What is estate planning?
Your estate comprises of everything you own – like your home, your car, your bank account, superannuation, shares and investments. Some of these assets you’ve worked hard for, and others may have significant sentimental value. An estate plan ensures that there are directives in place for where these assets will go when you pass away.
Why is estate planning important?
When a loved one passes away, a family must deal with many responsibilities, from planning a funeral to making decisions about important financial matters. Losing a loved one is a very difficult time, and by having an estate plan in place, you can relieve some of the stress from your family by making sure there is already a plan for where your assets should go once you pass away. It also removes any doubt or potential for disputes about where your assets should go. If you do not have an estate plan in place, it will be left up to the court system to allot where your assets will go, and it can also lead to disputes and disagreements.
Estate planning is especially beneficial if you have young children, as an estate plan also includes directives about who will care for any minors, and protects your beneficiaries. If you’re a parent of young children and you and your partner do not have an estate plan in place, it will be up to the court system to decide how best your children should be provided for in the event that the unthinkable happens.
There can also be significant tax implications surrounding estate planning, so it’s worth considering how capital gains tax and stamp duty may impact your beneficiaries.
Elements of estate planning
Will: A will contains your instructions for how you want your assets to be divided when you pass away. It includes clear instructions about who will be the executor of your estate, how you would like your children to be cared for and any instructions for sentimental items and family heirlooms.
Testamentary trust: A testamentary trust is established under a will, but contrary to popular belief, they are not the same thing! A testamentary trust gives the authority to transfer your asserts into certain trusts once you pass away, and appoints trustees to hold the assets of the trust and decide which of the beneficiaries can have access to the trust and when. The trustees can be the same people as the beneficiaries of the trust, or you can appoint different trustees. You could appoint your partner or children, a close family member, or your lawyer to act as trustees.
Enduring power of attorney: Enduring power of attorney appoints someone to make legal and financial decisions on your behalf in the event that you are no longer able to make them yourself due to significant illness or injury. Many people appoint their spouse, parents or siblings to do this.
Advanced care directive: An advanced care directive gives instructions about the preferences you have regarding medical care and treatment in the event that you are unable to communicate them yourself due to serious illness or injury. Nobody is able to override an advanced care directive once you make it, so it gives you the peace of mind of knowing that you can be in charge of your treatment. Times of illness and injury can be very distressing and stressful for family, and an advanced care directive also helps your loved ones know you wish to be cared for and relieves them of the burden of making those decisions on your behalf.
Reducing taxes: An important element of estate planning is considering the tax implications that your loved ones may face in regard to your estate. There are a range of taxes that can impact your beneficiaries, from superannuation taxes and capital gains tax. Astute estate planning can reduce the financial burden that tax issues could potentially place on your beneficiaries.
How do I get started?
Book an initial consultation with Lane Legal today and we’ll help you on your estate planning journey. Call +61 2 9477 1500 or email jlane@lanelegal.com.au.