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Estate planning: The four documents you need to have

Money Tips

What happens to our assets after we depart this mortal coil isn’t a subject we tend to enjoy pondering for longer than is absolutely necessary.

And, while many of us have a will (whether it’s an up-to-date version is another matter), that is only one of four key things a well-prepared person will have in place, says Crystal Wealth Partner’s executive director John McIlroy.

“The majority of our clients will have a will,” says John. “However, it’s quite unusual for people to have everything they should have in place and done properly.”

So, here are the four key pieces of information you need to have to ensure your estate is managed as you see fit – both while you’re here, and when you’ve gone.

Power of attorney for financial matters
A power of attorney gives a trusted person the ability to act on your behalf – in this instance for financial matters.

“People immediately think of a power of attorney being used in cases of illness,” says John. “However you may be on an extended holiday and need a document signed, or may need to arrange a funds transfer. Having someone who can act on your behalf in relation to financial matters is important.”

Power of attorney is usually granted to a spouse, relative, child or trusted friend. Keep in mind that, if you do appoint your spouse, it’s a good idea to have a back-up person with authority too, if your spouse is unavailable – holidaying with you, for example.

Power of attorney for medical matters
This enables someone you trust to make decisions about your medical care and accommodation on your behalf.

“Usually, this will come into effect if you’re incapable of making those decisions yourself,” says John.

“As an example, my daughter is an experienced nurse, and she acts as my medical power of attorney. She’s the best-equipped person to be making medical decisions for me.”

In some states, you can have one power of attorney covering both financial and medical, in others you need separate documents.

“Each state has its own set of laws regarding powers of attorney and estates,” says John. “So you need to be aware of the rules of the state in which you live.”

Superannuation beneficiary
Within your superannuation fund, you can nominate who you want your benefits to go to in the event of your death – usually, your spouse if you have one.

However, you also have the choice of making it binding or non-binding. Binding means the trustee of the fund has to follow your instructions – non-binding means it’s down to their discretion whether to follow the instruction or not.

“We believe it’s generally more advisable to set up a legally binding nomination, so it’s evident who the money is to go to,” says John.

“We’ve seen some unusual situations where you would have expected the trustees of super funds to pay money to someone, but they’ve elected to pay it to someone else. It’s better to remove that uncertainty with a legally binding nomination.”

Your will
Of course, the will. As well as deciding who you’re going to leave your assets to, you need to decide who will be the executor of your will – again, a trusted person, usually a spouse, child or children.

“Over the last few years, an increasing number of people are asking for someone independent to act as an executor – generally to avoid family disagreements,” says John.

“We are frequently asked to be co-executor on our clients’ wills, for both this reason and to ensure there’s someone involved who is familiar with their financial situation.”

There’s also the option of appointing a public trustee. However, John says fewer people are taking this option today.

If you are considering appointing your child as an executor – and you have more than one offspring – John advises appointing them all, or none at all.

“There have been several cases where someone appoints one of their children as an executor, and they are subsequently accused of favouring themselves rather than acting fairly. The lesson is to have all of your children as executors, and that way they have to agree.”

In addition to who gets what, it’s important to decide when they get things – particularly money. And this is where testamentary trusts come in.

“The tendency seems to be that people are feeling that their children are more capable of handling what can be decent sums of the money at an older age,” says John.

“In the past, people would have said, ‘When the child’s 21 they can have the money.’ Now, people tend to say 25 or 30.”

Overall, having these documents in place ensures your wishes are adhered to after you pass.

“If you don’t have a will, it doesn’t mean the estate’s just going to end up with the government,” says John, “however it will go through a pecking order – if you’re married it’d all go to your spouse; if you don’t have a spouse, it’d be divided between your children.

“There are some basic provisions there. However, it’s better to express your wishes in these documents rather than being intestate, and having to fall back on the various state laws.”

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