What is an estate plan?
Many people underestimate the importance of estate planning or believe that a simple Will is all they need when thinking about how their affairs are managed in the future. While having a valid Will is an essential part of estate planning, an effective estate plan also involves:
- Planning for the unforeseen – ensuring your legal and financial affairs can be dealt with appropriately if you are away, become ill, or incapacitated.
- Ensuring your estate maintains value – distributing assets in the most tax-effective manner, using a tailored approach specific to your circumstances.
- Protecting vulnerable beneficiaries – safeguarding at-risk beneficiaries from third party creditors, or depletion of an inheritance due to incapacity, disability or dependency.
- Succession planning – ensuring appropriate arrangements are in place for business and company interests.
- Minimising the potential for family provision claims – understanding family provision and implementing strategies to limit such claims.
Making a Will
A valid Will determines who should benefit from your estate when you die and who will be responsible for administering it – your executors / trustees. A Will can be simple or complex and can also appoint guardians for minor children and provide directions for funeral arrangements.
The preparation of a Will should take into account your family structure, your personal, and financial circumstances. The risk of a family provision claim being made after you die should also be considered.
Your Will should also consider the most tax-effective distribution of your assets and, if necessary, make provision for at-risk beneficiaries.
A testamentary trust is a complex Will that creates a trust after the testator dies. These trusts can provide flexible and tax-effective distribution of your wealth and protect vulnerable beneficiaries and safeguard assets from third-party creditors.
Talking to an experienced estate lawyer can help tailor your Will to address these important considerations.
Power of Attorney
Having a valid Will is important to determine how your affairs are managed after you die. But what happens if you are injured, incapacitated or too ill to manage your affairs? A Power of Attorney is invaluable in such circumstances and we generally recommend that anybody over the age of 18 has one prepared.
A Power of Attorney appoints a trusted family member or friend (your attorney) to look after your legal and financial affairs if you are unable to do so yourself. The Power of Attorney can specify the extent of powers an attorney is authorised to exercise.
A ‘general’ Power of Attorney will be ineffective if the person making it (the principal) loses capacity, and therefore many people will consider making an Enduring Power of Attorney, which as the name suggests, endures, or continues after capacity is lost by the principal.
A Power of Attorney gives considerable power to another person, who is essentially authorised to ‘stand in your shoes’ to manage your affairs. Your attorney can pay your bills, do your banking, and even enter into legal agreements on your behalf. It is therefore essential that you choose somebody you trust implicitly, with the capacity and willingness to make sound decisions that are in your best interests.
An appointment of enduring guardian appoints a person to make lifestyle, health and medical decisions on your behalf if you lack capacity to make those decisions yourself. A guardian acts as a substitute decision-maker and may consent to medical and dental treatment and living arrangements. The appointment also authorises health care professionals to share your personal information with your guardian.
Probate is a grant made by a court that proves the Will of a deceased person, vests title to estate assets in the executor and authorises the executor to deal with the estate. The executor is responsible for paying estate debts, distributing gifts, selling and transferring property, and generally finalising the estate in accordance with the Will.
There is no legal requirement to obtain probate and applying for a grant may not be necessary for small estates or where property was held jointly with a sole beneficiary. In such cases, the deceased’s share of jointly held property can be transferred to the surviving owner by completing the required documents with the relevant authority or institution.
What happens if I die without a Will?
Dying without a Will is referred to as dying intestate. In such cases your estate will be distributed according to a statutory formula. These rules provide for a specific order of distribution to the deceased person’s next of kin, designed to reflect society’s expectations. Such a distribution, however, may not reflect your real intentions or your unique circumstances.
When a person dies without a Will, there is a risk that:
- family members or friends miss out from an inheritance;
- a disproportionate distribution of assets between family members is ordered, leaving out more needy beneficiaries;
- an inheritance is received by a family member with whom a deceased person shared no significant or meaningful relationship.
If a person dies intestate, an application by an interested person (usually the next of kin) is made to the court for Letters of Administration. Once granted, the person is known as the Administrator of the estate and may deal with the estate assets and liabilities in the same manner as an executor.
Planning now for the unforeseen and inevitable can save you and your loved ones some of the suffering associated with illness and loss. Estate planning not only assists in maximising your hard-earned assets but helps to ensure that your wealth, whether significant or modest, is not depleted by uncertainty or unexpected claims.
We have significant expertise in this important area and look forward to assisting you.