Wills, Powers of Attorney & Succession Planning

The process of arranging your affairs for after your death is known as estate planning.  Having an estate plan is an important step to ensure there is an efficient and effective distribution of your estate after your death and can help you by:

• Ensuring your assets are distributed according to your wishes and in a legal and logical manner
• Protecting your loved ones
• Minimising taxation

The most basic estate planning strategy is to ensure that you leave a Will, however good planning should also encompass consideration about your superannuation, trusts, company, or business structures and even whether a Testamentary Trust may be appropriate for you.

Estate planning commonly also includes planning for what happens should you lose the ability to manage your own affairs while you are still alive. To plan for this possibility, you may wish to put an Enduring Power of Attorney and Appointment of Medical Treatment Decision Maker in place to determine who is authorised to make decisions about your personal, financial and medical matters.

A Will is an important document that becomes relevant when you pass away. A Will allows you to determine how your assets and liabilities are dealt with after your death. If you don’t have a valid Will, the law will determine how your assets are distributed according to a statutory formula which may or may not reflect your wishes.

A well drafted Will should have the longevity and flexibility to ensure that your estate is distributed according to your wishes in the right ways and at the right time.

In your Will, you can:

• Appoint an executor, multiple executors or alternative executors to manage your estate
• Make gifts of assets or cash that form part of your estate
• Nominate people to care for your pets or minor children
• Establish trusts for ongoing management of your assets for your beneficiaries

When a person dies, all the assets and liabilities of that person are collectively called that person’s estate. This can include assets such as cash, properties, bank accounts and investments that are in that person’s name. A Will can only deal with assets that form part of your Estate.

A good estate plan should consider both your estate and non-estate assets. Non-estate assets include certain assets that are held jointly with another individual, such as property and bank accounts, as those assets will pass automatically to the surviving joint owner.

Trusts and company structures will continue after your death generally speaking and as such, their assets don’t automatically form part of your estate. Usually, the main consideration in estate planning is how to pass control of these entities to persons you wish to benefit or to people you trust will administer them according to your wishes. Typically, the documents associated with these structures will dictate how and to whom you can pass control and this can vary significantly.

Superannuation entitlements are also not considered an Estate asset. Please see our Superannuation section below for further information.

Superannuation benefits and any life insurance owned via superannuation do not automatically form part of your estate to be dealt with by your Will. To control what happens to your super benefits after your death, you may wish to put a death benefit nomination in place. Nominations may be either:

• Non-Binding Nomination: a non-binding direction to the Trustee of your superannuation fund as to who should receive the benefit. The discretion to pay ultimately remains with the Trustee.
• Binding Nomination (“BDBN”): binding nominations require your Trustee to pay the benefit in accordance with your directions, provided you have nominated an eligible person. BDBNs must usually be renewed every 3 years, depending on your fund’s policies.

If you don’t have a BDBN in place at the time of your death, the Trustee of your superannuation will have discretion as to where to pay your benefits. Usually, the benefit will be paid to your spouse/partner or your children. The Trustee may also pay the benefit into your estate if you do not have any dependants or if there is conflict around who should receive the benefit.

To ensure your benefits are paid in accordance with your wishes, we recommend checking whether you have any binding nominations in place. If you do not, you may wish to contact your superannuation fund and request their nomination forms. Alternatively, if you have a self-managed superannuation fund, you may wish to have your lawyer or accountant prepare your nomination on your behalf.

Ideally, you should gift any money in superannuation or account-based pensions to your dependants because they will pay little or no tax. Your dependants include your spouse, minor children, others who are dependent on you or live in an interdependent relationship with you.

It is important that you seek taxation and financial advice in relation to your superannuation benefits.

Your Executors (also known as trustees) are the people who you appoint to have the legal authority to manage your estate’s affairs and uphold the wishes in your Will and are responsible for:

• Gathering your assets and paying out any of your debts and liabilities
• Distributing the assets of your Estate amongst your chosen beneficiaries
• Holding any money on trust for minor beneficiaries (unless your Will specifies otherwise)
• Defending any claims against your estate

It is important that you select people who you trust, who understand your financial interest and who can cope with the responsibilities of administering your estate.  It is possible to appoint multiple people to act as your Executors (up to a maximum of four), however you should be confident that those people are capable of cooperating and working together to administer the estate. You may wish to include a dispute resolution clause to deal with any potential conflict.

We also strongly recommend that you appoint a substitute Executor who can act if your first-named Executor/s are unable to do so.

Your beneficiaries are the people or entities who you elect to receive a gift or benefits from your estate in your Will. You can decide the type of gift you would like to give your beneficiaries and decide how that beneficiary will receive their gift (i.e outright or through a trust). Types of gifts may include:

• Specific gifts: for example, “my grandmother’s ring” or “my record recollection”
• General gifts: for example, “the sum of $10,000”
• Residuary gifts: for example, “the remainder of my estate after my liabilities are paid”

You must take care when giving specific gifts as, if you don’t own the asset at your death, the gift will fail.

If you give a gift to a beneficiary from your Estate, that beneficiary will be the owner and pay tax on any income generated from the asset. If that beneficiary is declared bankrupt, then the assets can be seized by the trustee in bankruptcy of that beneficiary.

Alternatively, you may elect to have that gift ‘held on trust’ for your beneficiaries. Assets that are held on trust will not be owned directly by the beneficiary. Instead, the assets are owned and controlled by a trustee according to the terms in your Will. The trustee could be your Executors or any other person that you nominate. The various types of trusts available include:

• Minor children trust: the trustee holds assets until the beneficiaries reach a certain age (18 years or older)
• Protective trust: the trustee holds assets for the benefit of a vulnerable beneficiary who is unable to manage their own affairs. This includes a beneficiary with substance dependency issues, minor disabilities or injuries, or personal and financial struggles
• Testamentary Discretionary Trust: like a discretionary family trust, the trustee holds assets and can pay income or capital to a range of different beneficiaries