Our industry experts provide insurance coverage, services and solutions tailored to meet your specific needs.
At Gallagher we believe that enabling your people to be better, means your business can start achieving its best.
We believe that in every organisation, and in every person, there are dreams, desires and potential waiting to be fulfilled.
You spend a large proportion of your life working; working to earn money to look after yourself, to provide for your family and to save for the future. Given the focus that is placed on creating wealth while you're alive, it seems logical to want some control over what happens to your assets once you're no longer around to enjoy them.
These days, everyone is aware of how important it is to have a current will in place. However, estate planning doesn't begin and end with a will. An effective estate plan involves several important documents that capture your wishes and provide peace of mind for your future.
Estate planning allows you to provide instructions on how you want your assets to be distributed once you pass away, so that the people you care about can be looked after when you're no longer around.
In other words, estate planning is about wealth succession — a process designed to help protect the wealth you've built over your lifetime so that it is allocated smoothly according to your wishes.
Given the importance of this process, we've put together this handy guide on estate planning to let you know why it pays to be a forward thinker.
Estate planning is important for everyone, regardless of how big your bank balance is. If you own anything, have something to leave a family member after you've passed away, or have people who rely on you, it is a good idea to have an estate plan in place. In addition, given the growing number of mixed families here in Australia, and the complexity around personal and financial affairs, the necessity for estate planning is evident.
There are certain times and milestones in your life when you should review your estate plan, as your needs and circumstances may have changed. This includes:
An effective estate plan can include several crucial documents including:
A will is a legal document outlining your wishes for your assets and possessions upon your death. It can also be designed to encompass a range of requests including:
Passing away without a valid will is called "dying intestate". When this happens, the court will appoint an administrator and your assets will be distributed according to a strict government formula. This formula may not be in line with your intentions, and the outcome may not be in the best interests of your family and loved ones.
You must consider whether or not you want your assets sold down and distributed as cash, or passed on as they are.
| Asset register | This document should include the location of your will, a list of your investments, as well as specific bequests. A copy could be retained by your legal representative to ensure it does not get lost. |
| Debts | Do you want your loved ones to inherit any debts attached to their inheritance? Do you want debts funded to make sure your estate is 'debt free'? |
| Tax | What tax implications will there be and how will these be handled? |
| Centrelink | Are any of your nominated beneficiaries receiving Centrelink benefits? What impact will an inheritance have on Centrelink entitlements? |
One of the most important considerations when drawing up your will is your dependants, in particular young children. Your will should detail who you want to take care of your children in the event of your death, as well as how you want them to be cared for. It should also include instructions for the appointment of a guardian who can legally act on behalf of your children, as well as specific instructions for their upbringing. This can prevent messy feuds later down the track, especially in the case of blended families and where both parents pass away at the same time.
Another consideration where minor children are involved is tax management. Children under the age of 18 can be hit with penalty tax rates up to 66% on the income earned on investments if your will is not structured correctly.
A Power of Attorney is a legal document allowing you to appoint someone to act on your behalf. When in force, the signature of the person you appoint as your Power of Attorney has the same legal force as your own.
The laws governing a Power of Attorney vary from state to state, and there are different Powers of Attorney each with a different purpose:
| General Power of Attorney |
Allows someone to act on your behalf regarding your personal and financial affairs. You can set limitations around the powers if you wish, defining specific time frames or asset boundaries. For example, you can nominate someone to operate a nominated bank account or sell a specific asset while you are overseas. All general powers of attorney become void if you lose your mental capacity to make decisions. |
| Enduring Power of Attorney | An Enduring Power of Attorney is similar to a General Power of Attorney, but it is not automatically revoked if you become mentally incapable.
An Enduring Power of Attorney can make important financial decisions in the event of your absence, illness or incapacity. |
| Enduring Guardian | While an Enduring Power of Attorney manages your financial and legal affairs, an Enduring Guardian makes medical and lifestyle decisions for you. An Enduring Guardian allows you to nominate someone to make health care decisions on your behalf. It is not revoked if you lose your mental capacity.
Some of the decisions that a Guardian can make include:
|
| Medical Power of Attorney | A Medical Power of Attorney allows the person nominated to make medical decisions on your behalf, in the event of you being ill or incapacitated and unable to make decisions.
Unlike an Enduring Guardian, a medical power of attorney does not allow the nominated person to make decisions affecting your lifestyle. |
| Advanced Health Directive | An advanced health directive also allows you to nominate the types of medical treatment or care you do or do not want to receive in the event you become unable to make the decisions for yourself.
Similar to an Enduring Guardian you can also nominate a person to make medical and lifestyle decisions on your behalf in the event become ill or incapacitated. |
Generally, your superannuation savings do not form part of the assets that are distributed via your will. This is a crucial consideration for the succession of your wealth, because if structured correctly your super savings can be received tax free when they are passed on to your beneficiaries. Conversely, if your preferences for your super savings are not structured correctly, the tax consequences for your savings can be damaging. Superannuation savings paid to someone other than your spouse, your minor child, or someone who is financially dependent on you can be taxed up to 31.5%.
The trustee of your superannuation fund has the ultimate discretion about whom to pay your superannuation savings, unless you have a binding nomination.
While estate planning can be a complex process, it is an essential part of managing your financial affairs. It requires careful consideration on your behalf, as well as the expertise offered by a solicitor and accountant, and financial adviser.
Wherever you are on your financial journey, from early career to retirement, we can help you plan for the future and adjust to changes when 'life' happens. With over 75% of Australians not having a valid estate plan in place, let us help you secure your wishes and protect the financial future of your loved ones. Get in touch today.
Start your journey with us today
