Developing an estate plan

There are a number of things to consider when planning for the distribution of your estate once you've passed away.

The first step is to make sure you have a Will. But a Will is just the beginning. An estate plan allows you to put plans in place for once you've gone, but also for while you're aging.

Ask yourself these questions:

  • Who's in charge? Who can manage your affairs for you if you become injured or sick and no longer able to manage your finances or make decisions?
  • Who gets what? Who will inherit which assets and in what proportions after you pass away?
  • How much debt? In the event of your death, do you have enough to provide for your family and pay off debts? If not, there are several ways to help make up the shortfall.

There are also other things to think about.

Taxation

There are several areas where tax considerations may influence the structure of a Will.

For example, assets that carry a capital gains tax (CGT) liability generally don't become due for CGT on inheritance, only on subsequent disposal.  If inherited by a beneficiary on a low marginal tax rate, less of the benefit will be lost in CGT.

By having an estate plan in place, you can structure your estate to ensure your assets are distributed in a tax effective way.

Social security

If you have a beneficiary in receipt of Centrelink benefits, they may be able to preserve their benefits by contributing part of their inheritance to a super fund or creating a complying income stream.

Testamentary trusts

Your Will can allow for the creation of a 'testamentary trust' that can protect assets for the benefit of younger children as well as those with special needs or those who are unable to manage their inheritance responsibly. In certain situations, trusts may provide some tax benefits.

Power of attorney

Granting a power of attorney means you legally appoint someone else (a family member, friend or a professional trustee company) to make decisions, sign documents and act on your behalf in various matters if you are no longer able to do so yourself.

While the names differ from state to state, there are documents that allow you to appoint someone to make financial or lifestyle decisions on your behalf, either for a period of time, or indefinitely if you become unable to do so for yourself.

The scope, timeframe and circumstances of the power of attorney is up to you and is documented to provide a legal agreement as well as peace of mind as you get older.

As requirements differ from state to state, it's important to seek specialist estate planning advice when putting together your estate plan.

To find out more about developing an estate plan make an appointment with a Bridges financial planner.