What is Estate Planning?

Estate Plan

By Ezra Sarajinsky

· Read time: 5 minutes

Estate planning, quite simply, is the proactive process of preparing for the management and distribution of your assets upon your passing. 

It involves crafting a comprehensive strategy to ensure your hard-earned wealth and personal belongings go to the right people and organisations, without unnecessary delays or disputes. 

Estate planning allows you to maintain control over your assets during your lifetime while safeguarding your family’s financial future and ensuring your legacy endures.

What Does a Comprehensive Estate Plan Cover?

A comprehensive estate plan covers all elements of your assets, as well as decision making delegation for your own health. It aims to ensure your entire estate is structured in such a way that on your passing it will be transmitted to those who should be its rightful beneficiaries. 

  1. Designate someone, acting as either an attorney or guardian, to handle both your financial and personal affairs in case you become incapacitated.
  2. Appoint someone to serve as an executor or trustee, to manage your estate and any associated trusts upon your passing.
  3. Structure your estate to minimise the chances of your will being challenged through a family provision claim.
  4. Shield your assets from accidental allocation to estranged partners or individuals facing insolvency or bankruptcy. Safeguard beneficiaries who may be vulnerable due to factors such as disabilities, addiction issues, or gambling.
  5. Incorporate adaptability into the distribution of assets, considering both current and future requirements of your beneficiaries. 
  6. Optimise the worth of your estate by implementing proficient tax planning measures that reduce both capital gains and the income tax liabilities that beneficiaries may incur upon receiving their inheritance.
  7. If you have a business, then designing provisions for a robust business succession plan or the orderly closure of a business.

Is an Estate Plan Different from a Will?

Your will is a crucial component of estate planning, but it is not the entire plan. 

Estate planning encompasses a broader spectrum of considerations. Which does include a well drafted will, but goes further. 

An estate plan will typically include:

  • A Will
  • Testamentary Trusts
  • Powers of Attorney
  • Guardianship decisions
  • Advance care directives
  • Life Insurance
  • Superannuation death benefit nominations
  • Burial arrangements

Core Considerations in Estate Planning

Family Structure

One of the fundamental aspects of estate planning is understanding your family structure and dynamics. 

Analyse  the roles and relationships of family members helps in tailoring your estate plan to accommodate their specific needs, as well as anyone who may make a claim on your will.

For instance, in a blended family, you might want to ensure that stepchildren are provided for. In cases where a loved one has special needs, you’ll need to create provisions to support them adequately.

Selecting an Executor and Trustee

The executor and trustee are pivotal figures in your estate plan. 

The executor is responsible for overseeing the distribution of your assets as per your will, ensuring your wishes are carried out. 

The trustee, on the other hand, manages assets you’ve placed in a trust, making decisions in the best interests of the beneficiaries. 

Your choices for these roles should be people you trust implicitly, as their responsibilities are significant.

Delegating Decisions:

Power of Attorney

A power of attorney is a legal document that authorises someone to make financial and legal decisions on your behalf if you become unable to do so. 

This provision is crucial to handle financial matters effectively in case of incapacitation, such as managing bank accounts, paying bills, or selling assets.

Enduring Guardianship

Enduring guardianship is similar to a power of attorney but focuses on personal and medical decisions rather than financial ones. 

It grants someone the authority to make decisions regarding your medical treatment and other personal matters if you are unable to do so.

Advanced Care Directives

Advanced care directives allow you to specify your medical treatment preferences in advance, ensuring your wishes are honoured in situations where you cannot communicate your choices.

Assets

Your estate plan should provide a comprehensive inventory of your assets (real estate, investments, bank accounts, and personal property), their estimated or real value, and location.

This inventory should also account for any liabilities, such as mortgages or outstanding loans.

Testamentary Trusts

A testamentary trust is a legal arrangement that becomes effective upon your death. 

It allows you to specify how and when your assets are distributed to beneficiaries, potentially providing tax benefits and asset protection. 

Testamentary trusts are particularly useful when leaving assets to minor children or individuals with specific needs.

Superannuation

Superannuation funds and life insurance policies operate independently from your Will. To ensure that beneficiaries are accurately designated, it is imperative to identify them individually with each provider. 

It’s worth noting that this might be a step you took when initially establishing your policy. 

As best practice, it should be periodically reviewed and revised as an integral part of the estate planning procedure.

Business Succession Planning

An finely crafted business succession plan offers transparency regarding the ownership of assets. It entails a thorough examination of trust deeds, the company’s constitution, shareholder agreements, buy/sell agreements, and deeds of variation. 

The primary objective is to ascertain the individuals or entities that will assume control of these structures when the business owner departs. 

In family businesses, this becomes even more critical, especially when younger generations within the family aspire to take charge of the company, often alongside non-family business partners.

Wrapping Up

Estate planning is a comprehensive and strategic process that goes beyond just having a will. It involves understanding your family dynamics, appointing the right individuals to oversee your estate, and making important decisions regarding assets, trusts, superannuation, and business succession. These considerations are vital to ensure that your legacy is preserved, your loved ones are provided for, and your final wishes are honoured. 

Movement Legal can help you with your estate planning. Get in touch to speak with a team member. 

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