectibles
• Valuable possessions or items with sentimental value
• Life insurance policies
• Superannuation savings

2. Protect yourself and your family

A good Estate plan will spell out what to do if you can no longer make decisions while you are still alive. Protecting your family and your own interests means assigning responsibility to people you trust.

• Creating a Power of Attorney, Power of Guardianship or making an Advance Care Directive will give your family clear instructions around handling your medical or financial needs if you become incapacitated
• Appointing a Guardian will ensure your children or pets are looked after by the right people when you die.
• Life insurance can act as an extra layer of protection when organising your affairs. This can help to pay off any debts in a deceased estate or help to offset potential capital gains tax liabilities.

3. Protect your assets

Creating a Will and other legal documents are an essential part of Estate planning. Now that you’re armed with an inventory of all your assets it is time to decide how you want to keep them safe. This can be done by creating a Will or setting up a Testamentary Trust. A Testamentary trust can also be a smart way to offset taxes on your assets for the sake of your Beneficiaries. It can help to reduce potential capital gains taxes imposed on assets sold off after your death.

4. Choose an Executor

This is the person who will carry out your final wishes after you die. An Executor should be someone you trust who has some financial knowledge as they will be responsible for paying off debts and managing your Estate according to the terms set out in your Will. An Executor can be a family member, close friend, a lawyer, Public Trustee or other corporate provider.

5. Review your beneficiaries

If you have created a Will it is likely you have already decided who your Beneficiaries are. But some intangible assets under your name do not necessarily flow to the same people named in your Will.

Superannuation funds or life insurance policies are not connected to your Will and Beneficiaries have to be identified separately with each provider. This may be something you did when you first set up your policy so it should be reviewed and updated as part of the Estate planning process.

6. Regularly review your Plan

Any good Estate plan should be reviewed and updated regularly. Major life events like marriages, divorces or deaths are a good opportunity to go back through your Estate plan and make sure the right people will be protected when you die.

FAQs

What is involved in estate planning?

Estate planning is the process of managing all your end of life affairs. It involves reviewing your assets and liabilities and then putting in place strategies to protect your Estate after death. An Estate Plan could involve creating a Will or Trust, assigning a Power of Attorney or Power of Guardianship and appointing a guardian.

What is the average cost of estate planning?

The cost of estate planning can vary significantly depending on your needs and circumstances. A basic plan including a Will, Power of Attorney and an Advance Care Directive could cost as little as $600-800. But more complicated plans involving Trusts or joint-assets could range from $1,200 to $8,000 depending on how much time a lawyer has to spend on the paperwork.

Summary

When most people think of death the first thing that comes to mind is creating a Will. But writing a Will won’t solve all your problems if you have assets tied up in life insurance or Superannuation funds. Creating an in-depth Estate Plan allows you to take stock of all your assets and make sure they will flow to the right people when you die.

Estate planning also gives you a chance to provide instructions for your loved ones if you get sick or incapacitated. In addition to a Will you might consider creating a Power of Attorney or Power of Guardianship to allow your family to make important medical or financial decisions for you on your deathbed.

An estate plan can also help you to implement smart strategies to minimise capital gains taxes or other taxes imposed on your estate.