Estate Planning

What is Estate Planning?

To most people, Estate Planning is simply making a will to ensure that their assets don't fall into the hands of the Government when they die. Estate Planning however includes much more than just making a will.

Estate Planning is organising your affairs so that you maintain as much control as possible over your assets while you are alive, so that you, and you alone, determine what becomes of your assets when you die.

Some people are put off the planning exercise because they feel that it is all accounting "gobbledegook" and "legalese". It doesn't have to be that way. Skilful advisers can ensure that you are properly protected and that you understand the structures that you have put in place.

The first step in Estate Planning is to decide who you want to benefit from your Estate. Different individuals will have different family situations and different views on who their beneficiaries should be. It is wise to get advice on such issues and such advice should address contingencies such as Capital Gains Tax, for example.

Blended families are now quite common. With second (or third) marriages people have more responsibilities to consider. To some degree, it does not matter how your estate is divided. What is important, though, is to utilise the appropriate method of dealing with your estate to ensure that the end result is that which you wish to achieve.

The second step in Estate Planning is to decide what control should be given to beneficiaries who have assets left to them. This control can be outright or can be governed by other people or institutions in the form of a Trustee. It is not uncommon to vest the assets or funds in the name of Trustees until beneficiaries reach a certain age. Hopefully, this ensures that the beneficiary has enough maturity to be able to handle the assets wisely and not have all your hard work wasted.

There are no "hard and fast" rules regarding what controls you give to your trustees. Each case must be treated according to the desired end result. The tools and machinery used for achieving your end result will vary greatly however basically fall into the following categories:-

Last Will and Testament

This is an essential tool for everyone, if for no other reason than it can often save considerable expense and difficulties in winding up your Estate. You may not consider that you have a lot of assets however you may need a Trustee to call in an insurance policy, for example.

Wills should be updated regularly. Nearly everybody has some major change in their life or situation every three to five years. Changes can include the death of a Trustee or Executor or the marriage or death of any one of your beneficiaries. Unfortunately there are also divorces and bankruptcies to consider.

Gifting

Gifting is an effective way of distributing one's estate during one's life. No gift duty is chargeable however there are restrictions on the amount capable of being gifted in any period imposed by the Department of Social Security. Often times the gifting of one's estate can ensure that you maintain your asset level below the threshold for pensions and/or medical benefits. These benefits can often be more use than the money itself.

Ownership of Property

Most married couples own property as joint tenants. This means that if one spouse dies, the survivor assumes ownership of the entire property, regardless of the contents of the will.

Insurance

The insurance industry has recently undergone great change. People need to consider as part of their Estate Planning whether they are sufficiently covered for sickness, accident or trauma cover and even basic life cover. Insurance is a very versatile tool which can be used to ensure the payout of debts so that assets can be divested to the beneficiaries free of charge.

Powers of Attorney

Enduring Powers of Attorney give other people the power to deal with your assets during your lifetime. They are utilised in situations where people may be suffering from Alzeimers Disease or any physical or mental disability which restricts them from acting on their own behalf. These are not just for older people. Unfortunately younger people are also prone to car accidents and the disabling injuries that flow from them. You should remember that the Trustee or Executor of your Will only has power to act when you die.

Advance Health Directives

Introduced in 1998 an Advance Health Directive is a method of stating what level and type of medical care and support you will require in specific situations. (See our brochure specifically on this subject.)

Business Planning

Just as one plans the growth of a business whilst you are alive, you should also plan to protect the business should you suffer some infirmity or die. Often times sole proprietor's businesses represent one of their largest assets and yet one of the most difficult to sell. There are various arrangements such as Buy Sell Agreements, Key Man Insurance and/or the holding of shares in trust which can be utilised. This ensures that business continues for long enough to enable it to be realised and the funds handed to beneficiaries. One should also consider whether a business is to be transferred to a beneficiary in its entirety, thus allowing succession of a family interest.

Remember.

Estate Planning is not just about planning your estate should you die. Rather, it is about being prepared for any challenge that might affect your ability to control your own assets.

As an incidental benefit there can often be considerable savings in tax of both a revenue and capital nature by the careful planning of one's estate. There is no right or wrong way to plan your Estate. The only mistake that you can make is to allow your Estate to be dissipated by taxes, costs and charges due to lack of attention to planning.