Estate planning might be an uncomfortable reality but it’s an important and necessary step.
Estate planning shouldn’t be a last-minute consideration yet it’s something that is often pushed aside. And for good reason.
No one wants to think about what will happen after they pass away, or if they become ill. But no matter what stage of adult life you are in, putting plans in place for future scenarios is an essential part of maintaining control and peace of mind.
An estate plan includes your will and any other directions on how you want your assets distributed after your death. It also includes documents that govern how you will be cared for medically and financially if you become unable to make your own decisions in the future, according to the Australian Securities and Investment Commission (ASIC).
Jennifer Maher, principal lawyer and estate planning expert at Melbourne firm KCL Law, says despite its importance, estate planning is often overlooked. For some it’s intentional – fear of mortality makes the task seem daunting – others will hold off because of the confronting decisions to be made or perhaps the costs involved can come up as a barrier, she explains.
“Prevention is the best cure in my experience though.”
Most Australians will be familiar with the idea of a will (a legal document that sets out how you wish your assets to be distributed after your death) however around 45% of Australians don’t have one. A will also needs to be updated as circumstances change.
If you pass away without having a will in place, your assets will be distributed according to a pre-determined formula with certain family members receiving a defined percentage despite what you may have wished, explains the NSW Trustee and Guardian.
Also, looking after such matters can be complicated. For example, a suitable administrator must be appointed by the court, who will need to arrange the funeral, collect assets and distribute them after paying any debts and taxes. The administrator must establish the family tree using certificate evidence which may be an expensive and time-consuming task depending on who are the next of kin or if they live overseas.
Having an estate plan is part of the bigger-picture process and puts your wishes first.
“It is fundamental to have in place a ‘life’ plan, about what happens when you lose capacity – who will manage your finances, your well-being and health when you can’t? Who do you want to benefit on death and how? – trusts are so effective for asset protection (family and creditor risks) and tax minimisation,” explains Maher.
“It is about protecting your wealth for future generations and making sure they are in the best position they can be – it’s your legacy after all.”
To create or update your will, and get help with your estate plan, seek the advice of a legal professional with expertise in wills and estate planning or contact your state Public Trustee and Guardian.
There is also plenty of useful online resources such as ASIC’s Money Smart website to help you understand what’s involved.