Estate Planning Guide

Estate Planning Guide

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What is Estate Planning?

Estate Planning sounds fancy and expensive. It sounds like something old people or rich people do. Well, it is not cheap, but it isn’t fancy, it is common sense. 

Estate Planning is you exercising your right to provide instructions to those caring for you if you become ill or incapacitated due to an accident or illness and those who are charged with caring for your Estate should you pass away. It is important that you think about this and leave clear instructions.

Don’t I just need a Will?

The short answer is no.  Your Will has effect or power only once you have passed away.  It does not give any direction to those caring for your while you are alive as to what they need to do to comply with your wishes.  For example, if you become ill after suffering a stroke or have a terminal disease, you may need assistance from those around you for a long time before you actually pass away.  Your Estate Planning documents will provide that guidance to those caring for you.

You commonly need 5 documents:

  1. A Will; and
  2. An Enduring Power of Attorney; and
  3. An Enduring Guardian; and
  4. A Binding Death Nomination for your Superannuation Fund; and
  5. An Advanced Care Directive
  6. Letter of wishes for your family to read after you have passed away

Lets take a look at each of them.

**Note that this guide is not legal advice particular to you or your circumstances and is a guide only.  You should seek legal advice before making any decisions.

Are there different types of Wills?

Yes. There are two types. A Simple Will and a Will that creates a Discretionary Testamentary Trust.

What type of Will do I need?

Each person is different and so are their family circumstances. Let’s have a brief look at the two types and you can think about what would achieve the desired outcome for your beneficiaries that reflects your wishes.

Simple Will

A Simple Will is just that.  A Simple Will that leaves your estate in a set way to your beneficiaries.  A Simple Will suits someone who is happy to leave their estate to their beneficiaries regardless of the beneficiary’s circumstances at the time of their death.  

You set out clear instructions for your Executor about who receives a share of your Estate and who receives certain items.   

Not only can you bequeath gifts in your Will, but you can direct your Executor to have your body buried, cremated and to pay or forgive debts owed to you.

This is the most common type of Will that is prepared by Solicitors.  However, there are real implications for your beneficiaries with this type of Will.

The beneficiary must take the bequest that you have left them in their own name regardless of their income, marital status or tax bracket.

If your beneficiary has married or is in a de-facto relationship, the bequest that you leave them may become part of their joint property pool.  This means that if they separate or divorce after they receive any bequest from you, your beneficiary may be at risk of loosing all or part of it in any family law proceedings.

Discretionary Testamentary Trust

In this type of Will a Discretionary Testamentary Trust (“DTT”) is created.  It is a bit fancy.  A DTT can only be created via a Will.  The purpose of creating a DTT is:

  1. If your beneficiary has reached the age (that you nominate) that enables them to receive your bequest then the beneficiary has a choice.  They can take the whole of the bequest (as a simple gift the same as they would under a simple will) or they can receive the bequest in part or whole in a DTT structure; and

     

  2. If your beneficiary has not reached the age (that you nominate) that enables them to receive your bequest then their share of your estate will be automatically held in a DTT and managed by the Trustee until they reach the age nominated by you.

Who controls the DTT?

When you make your Will and include a DTT, then you nominate not only someone to act as your Executor of your Will but someone to act as the Trustee of the DTT that you have created as well.  It can be the same person, or it can be two different people.

So how does a DTT work when my beneficiary is old enough to receive their bequest from me?

Each beneficiary will have a choice to either leave their inheritance inside the DTT structure or to take their inheritance and leave the DTT structure.

If they choose to take their inheritance, then that is the end of their involvement I the DTT structure.  However, if a beneficiary decides to leave their inheritance inside the DTT structure then they will have the following benefits available to them:

  1. To decide whether they will split and stream income and any capital gains that are generated from their inheritance between parties who fall into a category of people known as “Potential Beneficiary” – in most DTT structures this means their children and spouses.  
     
  2. They will have greater level of protection over their inheritance which can assist them in any business dealings and any future family law proceedings where assets in the beneficiary’s personal name may be at risk.

Power of Attorney

Taking the step to appoint someone to be your Attorney is the first step towards making sure someone can assist you with the financial aspects of your life should something prevent you from doing these things yourself.  If the appointment is “Enduring” this means that the appointment will continue even if you loose capacity.  In this instance “capacity” means the ability to make decisions for yourself.  You may lose capacity due to illness or injury and require assistance with your every life such as paying bills, buying or selling shares, real estate, motor vehicles or property.  

Appointing someone as your Attorney does NOT give them the ability to assist you with your medical needs.

You can revoke the appointment at any time provided you have capacity.

The document that you sign can be registered in NSW with the Land and Property Information Service.  This document must be registered prior to anyone using it to buy or sell real estate on your behalf.

If you don’t appoint someone as your Attorney and you lose capacity to manage your own finances, in NSW your family will need to make an application to the Guardianship Division of NCAT seeking an order for Financial Management.   This process can be involved and take time which may be a drain on your family and friends who are trying to care for you should something effect your health and capacity to make these decisions for yourself.

Enduring Guardian

If you lose capacity, in this instance “capacity” means the ability to make decisions for yourself, by appointing someone to be your Enduring Guardian you will have comfort that there is someone that you trust with the authority to discuss and manage your medical treatment, living arrangements and care with your health professionals.  This appointment will authorise your medical team to discuss all of your treatment, diagnosis and prognosis with the medical professionals caring for you so that they can make informed decisions about your future care.

If you choose to, in this document you are able to authorise your Enduring Guardian to refuse medical treatment on your behalf.  

In NSW when someone loses capacity to make medical decisions for themselves, their family or friends can make an application to the Guardianship Division of NCAT for an order appointment someone as a Guardian.   This process can be involved and take time which may be a drain on your family and friends who are trying to care for you should something effect your health and capacity to make these decisions for yourself.

The document that you sign can be registered in NSW with the Land and Property Information Service

Binding Death Nomination

Every Australian who is employed has superannuation.  As part of the Australian Governments Super Guarantee Scheme all employers must contribute a percentage of their employee’s wage into a Superannuation Fund.  The Trustee of the Superannuation Fund is not obliged to pay the Superannuation to the Legal Personal Representative of your Estate should  you pass away.  Anyone can submit an application to the Trustee setting out their reasons as to why the Trustee should pay all or part of your Superannuation to them.

One way to ensure that your Superannuation is paid to the person or people that you choose is to execute a “Binding Death Nomination” (“BDN”) form.  Your superannuation fund usually has this form available on their website for your to download and complete.  Some funds require you to execute a new BDM every 3 years.  You should check with your fund regularly to ensure your BDN is up to date.

Advanced Care Directive

In NSW an Advanced Care Directive can be made by anyone who is over 18 years and who has capacity.   This can be a letter setting out what treatment you would or would not like to receive should you lose capacity.  An Advanced Care Directive must be in writing and while it does not have to be witnessed, it is recommended that it is.  If you change your mind, you must replace any advanced care directives that you have given to your health care professionals.  

This document can not be registered anywhere.   Your doctor only needs to follow your directions if they are of the view that you had capacity at the time you wrote it.

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