A guide to estate planning and will writing
Writing Wills and Planning Your Estate
Retirement is a time in which one can explore the world and live the lifestyle they’ve always dreamed of. However, it’s important to continue planning for the future to ensure your final wishes are met. Writing a will and planning your estate are essential components in making sure your assets are protected and loved ones are provided for in the event of your passing.
This article will guide you through wills and estate planning and provide top tips for leveraging your financial resources to preserve them for family and friends.
What is estate planning?
An estate plan is a holistic approach that considers one’s future wishes and distribution of their assets. A thorough plan goes beyond a will but also contains the power of attorney, trusts and beneficiary designations. Developing an estate plan aims to remove undue stress and expense from family and friends when a loved one dies.
When should I plan my estate?
Planning your estate is a step that should be taken sooner rather than later. Regardless of your age or financial status, creating an estate plan ensures that your wishes are followed and your loved ones are protected. It’s advisable to start estate planning as soon as you have assets, dependents, or specific wishes regarding your medical care and property distribution. Life is unpredictable, and having an estate plan in place provides peace of mind, safeguards your legacy, and reduces the burden on your family during challenging times.
Writing and updating your will
A person’s will is the cornerstone of their estate plan. The legal document details the distribution of assets, specifies the executor and beneficiaries, states the guardians of dependent children, as well as detailing funeral plans. A will must be updated when a person’s financial or familiar circumstances change to remain a legally binding document.
If a person dies without a will, or their will is outdated, decisions on the distribution of assets will be garnered by state judges. This could mean estranged partners are allocated inheritance or assets are not distributed as you wish.
It is common practice in Western Australia to write a will under the guidance of legal experts. However, for those who choose to write their will independently, it is important the document is witnessed to ensure it holds up against potential disputes in court.
Powers of Attorney
Powers of attorney are legal documents that grant authority to someone you trust to act on your behalf if you become unable to make decisions for yourself. There are two main powers of attorney that might be detailed in one’s estate plan: medical and financial. A medical power of attorney allows your chosen representative to make healthcare decisions for you, while a financial power of attorney enables them to manage your financial affairs.
Having powers of attorney in place is critical. In the event of incapacitation, a designated individual can make decisions according to your preferences, sparing your loved ones from potential legal complexities and ensuring your wishes are honoured.
It’s important to say, having a power of attorney does not mean you lose control of your assets whilst you are still able to manage them. Limitations can be implemented. Ensuring that the document remains a precautionary measure and is only enforced if a person becomes unable to make informed decisions.
Managing financial assets
Your superannuation does not form part of an estate or will, however, one should prepare a beneficiary to receive any remaining balance. This is distributed as a ‘superannuation death benefit’. By nominating an individual, the benefit will be paid faster and according to your wishes.
It’s a good idea to learn key ways to optimise your superfund for retirement to ensure you make the most of your savings.
Life insurance policies are a popular component of estate planning and provide a financial safety net to families that may be burdened with mortgage payments. Insurance helps cover funeral costs and can be used to protect assets from estate claims, preserving funds for the intended beneficiaries.
The cost of life insurance varies by individual and is determined by one’s health and lifestyle. If you’d like to look into this in more detail, a policy comparison site can be found here.
When estate planning, one should consider ways to minimise the tax burden for those who might receive an inheritance. A common way to do so is through setting up a trust.
When assets are placed in a trust, they are transferred into the name of the trust, rather than an individual. A deed sets out the management of assets, and trustees have the power to nominate the flow of capital in the most tax-effective way.
For example, a Business is placed into a trust. The trust does not pay tax, however, the income generated by the business must be distributed to trustees, who are liable to pay tax based on their income. A trust generally makes high payments to low-income trustees, making the most of tax-free thresholds.
When estate planning it’s important to ensure one’s will is up to date, include nominated powers of attorney, and are using financial management strategies as a means to protect assets. By working with professional advisors or accessing online resources, you can begin to create an estate plan that aligns with your wishes and ensures your loved ones are well taken care of.