“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”
– Robert Kiyosaki –
Although it might be difficult to think about, it’s important to consider what will happen to your financial assets when you eventually pass away. Providing solid legal instructions upon your death will help ensure the right assets end up in the right hands when you are no longer around.
It’s also important to provide legal instruction should you become unable to make your own decisions due to temporary or permanent injury.
It is estimated that nearly half of all Australians die without a Will or appropriate Estate Plan therefore ensure this will not happen to you by contacting an Odyssey Financial Adviser today.
Estate Plans involve not only the creation of a Will, but any other necessary instructions for asset distribution. Estate Plans may also involve appointing an Executor of your Will and establishing a Power of Attorney, setting your beneficiaries, and whether a Trust will be required consideration.
We’ve outlined some factors and documents that are important to consider when developing your Estate Plan.
1. Wills
A properly drafted and executed Will can simplify the administration of your estate and potentially reduce costs for your beneficiaries. It can also help to avoid family disputes.
What are the benefits?
- Your estate can be administered faster and with fewer complications because your intentions will be known.
- Your assets are more likely to pass to your intended beneficiary.
- There is reduced potential for family disputes.
- You will have opportunity to manage tax implications and reduce costs for beneficiaries.
- You will have opportunity to nominate a suitable guardian if you have dependants.
A key aspect when preparing a Will is to identify which assets will form part of your estate and which are non-estate assets. Only estate assets are covered by your Will.
Your Will should be reviewed regularly, in particular if there are any changes to your assets (eg purchases or sales) or personal situation (eg marriage, divorce, birth of a child).
The tax and Centrelink implications of leaving assets to certain beneficiaries should be considered where applicable.
If you die without a valid Will, you are said to have died ‘intestate’. The distribution of estate assets if you die intestate is determined by state and territory legislation.
2. Testamentary Trusts
A Testamentary Trust may be useful if you have beneficiaries who are young or who have a disability. Your assets will pass into the trust where they can be protected if necessary. Income distributed to beneficiaries who are minors from a testamentary trust can receive favourable tax treatment.
3. Powers of Attorney
A Power of Attorney allows another person to take care of your affairs in the event that you aren’t able to take care of those affairs yourself.
It is a legal document which allows another person (called an ‘Attorney’) to undertake specified activities on your behalf.
Various types of Power of Attorney are available. The ones that are appropriate for you will depend on your circumstances and what decisions you think are important in the event that you lose capacity to make those decisions yourself.
- General Power of Attorney – allows the Attorney to make financial or legal decisions on your behalf whilst you have mental capacity. These decisions may include signing legal documents, selling property or doing banking. A general Power of Attorney is often used for a specified period of time (such as if you are holidaying overseas) or they can be indefinite. They can be limited to certain assets (such as a particular bank account) or broad powers can be granted to enable the Attorney to deal with all of your financial and legal affairs.
- Enduring Power of Attorney – allows the Attorney to make financial or legal decisions on your behalf, even if you lose mental capacity.
- Medical Power of Attorney – allows the Attorney to make medical decisions on your behalf (such as agreeing to or refusing surgery) in the event that you become incapable of making those decisions.
- Enduring power of guardianship – allows the Attorney to make day-to-day lifestyle decisions on your behalf in the event that you cannot make those decisions yourself. Lifestyle decisions may include deciding where you will live or health care matters.
The rules around these documents are complicated and vary from state to state. It’s important to obtain legal advice to determine the right documents for you.
The documents you need will depend on your unique situation.
Whilst your Odyssey Adviser cannot provide specific legal advice, they can refer you to a legal professional who we will work with to help you put in place a robust estate plan.
