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5 Steps on How to Be Effective in Your Estate Planning

May 10, 2024 | Estate Planning

Effective estate planning allows you to ensure that your assets are distributed according to your personal wishes after your passing, minimising the potential for disputes among family members and ensuring your loved ones are taken care of. 

Effective estate planning has capital gains and income tax benefits on your estate, potentially saving your beneficiaries significant amounts of money. Additionally, it allows you to appoint guardians for minor children and specify healthcare directives in the event of incapacity.

Here are 5 easy estate planning steps to help you in managing your wealth and investment.

Step 1: Identify Your Estate Assets

Knowing what you own is essential for a successful estate plan. It helps you to identify the assets that you want to distribute to your heirs, determine the value of your estate, and ensure that your valuable assets are protected from unnecessary tax implications and legal fees. 

Additionally, it allows you to make informed decisions about your assets and plan for their management and distribution after your death, whether you have heirs or not.

What are considered as valuable assets

List of Common Estate Assets to Consider

When identifying your assets, it is important to consider all types of property, including real estate, personal property, financial assets, and digital assets. Here are some common assets to consider:

1. Real Estate: Real property includes your primary residence, rental properties, vacation homes, and any undeveloped land.

2. Personal Assets: This includes items such as jewellery, art, collectibles, vehicles, and any other personal items of value.

3. Financial Assets: This includes bank accounts, retirement accounts, stocks, bonds, and any other investment accounts.

4. Digital Assets: This includes social media accounts, email accounts, digital files, and any other digital property.

5. Business Interests: This includes ownership in a business, partnership interests, or any other business-related assets held.

Tips for Keeping Track of Your Assets

To ensure an effective estate plan, it is important to keep track of your assets. Here are some tips for keeping track of your assets:

1. Create an inventory of your assets: This should include a description of each asset, its current value, and its location.

2. Update your inventory regularly: It is important to update your inventory regularly to ensure that it is accurate and up-to-date.

3. Keep your inventory in a safe place: Make sure that your inventory is stored in a safe place, such as a fireproof safe or a safety deposit box.

4. Share your inventory with your estate planning attorney: Providing your attorney with a copy of your inventory will help them create a comprehensive estate plan that meets your needs.

5. Consider using asset tracking software: Asset tracking software can help you keep track of your assets and ensure that your inventory is always up-to-date.

Step 2: Determine Your Beneficiaries

Beneficiaries can be individuals, such as family members, friends, or charities, or entities, such as trusts or businesses. You can name primary beneficiaries, who will receive your assets first, and contingent beneficiaries, who will receive your assets if the primary beneficiaries are unable or unwilling to accept them.

Factors to Consider When Choosing Beneficiaries

When choosing your beneficiaries, there are several factors to consider, including:

1. Age: If you have minor children, you may want to consider setting up a trust for their benefit and naming a trustee to manage the assets until they reach adulthood.

2. Relationship: Consider the relationship between the beneficiary and your other heirs to avoid potential conflicts or disputes.

3. Tax Implications: Naming certain beneficiaries, such as a spouse or a charity, may help minimise the estate tax burden.

4. Special Needs: If you have a beneficiary with special needs, you may want to consider setting up a special needs trust to ensure that they receive the necessary care and support.

5. Insurance Policy and Superannuation Fund: Superannuation funds often provide life insurance policies, total and permanent disability (TPD) insurance, and income protection insurance for their members.

Step 3: Choose Your Executor

The executor’s primary role is to manage your estate after your death. They will file your Last Will with the court, collect and inventory your assets, pay off any debts and taxes, and distribute the remaining assets to your beneficiaries. They may also need to manage any legal disputes or challenges to your Will.

Duties of an Executor of a Last Will

Qualities to Look for in an Executor

When choosing an executor, it is essential to consider qualities essential for managing the complex and time-sensitive tasks involved in settling an estate.

1. Trustworthiness: You need someone who will honour your wishes, act in the best interests of your beneficiaries, and handle your affairs with integrity.

2. Responsibility and Organisation: Being an executor involves managing finances, communicating with beneficiaries, and navigating legal processes. 

3. Availability: Managing an estate may be time-consuming, so choose someone with the time and availability to dedicate to the role.

4. Legal and Financial Knowledge: If your estate is complex or involves significant assets, you may want to choose someone with expertise in these areas or someone willing to seek legal professional advice when needed.

5. Family Dynamics: Choosing a neutral party or someone who can remain impartial can help prevent conflicts among heirs.

Step 4: Create a Valid Will or a Trust

In Australia, a valid will must be written and signed by a mentally capable testator (will maker), witnessed and signed by at least two witnesses, and dated to avoid confusion.

When deciding whether to create a Valid Will or a trust, it is essential to consider the size of your estate, your specific legacy goals, and your family situation. 

