Estate Planning: Who gets my money if I die?

While no one wants to think about the uncomfortable subject of death or losing capacity, it is important to consider what happens in either of these events. An appropriately administered estate plan will ensure that relevant assets go to the relevant people at the right time, in a productive and tax-effective way. It can also ensure that if you’re unable to make important decisions (both financial and lifestyle) for yourself, the appropriate person is able to intercede and make these decisions on your behalf.

In this post we will outline the key strategies and tools you can use to attain your estate planning objectives at a high level, ready for a deep dive on the respective strategies in future posts. 

 

Where do I start?

Before you begin planning your estate, it’s important to consider how different assets are regarded and the options open to you. Directing assets to the right people after you pass away is not always as easy as expressing your wishes in your will. How your property is distributed may depend on a number of factors, including how your assets are owned, the terms in your will, and which State or Territory legislation applies to your assets.

Many are uncertain about how and where to start when estate planning. Pekada is on hand to quell any concerns you may have about going through the process. We can also help you in ensuring that any future investments you make are structured in a way that is consistent with your estate planning preferences and objectives. The estate planning process can be summarised as:

  1. Assessing your current situation and ideal outcome – Identifying and evaluating the value of your personal and other assets (Life insurance, Super, trust fund, etc.) is key to proceeding and then casting your mind forward to think of how you would like things to play out in a perfect world. Whilst the perfect scenario cannot be guaranteed in all cases, it forms a useful starting point to understand what is most important to you.
  2. Pinpointing risks – Identifying any potential risks (health issues, mental incapacity, relationship breakdown, dependency issues of beneficiaries, etc.) in the future can help you prepare for their occurrence. 
  3. Establishing a plan – The best intentions and ideas left unexecuted are unlikely to result in your desired outcome being achieved. Finally, work with a financial planner, accountant and solicitor to execute a formal estate plan that is tailored to suit your requirements. At a minimum this should include preparing a will, power of attorney and nominations for any superannuation benefits.

 

Prepare a Will

A will comes into effect after you die. It may detail how you wish your assets to be divided, any trusts you want set up, who you nominate to take care of your underage children, even your own funeral arrangements. 

You may want to consider having a provision for a testamentary trust created after your death. This could provide some benefits, such as tax planning opportunities and asset protection.

While you may write your own will if you want, it is suggested to have a solicitor or public trustee review the document to make sure everything is in order. Also, if a will remains unsigned or isn’t adequately witnessed, it may be considered invalid.

If you die without a valid will, your estate assets will be distributed by a Court appointed administrator, according to the intestacy laws. While the intestacy laws vary between the different States and Territories in Australia, they generally only cater for certain family members, in strict proportions, and are unlikely to reflect your wishes. 

 

Execute a Power of Attorney

Executing a ‘Power of Attorney’ means legally granting a person the authority to sign documents, make decisions and look after affairs on your behalf. 

There are several types of Powers of Attorney –

  • General Power of Attorney: This is used when you are unable to maintain your affairs for a specific period of time; i.e. travelling out of the country. This Power of Attorney can only make legal, financial and property decisions.
  • Enduring Power of Attorney (financial): This comes into effect only if you lose the ability to make decisions for yourself; i.e. disability resulting from an accident or dementia. Enduring Power of Attorney can only make legal, financial and property decisions. 
  • Enduring Power of Attorney (medical treatment): This Power of Attorney is valid if you lose the ability to make decisions for yourself. However, this is only applicable to your medical decisions, and NOT your legal, financial, or property decisions.

You may be able to choose for the Power of Attorney to be effective from the time you execute the document until formally rescind it, or alternatively only to come into effect in specific circumstances (eg. loss of capacity). 

 

Make superannuation death benefit nominations

Superannuation is a non-estate asset that isn’t part of your will. Most super funds allow you to nominate someone to receive your death benefit in the event of your death. If you do not have a nomination in place, then the super fund trustee decides who should receive your super benefits. 

To avoid the super fund trustee having sole discretion, you may set up beneficiary nominations –

  • Binding nominations: A binding nomination determines who your death benefit will go to and the trustee is legally required to follow your directions (providing the nominations are valid).
  • Non-binding nominations: A non-binding nomination serves simply as a guide to the trustee, who has the sole discretion to either follow your direction, or choose your estate, or someone else to receive your benefits.

Even if you intend to send your superannuation benefits to a specific beneficiary, it’s important to establish a contingency in the event your superannuation is directed to your estate.

 

In summary

Below is a useful checklist for estate planning issues to discuss with your financial adviser, solicitor and registered tax agent. 

  • Do you have a Will? 
  • Would your circumstances warrant including provisions in your Will for the creation of a testamentary trust in the event of your death? 
  • Have you executed an Enduring Power of Attorney? 
  • Have you completed a valid and up to date nomination for your superannuation? 
  • Will enough money (including the proceeds from insurance) become available to enable your dependants to maintain their lifestyle if you pass away? 
  • Are your investments and other assets held in structures that are aligned to your estate planning objectives? 
  • Could you benefit from passing on some of your wealth before you pass away? 

 

To find out more or if you have any questions relating to Estate Planning, please don’t hesitate in contacting pete@pekada.com.au.

 

Pete Pennicott

Principal Adviser | Pekada

Wealth Collective trading as Pekada (ABN 95 624 612 684), corporate authorised representative (CAR), number 1263725, is authorised to provide financial services on behalf of Communitas Wealth Pty Ltd.

The information provided on this website is general in nature and does not constitute advice. You need to consider with your financial situation and your particular needs prior to making any strategy or products decision. Pekada will endeavour to update the website as needed. However, information can change without notice and Pekada does not guarantee the accuracy of information on the website, including information provided by third parties, at any particular time Unless otherwise specified, copyright or information provided on this website is owned by Communitas. You may not alter or modify this information in any way, including the removal of this copyright notice.