Irrespective of the size of your estate, everyone needs a Will. If you die without a valid Will, you die intestate and all your worldly possessions are distributed (not according to your wishes) but pursuant to the statutory rules of intestacy. In other words, the State (not you) gets to decide who should inherit your assets.
This depends on the nature and extent of your estate and the range of potential beneficiaries.
If you have minor children and assets that extend beyond the family home and may be held in family trusts, then you will need a Comprehensive Will incorporating:
- Optional testamentary trusts
- Provisions for the transfer of control of existing trusts
- A range of specific provisions dealing with the care and ongoing needs of minor children
If your estate is less complicated, then a Simple Will may be all that is needed. A Simple Will is usually a fairly straightforward document that will ensure that your testamentary wishes (simple though they may be) are carried out and that your assets (modest though they may be) end up with the desired beneficiaries. Even a Simple Will needs to be professionally drafted and properly witnessed to ensure its efficacy and validity.
Any trust established by a Will is technically a testamentary trust. However, the term is more commonly used to describe a discretionary trust created by the Will that operates in a similar way to a family trust.
If properly drafted, the terms of the trust will facilitate:
- Asset protection
- Tax effective distributions of income and capital to tax favoured beneficiaries
- Preservation of the inheritance within the nominated bloodlines.
The trust only begins on the death of the Will maker and will exist for a maximum period of 80 years. It can, however, be vested or wound up by the trustees in certain circumstances during this period.
If you do not have an Enduring Power of Attorney or Appointment of Enduring Guardian in place while you are alive, the State may again get to decide who should control and manage your affairs should you become incapable of so doing through illness or misadventure. This is how it might play out without these documents in place:
- Pursuant to the provisions of the Guardianship Act (NSW) 1987, the Guardianship Tribunal may make financial management orders with respect to a person who is no longer capable of managing his or her own affairs.
- In the absence of a suitable appointee, the person’s affairs may ultimately be placed in the hands of the Protective Division of the Supreme Court.
- In some circumstances, there may be competing applications for control which will only add further delay and uncertainty to the ultimate determination.
An Enduring Power of Attorney allows a person to appoint another to make financial and legal decisions on their behalf. It differs from a general power of attorney in that it continues even if the person loses legal capacity.
An Enduring Power of Attorney in New South Wales does not allow the attorney to make medical and lifestyle decisions in circumstances where the donor is no longer able to make such choices. A separate document, the Appointment of an Enduring Guardian, is required.
Jane (42) has an elderly mother Gracie (late 70s) who suffers from dementia. At the instigation of some well-intentioned social worker, the Guardianship Tribunal has been requested to conduct an inquiry into Gracie’s affairs with a view to making financial management orders and appointing a guardian or attorney to act for Gracie in all aspects of her life (both financial and personal). Jane now has to convince the members of the Tribunal that even though Gracie suffers from dementia, she still has the capacity to appoint her own guardian and attorney and that the helpful intervention of the Tribunal is not required.
All of this could have been avoided had Gracie (at a time before the onset of dementia when her mental capacity was not in doubt), consulted a solicitor to put in place (at a very modest cost) an Enduring Power of Attorney and an Appointment of Enduring Guardian appointing a family member (Jane) as her attorney and guardian. Although the hearing before the Tribunal may result in the same outcome, there is no guarantee and it may be weeks before the Tribunal makes a decision.
An advance care directive (living will) is a document that expresses your so-called “end of life” directions. If for example you are in a coma with medical certification that there are no reasonable expectations for your recovery, you may not want your life prolonged by artificial means. A document signed by you in the presence of a witness will set out your wishes and directions thereby relieving your family and doctors of the responsibility for making any such “end of life” decisions.
Estate Planning involves the development and documentation of strategies:
- For the protection of client wealth
- For the tax effective distribution of that wealth following death
- For the effective transfer of control of non-estate assets such as superannuation and family discretionary trusts.
In addition to the preparation of the Will, Enduring Power of Attorney and Appointment of Enduring Guardian, the comprehensive Estate Plan may need to address:
- SMSF deed amendments & control issues
- Review & amendment of family and unit trusts
- Discretionary & binding death benefit nominations for superannuation
- Succession to family companies and trusts.