For example, if you have a small estate and simple estate planning goals, a Will may be sufficient. However, if you have a larger estate, complex instructions on income distribution, or unique tax liabilities, a trust may be more appropriate.

What is a Will?

A Will is a crucial legal document that outlines your assets distributed post-death, ensuring the fulfilment of your wishes and the care of loved ones.

In Australia, there are several options for a will maker to create a Will, including using a solicitor or a trustee company.

When creating a Will, it is essential to avoid common mistakes such as not updating it regularly, not considering all your assets, and not specifying your wishes clearly. It is also important to ensure that your Will is valid and legally binding.

What is a Trust?

A trust is a legal arrangement where a trustee manages assets on behalf of a beneficiary, ensuring asset protection from creditors, and distributing assets according to your wishes.

Using a trust in estate planning can provide effective wealth management but also significant tax advantages for the beneficiaries. However, Trusts can be more complex and expensive to set up than Wills.

The Benefits of Having a Trust

A trust can be created during your lifetime (family trust) or after your death (testamentary trust). Trust can either be revocable or irrevocable. Revocable trusts can be changed or revoked during your lifetime, while irrevocable trusts cannot. 

There are several types of trusts, including testamentary trusts, discretionary trusts, and testamentary discretionary trusts:

  • A testamentary trust is created by your Will and comes into effect after your death.
  • A discretionary trust allows the trustee to determine the distribution of income or capital to each beneficiary, making adjustments as needed.
  • A testamentary discretionary trust is a trust created by your Will that gives the trustee full discretion on who benefits and to what extent under the trust.

Step 5: Plan for Incapacity

Incapacity refers to a situation where an individual is unable to make decisions for themselves due to physical or mental incapacity. 

Careful planning for incapacity ensures that your financial and personal affairs are managed according to your wishes in case you become unable to make decisions for yourself.

Options for Appointing a Power of Attorney

An enduring power of attorney is a legally binding document that gives another person the authority to make decisions on your behalf. You can appoint enduring powers for financial decisions, personal care decisions, or both. 

You can choose anyone you trust to be your power of attorney, as long as they are 18 years old or older and of sound mind.

How to Choose a Power of Attorney

When choosing a power of attorney, it is important to consider the following factors:

1. Choose someone you trust to make important financial and healthcare decisions on your behalf, so it is essential to choose someone you trust.

2. Choose someone responsible and capable of handling the responsibilities of managing your financial and personal affairs.

3. Choose someone knowledgeable about financial and legal matters to make informed decisions on your behalf.

4. Choose someone available and able to respond quickly to requests for information or assistance.

5. Choose someone compatible and whom you have a good relationship and who understands your values and wishes.

Reviewing and Updating Your Estate Plan and Having a Financial Planner

Proper estate planning is a continuous process that requires regular review and updating to ensure it aligns with your current wishes and circumstances. 

Life events like marriage, divorce, childbirth, death, or financial changes may potentially affect your estate plan. Thus, regular reviews may identify necessary updates and maintain its effectiveness. 

Estate plan reviews should be conducted every three to five years, or during significant life events, depending on individual life circumstances and plan complexity.

Tips for Making Updates to Your Estate Plan

1. Review your beneficiary designations: Ensure that your beneficiary designations for superannuation benefits, retirement accounts, life insurance policies, and other assets are up-to-date and reflect your current wishes.

2. Update your Will: If you have experienced a significant life event, such as the birth of a child or grandchild, you may need to update your Will to include new beneficiaries or make other changes.

3. Review your powers of attorney: Ensure that your powers of attorney for financial decisions and advance care directives are up-to-date and reflect your current wishes.

4. Keep your estate plan organised: Keep a copy of your estate planning documents in a safe place, and provide copies to your executor, trustee, and other relevant parties.

Why it’s Important to Have a Financial Adviser

A financial adviser can be valuable in reinforcing these estate planning steps, providing expert guidance, regularly reviewing and updating your estate plan, and helping to ensure that your loved ones are financially cared for after your passing. 

They can help create a comprehensive plan, including a Will, Trusts, powers of attorney, and other legal documents and instruments, to manage and protect your assets.

By working closely with a financial planner in your estate planning process, you can help ensure that your wishes for the financial security of your family are carried out according to your plans.

Ready to Create a Legacy? 

It doesn’t matter whether you’re young or old. If you have any accrued personal wealth or have people who financially depend on you, you should have an estate plan. 

It’s essential to update your estate plan regularly to ensure that the right money goes to the right people at the right time. 

At Coastal Advice Group, we can work with you and your solicitor to formulate an estate plan that is thorough and works to maximise the financial benefits to your family and beneficiaries.  

Call us or book online to secure your initial meeting with us today and get started! 





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