Estate Planning details the ‘who’, ‘what’, ‘when’ and ‘how’ with regards to your life if incapacitated or the management of your estate after death. In particular it incorporates the establishment and/or review of your Will, Death Benefit Nomination and Powers of Attorney.
It is an essential pillar in the financial advice process and one that is intended to provide certainty and structure during a very emotional period.
Your Will is the main document that details the distribution process of your accumulated wealth upon death.
Importantly, not all assets are distributed via your Will with the most common asset requiring separate consideration being your accumulated superannuation benefits (see ‘Death Benefit Nominations’ below).
We recommend that you review your Wills every three years to ensure they remain relevant to your needs and reflect your wishes. Whenever there are changes to your investments, marital status, family situation or your wishes, your Will also needs to be revised to ensure proper distribution of your assets.
Accumulated superannuation benefits do not necessarily form part of an estate and therefore are not necessarily caught under the directions of a Will.
Most superannuation plans now allow you to instruct the Trustee of your superannuation benefits how to distribute those assets after your death, this is achieved via a Binding Death Benefit Nomination.
A Binding Nomination instructs the Trustee of your superannuation to pay your benefits to your nominated beneficiary in the event of your death– there is no Trustee discretion. In the absence of a Binding Nomination, the superannuation Trustee must use discretionary powers to determine how your entitlements are to be paid noting that this may be to your estate and ultimately distributed according to your Will.
It is important to understand that not everyone is able to be nominated to receive accumulated superannuation benefits and the tax implications of this decision.
Getting the right advice in this regard is critical.
In Victoria, there are two Powers of Attorney that form part of your Estate Planning:
Enduring Power of Attorney (Financial and Personal Matters)
An Enduring Financial Power of Attorney (Financial and Personal Matters) is a legal document appointing another person or persons to make financial decisions as well as personal and lifestyle decisions on your behalf whenever it is inconvenient for you to do so. For example, if you are injured in an accident or away for an extended period of time, that person could attend to payments of your expenses and administer your personal bank accounts or investments. Regarding your ‘Personal Matters’ powers, these decisions can include where and with whom you live, health care, some medical decisions and who is able to visit you. Your Attorney cannot refuse medical treatment (a Medical Power of Attorney is required for this).
Enduring Medical Power of Attorney
An Enduring Medical Power of Attorney allows the nominated Attorney to make medical decisions on your behalf should you be unable to make your own decisions on treatment and care.
An Enduring Power of Attorney does not terminate should you lose competency to act on your own behalf – which is when it is most needed.
Generally people nominate a primary person to make decisions on their behalf (with a secondary person nominated in the absence of the primary decision maker). It is not possible to assign an Enduring Medical Power of Attorney to people jointly.
Given the powers being bestowed, you should consider very carefully, who to nominate as your Attorney.