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Estate Planning

What is a Will and do you need one?

 


 

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What is a Will and do I need one?

Will or Testament is a legal document by which a person, the Testator, expresses their wishes as to how their property is to be distributed at death, and names one or more persons, the Executor, to manage the estate until its final distribution.  [Source]

You can describe your wishes regarding how your assets are distributed, and how any minor children are cared for after your death.

Whilst everyone’s needs can vary depending on their circumstances a Will, Enduring Power of Attorney and Advance Care Directive are essential.

By making a Will you ensure that after your death your assets are distributed according to your wishes. Only by having a Will can you be certain this will happen.

What is an Enduring Power of Attorney?

An Enduring Power of Attorney manages your assets and financial affairs if you are unable to do so due to illness, an accident or an absence.

What is an Advance Care Directive?

An Advance Care Directives expresses your wishes for future health care, medical decisions, living arrangements and other personal matters should you no longer have the mental capacity to make decisions for yourself; whether it be permanent incapacity or temporary incapacity.

Who can make a Will?

Any person over the age of 18 can make a Will and it can be altered at any time. In certain very limited circumstances a person under the age of 18 can make a Will.

Am I required to have a Will?

No, but it is strongly recommended to ensure your wishes are met after your death and to protect your loved ones. Without a Will, the Administration and Probate Act will apply. Your spouse and dependent children will not automatically be entitled to your whole Estate, which can cause them significant financial hardship.

Can I make a Will myself?

Yes, but it is not advisable. This includes the ‘do-it-yourself’ Will option, because there is no one to help you navigate the legal requirements which must be fully observed. If there is a mistake or any ambiguities, the Court may need to interpret the intent, which can be costly and may not reflect your wishes.

Should I review or renew my Will?

Yes, you should review your Will every two to three years and as soon as any personal circumstances change.  This may include the birth of children or grandchildren, the death of a beneficiary or Executor, a large windfall, land purchase or sale, marriage, separation or divorce.

Are there any rules about who I can leave my Estate to?

You can give your Estate to whomever you wish. However, if your decision results in financial hardship for a spouse, child, someone in your family who may have special needs, or (under certain circumstances) another relative, then the Court could award them part of the Estate under the Inheritance (Family Provision) Act. Careful consideration when writing your Will can assist in avoiding the Will being contested after your death.

What is an Executor?

The Executor is responsible for looking after your Estate after your death. This means gathering the assets of the Estate, paying any debts, and ensuring the terms of your Will are carried out lawfully.  You can appoint a family member, trusted friend, professional advisor or a trustee company.  An Executor can be a beneficiary and they do not need legal or business expertise, as a lawyer can guide them through the process.

What are the costs of administering an Estate?

Upon your death, an Executor will typically instruct a lawyer to administer your Estate on their behalf. The costs are payed by the Estate and will vary depending on complexity, but typically are less than 1% of the total value of the Estate.

Can I appoint a Trustee Company?

Yes, but it adds an unnecessary cost to your Estate. Trustee Companies often charge a sliding scale of costs to administer your Estate, which can total over 6% of the value of the Estate. The services of a Trustee Company are not necessary when you have a lawyer guiding you for a much small cost.

What is an Enduring Power of Attorney?

An Enduring Power of Attorney is a document by which you appoint someone to look after your financial affairs, even if you become incapacitated. Your Attorney can perform financial actions on your behalf that they could not otherwise do such as operate your bank account for you, pay your bills, arrange insurance for you, or even sell your house for you. You can, of course, still do these things yourself.

You can revoke an Enduring Power of Attorney at any time while you are mentally capable of managing your own affairs, and it is automatically revoked by your death.

What does a Power of Attorney NOT have authority to do?

An Attorney does not have the authority to make a Will on your behalf, make personal, lifestyle or medical decisions, act illegally, deal with any property held in trust by you, perform the functions of a director or secretary of a company on your behalf, or delegate their authority.

Who should I choose as my Power of Attorney?

This is your choice, and may be your spouse or de facto partner, another family member or close friend, an accountant, lawyer or a trustee company. It should be someone you trust implicitly.

What should I consider when choosing a Power of Attorney?

It is important to ensure the person is: 18 years of age or over; willing and able to take on the responsibilities; will act in your best interests; and is competent to deal with all financial and property matters.

