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Estate Planning Considerations

Estate planning is a logical extension to the financial planning process. Having put your financial plan into place to ensure your family’s future financial security, estate planning can be a tax efficient means of transferring your assets.

At its core, estate planning aims to lessen the stress for grieving families during an already painful time.

A well-constructed estate plan entails much more than making a will. It may, for example, include:

  • appointing a power of attorney – one person or a group of people you trust to look after your financial and business affairs;
  • establishing a discretionary or family trust to protect your wealth;
  • establishing a testamentary trust to reduce your family’s tax liability after the main breadwinner’s death ; and
  • appointing a trustee and/or executor to carry out your wishes as per your will.

Wills

A Will is an important estate-planning tool to ensure that your estate assets are distributed to the people and organisations of your choice. It must be updated to include any changes in your personal and financial situation, such as new members in the family and new assets to be bequeathed.

It is wise for you to have more than one executor for your will, as this will cater for the situation where one executor may be unable or unwilling to take on the responsibility.

Be aware that your instructions to dispose of assets through a Will could be challenged through the courts by any of your potential beneficiaries. You should speak with a legal adviser about this, as there are ways to ensure that your wishes are actually met. For example, a current binding death nomination on your superannuation cannot be varied by anyone.

Power of Attorney

What Is It?

A power of attorney is a legal document in which you appoint someone to make financial, legal and/or medical decisions on your behalf. Depending on the extent of the power, the attorney (ie. the appointed person) is given authority to make decisions as if you were making them yourself. It is important to note that there are different types of power of attorney (eg general, enduring and irrevocable) which are more suited to different circumstances. It is also important to remember that there are slight variations in the law between states.

Why Take Out a Power of Attorney?

A power of attorney can be a very powerful tool in the organisation of your financial matters and personal affairs. A power of attorney is a legal document, which appoints one person to act on behalf of another, often in areas of property and financial management. A power of attorney is particularly useful if you travel or become physically or mentally incapacitated.

Organising a Power of Attorney

A power of attorney should be prepared by your solicitor. Your financial planner can help you identify your power of attorney needs. .A power of attorney is a formal document by which one person, the donor, appoints another person, the attorney, to act on his or her behalf. For example they could bid on a house for you or pay bills for you whilst you are on holiday. You can limit the extent of the power of attorney in any way you require and it can be cancelled at any time.

It should be noted that a power of attorney remains in force until, cancelled, expired, or if you become incapable of performing the activities covered in the power of attorney.

An enduring power of attorney ensures that the authority given by the donor to the attorney continues
beyond the donor’s own capacity. This allows the attorney to continue to act notwithstanding that the
donor has lost his or her mental capacity. It is common to have reciprocal powers of attorney, that is, to nominate one person as attorney for the other.

Medical Power of Attorney

A Medical Power of Attorney allows you to appoint someone you trust (known as a ‘Medical Agent’) to make decisions on your behalf about your medical treatment when you are no longer capable of doing so.

Enduring Power of Guardianship

An enduring power of attorney can make decisions relating to your financial affairs if you lose the
capacity to do this for yourself.

An Enduring Power of Guardianship allows you to appoint someone to make decisions about your personal affairs if you lose your mental capacity. For example; where you live, whether you need to go to a nursing home or consent for medical treatment.

Anticipatory Direction

An Anticipatory Direction allows you to make binding decisions about your medical treatment if you are in the final stages of a terminal illness, or if you are in a persistent vegetative state and are therefore unable to communicate your wishes regarding medical treatment.

Having an Anticipatory Direction will relieve those closest to you from the burden of making difficult decisions. It will allow them peace of mind knowing that they are complying with your wishes at the end stage of your life.

Binding Nomination

A binding nomination allows a member of a superannuation fund to exercise their discretion to determine who should receive their superannuation benefits in the event of their death. The Trustee is bound by the member’s nomination, subject to validity requirements. Binding nominations must be renewed every three years to remain valid.

Testamentary Trust

A testamentary trust is a discretionary trust that is created under a Will at the time of a person’s death. The primary purpose of a testamentary trust is to manage estate assets to produce income for beneficiaries.

There are enormous benefits in providing for your family through a testamentary trust.

Passing Assets Outside of Your Estate

Upon your death, assets do not necessarily need to be passed through your estate. Alternate methods of asset transferral outlined below should be discussed with your solicitor prior to the preparation of your will as these may not need to be included should you wish them to pass outside of the Estate.

Death Nominations

In most cases, Life Insurance policies and Superannuation Funds can nominate a beneficiary to
which benefits are transferred upon the death of the life insured or fund owner. Again, this can be a simpler way of transferring ownership than passing assets through an estate.

Nominations can be both binding and non-binding. Should you decide to nominate beneficiaries in this way, it is recommended at that you make binding nominations to ensure the nomination is unable to be
altered under any circumstances.

Non Estate Assets

Many assets such as superannuation, life insurance and assets held by trusts or companies are not ‘your’ assets. Specific arrangements must be made to take these assets into account when determining your beneficiaries’ entitlements.

Ownership

When assets are owned as joint tenants, the asset will pass immediately to the remaining holder(s) should another holder die. This can be a simpler way of transferring ownership than passing assets through an estate.

Arranging the Legal Documentation

It is important that you get professional assistance in preparing your will. Whilst, Nouveau Wealth Management do not provide professional advice in these areas however we do work in conjunction with legal advisers to ensure appropriate coordination between insurance and estate planning. Most do not charge for the initial consultation and will provide you with a quote to prepare the documentation you require.

Charter Financial Planning Limited is not responsible for any of the advice given by the above mentioned legal advisers.

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