Each new year brings with it new challenges, goals and aspirations. One challenge/goal that can easily be ticked off the list is to get your affairs in order by arranging your estate documents.
Estate documents include your will, powers of attorney and superannuation/life insurance nominations and it can also include financial/taxation advice and planning.
These documents and advice should be reviewed every 5 years but especially if your circumstances have changed such as you have separated from your partner, divorced, married, someone listed in the will has passed away, you start a company or change your trust beneficiaries or trustee and so on.
A will is a statement of wishes by you to the people you care the most about. It tells those you love how you wish for estate to be managed and distributed after your passing.
There are a few important matters to consider when preparing a will.
This is the person or persons responsible for administering your estate in accordance with your wishes in your will. This person is responsible for ensuring that your assets are distributed to your beneficiaries and, therefore, should be someone you trust.
The role of an executor is a large responsibility, and it is recommended that you discuss the role with the person you wish to appoint to make sure they feel comfortable with the role.
It is also recommended that you consider appointing an alternative executor should the person you wish to appoint first is unable to act for your estate at the time of your passing. This will allow for longevity of your will.
This is the person or persons who you wish to receive a portion or all of your estate assets. When considering the assets or funds they may receive, you will need to consider their age and their capacity to manage those funds. If they are under 18 years of age, the executor of your estate will be trusted to manage those funds until the beneficiary reaches a certain age. You may also consider empowering the executor to use those funds and apply them for the maintenance and benefit of that minor beneficiary (for example to pay for schooling fees or buy them a car).
You should also consider alternative beneficiaries should your chosen recipients not be able to receive your benefits.
DISTRIBUTION OF YOUR ASSETS TO YOUR BENEFICIARIES
You will need to know how your assets are currently held. For example, if you own real estate jointly with another person then, through the principles of survivorship, that joint owner will become the sole owner of the property and your 50% share of the property will not form part of the assets of your will. In the future, and upon the passing of the joint owner, the full value of the property will form part of the joint owners estate and will be distributed in accordance with their own will.
Please note that if the property is held as tenants in common, then your share of the property shall form part of your will and be distributed in accordance with your will. Although, you will also need to consider how the property is currently being used between you and the other co-owner (for example, are they currently residing in the property, do you wish for them to continue to reside in the property after your passing).
When considering what assets will be transferred to which beneficiary, you may wish to consider leaving a specific item (such as a family heirloom or jewelry) or a monetary amount to certain persons.
For any minor children under 18 years of age, you will need to consider who will care for them after your passing. This may be your spouse, partner, eldest child, aunt, uncle and so on.
When considering who to appoint, you will also need to consider that the guardian will be solely responsible for managing the affairs of your children and will use the assets of your estate to pay for the maintenance, education and support of your children. You will also need to consider any shared custody arrangements and any alternative guardians should your appointed guardian not be able to care for the minor children.
You may also wish to consider your wishes in relation to where your children will live and go to school.
We note that a person appointed as guardian in the will does not automatically authorise them to be guardian. Your appointed guardian will still be required to obtain an Order from the Victorian Civil and Administrative Tribunal (VCAT) appointing them as legal guardian.
WHAT HAPPENS IF THERE IS NO WILL?
Without a valid will in place, your estate falls into the laws of intestacy. Your next of kin is then responsible for the administration of your estate and any specific wishes or protections a will could provide are not possible under the laws of intestacy.
A valid will shall also assist your loved ones in administering your estate in accordance with your wishes.
POWERS OF ATTORNEY
A Power of Attorney is a person appointed by you to manage your financial, personal and medical affairs whilst you are still alive, but you no longer have capacity to make your own decisions.
Your incapacity can only be determined by a doctor.
This person is responsible for managing your entire estate and it is highly recommended that the person or persons you appoint are people that you trust completely.
Without your powers of attorney documents in place, for your financial and personal affairs, your loved ones would need to apply for a Guardianship Order from VCAT in order to manage your affairs.
For your medical matters, the doctors would speak with your loved ones and ask for their opinions, however, the doctors will ultimately make the final decision which may be against your wishes.
Your superannuation is an asset largely forgotten about. What most do not realise is that your super does not automatically form part of the pool of assets to be distributed in accordance with your will.
Your superfund can only distribute your super to the following authorised recipients:
- Anyone financial dependent upon you; and
- Your legal personal representative (ie your estate).
If you wish for someone who is not a spouse or dependent to benefit from your estate (such as a friend, niece or nephew) then the super would need to be given to your legal representative so that it becomes part of your pool of assets to be distributed through your will.
In order for your super to distributed to your intended recipients, you will need to complete and lodge with your superfund a binding death benefit nomination. Without such nomination, your superfund will decide where the funds are distributed by reviewing your estate in light of the above category of authorise recipients. This may be against your wishes.
Please note that a binding death benefit nomination can be lapsing and non-lapsing. Generally, a retail superfund will have a lapsing nomination which means the binding nomination becomes non-binding on the superfund after a period of time (generally 3 years). You would be required to lodge a new nomination every 3 years for it to continue to be binding.
We recommend speaking with your superfund or a financial advisor about what type of nominations your superfunds provide and whether any current nomination is binding.
Another consideration in your estate planning is whether you have any life insurance in place. This may be included with your super or may be outside your super. There are benefits and negatives of each option.
If you have a life insurance policy in place it is recommend you review the amount you have been insured for and whether it is sufficient. You will also need to consider who you wish to benefit from your life insurance policy.
Similar to your super, your life insurance benefit does not automatically form part of the pool of assets to be distributed in accordance with your will. You will need to lodge a binding death benefit nomination with your insurer to ensure the benefit of the policy will pass to your intended beneficiary.
If you are in need of a review of your estate or wish to start the process of putting your estate documents in place, our skilled team of lawyers will be able to assist you.