The odds are that if you have chosen to read this and it’s a topic of interest, you’re well-informed, someone who already has a pretty sound idea of what good estate planning can deliver, and the key tools that exist within a succession lawyer’s armoury.
But even so, sometimes there are simple tips and traps that are forgotten. Even more relevantly, as succession law is quite rapidly evolving, even the best of us can continue to learn.
We aim to keep it simple. Estate planning, at its essence, is about putting the right plan in place to ensure assets and wishes for those around you are properly taken care of after you’ve passed away, or dealt with appropriately if you lose mental capacity. Estate planning helps ensure you and your loved ones are protected and looked after when you are no longer around or competent, and that your precious assets are distributed to the right people for the right reasons, at the right time and with optimal benefit and maximised outcomes.
On the flip side, the perils of having poorly drafted estate planning documents such as an inadequately considered Will, or simply no estate plan in place at all, creates a fertile ground for protracted and expensive litigation, family heartache and a disastrous legacy no one deserves to leave behind.
What estate planning documents should be in your essentials toolkit?
The Will
The centrepiece of an estate plan is almost always a Will, but rarely the only piece.
The Will records intentions and instructions on what happens to your worldly goods when you die, who is in place to look after children, and how business interests are carried on, and a thousand other things. Wills should be formal to comply with the legal requirements in the Wills Act, but in recent years informality has been allowed. Informal Wills, that is, ones that don’t comply with the formalities dictated by the Wills Act, come with extraordinary risk and are not to be relied on. They are seen as the Will of last resort, notes written on iPads, sometimes diary pages and the like.
There is no one-size-fits-all when it comes to the drafting of a Will. The considerations and complexities must match those of each client’s unique circumstances. Wills should be reviewed every few years, particularly on the back of marriage, divorce, births, beneficiary or Executor deaths, relationship breakdowns, new partners, significant changes to asset structures or quantum of wealth, growing superannuation pools or superannuation insurances, and of course any serious medical diagnoses.
Testamentary Trusts
Known by their shorthand in the legal industry as TTs. In simple terms, a Testamentary Trust is no more than a Trust set up on death. But within this simple idea is a world of possibility. These Trusts are routinely used for asset protection and tax effectiveness, or more rarely, to ‘rule from the grave’ and control beneficiaries. The benefits are often seen when protecting wealth against high-risk beneficiaries, with risk seen coming in the form of shaky partner relationships, high-risk lifestyles, precarious businesses or dependency issues.
Young children also significantly benefit, allowing clients to delay wealth transfer from the minimum of 18 years old (when the law determines a person to be an adult) to much later in life when the wealth is far more likely to be protected and children have had to learn critical lessons on independence to set them up well for tomorrow.
Trustee choice is obviously critical here, and we have a raft of considerations we walk through with each client to ensure the right Trustees and suitable checks and balances are in place. For family members living with a disability, a Protective Trust or a Special Disability Trust can also be established, delivering incredible value and peace of mind.
Power of Attorney
The Power of Attorney is an estate planning document created to appoint someone to stand in your shoes, legally speaking, to make financial and legal decisions for you while you are still alive. The most common variant is the Enduring Power of Attorney, with the difference being that an Enduring Power of Attorney continues to work even if you lose mental capacity, whereas a regular Power of Attorney stops working if you lose capacity.
In both cases, the value is in being able to choose who handles your affairs, rather than leaving it up to the State Administrative Tribunal after what is usually a hotly contested hearing. It’s vital to remember that this document only works during life and ceases to have any power once you have passed away, at which point the Will takes over. The Power of Attorney is an incredibly practical and useful document, and a very powerful one, with the potential to be very dangerous if the wrong person is appointed.
The Power of Attorney is known as the most abused legal instrument in Australia because there are clear risks involved. The most obvious risk is that the wrong person is appointed and they abuse the power by enriching themselves. This is surprisingly common, as some people simply cannot resist the temptation of being left with the keys to the bank vault with no one else looking over their shoulder at what they are doing.
This is particularly problematic for the elderly and is common enough that a term has even been coined for it, known as ‘strip mining’. This practice often starts with someone using their elderly parents’ bank card for all the wrong reasons at the ATM and then progresses to transferring land, property and shares to the point that the elderly person effectively ends up owning no assets at all.
Myths are also prevalent here. Many people believe that a Power of Attorney gives them the right to start doling out early inheritances to family members. It does not, unless very specific instructions have been given to make it happen, which is rare.
As a result, this is a key area of consideration for clients, especially as we are ageing as a population and the likelihood of mental capacity being more visible is higher than ever. Sometimes we craft very niche and specific Powers of Attorney with cascading lists of Attorneys in case anyone cannot do the job. Some Powers of Attorney have restrictive powers, limited to certain bank accounts or actions, rather than just giving carte blanche to a person.
An Enduring Power of Guardianship
Similar to an Enduring Power of Attorney, but this estate planning document allows you to appoint a person to make lifestyle and some health and medical treatment decisions for you in the event you have lost capacity and cannot make them yourself.
Rather than leave it up to fate as to who has this very significant power, you can take the bull by the horns and put the right person in the job. Again, the choice of who you make Guardian is critical. Put the wrong people in the chair and the decisions made could be quite opposite to what you actually wanted, with one of the biggest decisions they get to make being where you end up living. It’s not uncommon for some beneficiaries to want to put an elderly parent into the cheapest accommodation available so that it won’t eat into their inheritance.
An Advance Health Directive
Colloquially known as a living Will, this estate planning document allows you to make certain health and treatment decisions yourself, in advance, for when you are unable to communicate your wishes in the future.
Unlike a Power of Guardianship, you are not giving the decision-making power to someone else, but setting down your own particular wishes and requirements. This is particularly important for non-resuscitation type decisions, or for those people with religious or cultural views that impact on the sorts of treatment they can receive. It is not a document to be entered into lightly and requires certainty of mind and a strong philosophy. We tend to write many of these for doctors and medicos here in Perth, or people who have seen the grim reality of a body being kept alive for many years despite there being no possibility of meaningful recovery, with no quality of life but at enormous financial cost and drain on resources.
The right time is now
The best time to plan your estate is before it’s needed. Taking action now means creating certainty, preventing future conflict, and preserving your legacy for the people who matter most.
Don’t leave it to chance. Talk to our experienced estate planning lawyers today and let us help you put the right structures in place with confidence and care.