Are there any restrictions in appointing a Power of Attorney?

You must have ‘full legal capacity’. This means knowing and understanding the details of your own Estate; and that the Attorney will have authority to appropriately deal with all aspects of your property and financial affairs. People with a psychiatric condition, mental illness, dementia, intellectual disability or an acquired brain injury may not be able to execute an Enduring Power of Attorney. If there are any questions about whether you have capacity to appoint an Attorney, then discuss this with your lawyer. In some cases a written report from your doctor will be required.

When does the Enduring Power of Attorney come into effect?

The Enduring Power of Attorney can come into effect immediately or after you lose your capacity to make decisions. The Enduring Power of Attorney ends upon your death and the provisions of your Will take over.

What is an Advance Care Directive?

An Advance Care Directive is a written record of your preferences for future care. Having an Advance Care Directive means that, prior to developing or suffering an illness or injury which may impair your decision-making capacity, you can choose one or more Substitute Decision-Makers and provide them with directions about the medical and lifestyle decisions you want them to make for you. It cannot be used to make financial decisions.

When will an Advance Care Directive be used?

The Substitute Decision-Maker can only act on your behalf if you are not capable of making your own decisions, whether temporarily or permanently, and must always protect your interests.

Do I need an Advance Care Directive on my Will?

It is your choice whether or not to write an Advance Care Directive – you cannot be forced to have one, or include things you do not want. Please note that nursing homes and hospitals sometimes request that you have one.

Can I change my Advance Care Directive on my Will?

You can change your Advance Care Directive at any time whilst you are still able. This is done by completing a new Advance Care Directive.

Who can be my Substitute Decision Maker in my Will?

You choose who you wish to be your Substitute Decision Maker. If you are married, it is usual to appoint your spouse. It is also common to appoint an adult child or children if your spouse cannot act for you, or in addition to your spouse. Due to the nature of the decisions your Substitute Decision Maker may be making for you, only a trusted person should be appointed to carry out your wishes.

What is Succession Planning?

If you have a family farm or small business, then Succession Planning is important to help prepare for possible future eventualities – planned and unplanned. It is sometimes also referred to as ‘risk management’ and ‘disaster planning’.

What are my Succession Planning options?

Succession Planning considers some of the issues surrounding a future change of ownership or change of control.

  • What will be the business viability?
  • Is sale an option? Should transfer of assets be considered?
  • How can economic security for all family members be achieved?

A Succession Plan will consider a range of details:

  • Insurances to consider putting in place.
  • Retirement plans for the older generation.
  • A review of Wills to ensure they are current and consistent between family members.
  • Evaluating whether Testamentary Trusts are beneficial.
  • Appointment of Enduring Power of Attorney.
  • Advance Care Directives.

How do I effectively communicate my Succession Planning to others?

The best way to engage the family or other parties in Succession Planning depends on personal circumstances, but there are a few options to consider.

  • Encourage all family members to contribute to the planning.
  • Have an independent facilitator help everyone constructively share their views.
  • Share a copy of the draft Will for family members to comment on, enabling any concerns to be addressed before the Will is finalised.
  • Have an Advance Care Directive.

What is a Testamentary Trust?

A Testamentary Trust is incorporated in a Will to provide more control over the distribution of assets to beneficiaries. There are also potential tax benefits too, making them an effective Estate Planning tool.

Upon your death, the Trustee (or Trustees) takes effective control of the trust and its assets. The Trustee must act within the guidelines of the Trust Deed which are determined by the Will maker.

When is a Testamentary Trust considered?

A Testamentary Trust may be considered if beneficiaries:

  • cannot manage or protect the assets themselves;
  • could face bankruptcy or legal action;
  • are experiencing, or are at risk of, family breakdown;
  • face potential tax consequences from the income generated by the assets.

What assets can be part of a Trust?

There are many types of assets that can be held in Trust, including investments, cash, property and valuables such as paintings, furniture or jewellery.

Who can be a Trustee of a Testamentary Trust?

You can choose any person or persons to be the Trustee, usually the Executor(s) of the Will. The Trustee has effective control of the Trust, so should be a person whom you know well and are confident will act according to your wishes and in the best interests of the beneficiaries of the Trust.