Legacy – what will yours be?

09 Apr 2014

By Chris Youssef

The transfer of wealth from one generation to another requires careful thought about all of your assets and liabilities.  Having an effective estate plan helps ensure your assets, or the control of your assets, pass to your desired beneficiaries with minimal disruption and in the most tax-efficient manner.

Most people have dealt with a Will in one capacity or another, either being a beneficiary, a witness or they have their own Will in place. It goes without saying that a Will is important as it allows you to determine what happens to your estate after your death.

It is just as important to understand what a Will does and doesn't cover so you can be confident all your assets are distributed according to your wishes.

What does a Will cover?

Estate Assets​Non-Estate Assets
​Assets owned in your name​Life Insurance with beneficiaries named
​Business interests including interests in a Partnership​Company assets
​Residential or commercial property​Jointly owned assets (held as joint-tenants)
​Income or capital allocated to the Will maker or from a trust​Account based pensions with a reversionary beneficiary
​Interest in assets held as tenants-in-common​Annuities with a reversionary beneficiary
​loans by the Will maker to/from a trust​Superannuation subject to member/trustee direction
​Cash Investments ​
​Personal chattels ​

Tenants in common and joint tenancy

When it comes to the co-ownership of property this is divided into two categories; joint tenancy and tenancy in common. Upon the death of a joint tenant the remaining tenant receives the total ownership of the asset in question. Alternatively upon the death of a tenant in common, the portion of the share owned by the deceased will be distributed according to the deceased's Will.

What happens if you die without a valid Will?

The legal expression for a person who dies without a valid Will is "having died intestate". If this happens the court will appoint an administrator who will distribute your assets in accordance with legislation.

This can be a lengthy process during what is likely to already be an emotional time for your loved ones.  In addition, the associated costs will be deducted from your estate leaving your beneficiaries with less in heritance.  Added to this is the fact your dependants may not actually receive what you had intended and, in extreme cases, where there are no eligible recipients the state is entitled to keep your assets!

When should you review your Will?

As your circumstances change it's important to review your Will to make sure it remains relevant. Examples of events which should trigger the need to review your Will include:

  • If your wishes change
  • There is a change in your assets
  • Getting married
  • Having children or the arrival of grandchildren
  • Divorce
  • Retirement planning.

What else should you consider when drafting a Will?

Power of Attorney

A Power of Attorney allows you to nominate another person to handle financial and legal decisions on your behalf in the event you are unable to do so.  There are generally four types of Power of Attorney:

  • General Power of Attorney- this gives a nominated person the right to act on your behalf for a specific period or purpose eg, if you go away on holiday and want someone to look after your finances.  This type of attorney ceases immediately should you become mentally unable to manage your affairs.
  • Enduring Power of Attorney (financial) – Unlike a General Power of Attorney an Enduring Power of Attorney will continue should you become unable to manage your affairs.
  • Enduring Power of Attorney (medical treatment) – This authorises a nominated person to make medical decisions on your behalf.
  • Enduring Power of Guardianship – This allows a nominated individual to make lifestyle decision on your behalf ie, where you will live.

Testamentary Trusts

A Will can be drafted to include the option of establishing a testamentary trust upon your death. The benefits of establishing a testamentary trust include:

  • Income splitting, for example so minors are not taxed at adult rates.
  • Asset protection such as for beneficiaries that may become bankrupt from a business, in the event of divorce, for disabled children or for spendthrift children.

So what will your legacy be?

In most cases there is more to estate planning than establishing a set and forget strategy after you make your Will. An effective estate plan will ensure your assets are inherited by the people you want as well as effectively managing any taxes that may be applicable.

While it's not easy thinking about death and leaving behind loved ones, it is important that adequate provisions are made to ensure your wishes are reflected in the event of your passing.  We have all heard those dreadful stories of families getting torn apart after the death of a loved one. You can't "rule from the grave" and control what will happen when you pass however, an effective estate plan will provide you and your loved ones with more certainty on how your legacy will be distributed.

It's important you seek professional advice from both a financial adviser and an experienced solicitor. If you don't have an estate plan, there's no better time than the present to seek advice and put a plan in place.​

To learn more about Chris, view his online profile.

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