EP FAQ Part 1: What is estate planning and what do you need to consider?

FAQ: Why do you need your EP and what do you need to consider?

Welcome to our EP FAQ series, where we’ve gathered up some of our most frequently asked questions (and answers!) about estate planning. This series is perfect for anybody thinking about completing their estate planning documents for the first time or individuals who would like a easy to read refresher on some estate planning concepts. Ready? Let’s dive in!

What is Estate Planning?

Estate Planning involves creating a comprehensive plan for the distribution of your assets, properties, and wealth after you pass away. It’s a strategic way to ensure that your loved ones are taken care of and that your wishes are followed even when you’re no longer here. 

Your estate planning documents are the key to ensuring your estate is managed smoothly and in accordance with your wishes. Your Enduring Power of Attorney and Care Directive/Guardianship documents come into effect if you lose capacity (being the ability to make legal or medical decisions for yourself) – we talk about the documents a little later in our EP FAQ series. After your death, your Will directs when and how your estate assets pass to the people you have selected to benefit from all your hard work, being your beneficiaries. The Will might also include some directions about the ongoing control and administration of certain assets. 

Depending on the complexity of your affairs, your estate plan may require additional documents to deal with assets held in self-managed superannuation, trusts and companies.  

Why do I need to think about Estate Planning?

Estate planning is not just for the wealthy or the elderly. It’s for anyone who wants to have control over what happens to their assets, their dependents, and their legacy. By creating a well-thought-out estate plan, you’re ensuring that your family’s future is secure and that your hard-earned assets are distributed according to your wishes.  

What kind of documents might I need to establish?

Depending on your circumstances and location, the documents you need may be different. 

The standard estate planning documents that we think everyone needs are: 

  • A Will. Your Will is a legal document with instructions for who you want to inherit your estate, care for your children and be the executor of your estate. 
  • A Power of Attorney. A ‘Power of Attorney’ is a legal document which appoints one or more persons to look after your financial affairs on your behalf while you are still alive. Powers of Attorney come in several types. 
  • An Appointment of Enduring Guardian, sometimes known as a medical directive or Advance Care Directive (depending on your location).  These documents give someone else the right to make decisions about your welfare or medical treatment in the event that you are no longer able to make these decisions yourself. 

Each of these documents serves a specific purpose in safeguarding your assets and ensuring your wishes are respected. 

Have we convinced you? We’d love to help you get your estate planning in order. Call us on 1300 654 590 or email us to get started.

What happens if I die without a Will?

If you die without a valid Will, then your assets will be distributed according to the laws of intestacy.  Each state and territory has its own rules about who is entitled to receive some or all of a person’s estate. This is often not what the individual intended. For example, a former spouse or estranged child may be entitled to receive some or all of an estate assets to the exclusion of other family members. 

Another problem is that your relatives will need to apply to the Supreme Court for the right to deal with your assets and distribute them according to intestacy rules. If you have children who are under 18, then disputes may arise as to who should have legal guardianship over your children. This also has to be resolved by way of Court application. 

By putting in place a valid Will, you have the ability to make your wishes clear and ensure that your estate is administered as you intend. 

What happens if I lose capacity without an Enduring Power of Attorney or medical directive?

If you lose capacity without a valid Enduring Power of Attorney or medical directive, then a family member or friend has to apply to the State or Territory Civil and Administrative Tribunal in order to obtain a financial management or guardianship order over you. In doing so, they have to show the Tribunal that they are appropriately positioned to take care of your financial, legal and medical affairs.  

By completing these documents while you have capacity, you ensure that somebody you trust is appointed to make financial, legal and medical decisions on your behalf and save your loved ones the stress of having to make a Tribunal application.  

When should I update my EP documents?

Estate planning isn’t a one-time event. Life is dynamic, and your circumstances may change over time – like getting married, getting divorced, having children, acquiring new assets and starting, buying or selling a business. It’s a good idea to review and update your estate planning documents whenever significant life events occur. 

Otherwise, we recommend that people update their estate planning documents every 3 to 5 years. In between updates, people should regularly review their documents as an estate planning ‘check-up’. We suggest people review their documents annually. 

Why should I update my EP documents?

Updating your estate planning documents ensures that your plan stays current and relevant to your life’s changes. Outdated plans might not accurately reflect your wishes or account for new assets or family members. By keeping your plan up to date, you maintain control over your legacy.  

Big life changes can affect your estate plan. For example, a Will (or parts of it) can be voided by marriage or divorce (unless specific wording is included to prevent this) so you could be left intestate if you do not update after these events. However, in the case of separation, a Will stays in place until it is updated.  

Other significant changes in your personal or financial situation will usually give rise to a need to update your estate planning documents. For example, buying or selling your home or changes to your family. 

Another significant reason to update your estate planning documents is if there have been any significant changes in the law. 

In need of an estate planning update?. We can help. Call us on 1300 654 590 or email us.

What do I need to consider?

A comprehensive estate plan takes into account who is in control of your affairs in the event of your death or incapacity, how you want your assets distributed upon death, guardianship of minor children, and even your healthcare wishes. 

When commencing the estate planning process, you should think about things like: 

  • What assets do you own? 
  • How do you own them? 
  • What do you want to do with your assets when you die? 
  • Who do you want to be responsible for administering your affairs after you have died? 
  • If you have children under 18, who will look after them? 

These questions are a useful starting point. When you are ready to see a solicitor, they will ask you more detailed questions to obtain your instructions and shape your estate plan. 

What does ‘legal capacity’ mean?

Legal capacity refers to your ability to make informed decisions and understand the consequences of those decisions. To create valid estate planning documents like a Will or Power of Attorney, you must have the legal capacity to understand and consent to these documents. If it is not clear whether a person has capacity to make their estate planning documents or if their capacity is in doubt, then they will usually be referred to a medical professional to obtain an assessment as to their capacity before their estate planning documents can be prepared. 

More questions about your estate planning?

Check out the rest of our EP FAQ series:

 

The information contained in this post is current at the date of editing – 25 September 2023.

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