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Is estate planning the same as a will? Should I consider estate planning?

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What would happen to your assets, family and loved ones if you were to lose your mental capacity or pass away? If you are considering this question, chances are, you should consider estate planning. 

You might think that because you are young and healthy, or you have few assets, you don’t need to worry about estate planning. However, nearly everyone has either estate or non-estate assets. These might include:

  • Real estate
  • Cars
  • Bank accounts
  • Shares
  • Personal belongings
  • Superannuation
  • Life insurance
  • Digital assets (such as followers on social media, streaming subscription service accounts, copyrights in photos, videos and music you have created,downloaded or purchased online).

Alternatively, you might think that because you don’t have any dependents or family that you don’t need an estate plan. But who would make important decisions about your finances, your personal care, your medical care if you were injured or became unwell? Who would decide whether medical care (such as life-support) should be withdrawn on your behalf? Would these decisions cause a dispute amongst your loved ones?

Making a plan about what will happen to your assets when you pass away or lose capacity is a crucial step in properly managing your estate. When you have the right strategies in place, you will have peace of mind knowing that your assets will be distributed the way you want upon your death, and that you will be looked after in the way that you would like if you lose the ability to make decisions for yourself. 

What is estate planning?

In a nutshell, estate planning is the process of making sure that everything you own or control will go to who you want it to go to, or be looked after by who you want, if you die or become incapacitated (i.e., through accident or illness). 

Is estate planning the same as a will?

An estate plan nearly always includes a Will, but a Will isn’t always enough. Estate planning is a broader concept that involves the consideration of:

  • What sort of assets you have now and may have in the future;
  • To whom you might be responsible to provide;
  • How to minimise the risk of a dispute;
  • How to transfer ownership or control of estate and non-estate assets to their intended recipient in the simplest and most tax-effective way;
  • Who are the right people to look after your estate and non estate assets after your death?; and
  • Who will make important decisions for you if you can’t make decisions for yourself.  

Not all of your assets can or will necessarily be dealt with by your Will. A good example of this is superannuation, which is not automatically an estate asset that can be dealt with by your Will, or jointly owned property, which would pass to the other owner regardless of what you say in your Will. Non-estate assets require careful consideration as part of the estate planning process. 

Estate planning can also involve consideration of non-estate entities that you have an interest in, such as a company, a family trust or a self-managed super fund. These kinds of entities, which are yours or you have an interest in, are not necessarily covered by a Will.

So in addition to a Will, a good estate plan may include:

  • an Enduring Power of Attorney (to appoint your substitute decision maker/s and what decisions can or can’t be made by them);
  • Superannuation Binding Death Benefit Nominations (to ensure your super benefits are received by the intended recipients);
  • Beneficiary nominations (for life insurance policies); and
  • Other trust or company documents as required. 

What are the main steps in estate planning?

People often come to us for estate planning because they have reached a point in their life where they feel they need to make plans about their estate. Perhaps there is illness or perhaps they have just started a family. Sometimes they come to us when they have acquired significant assets or there may have been a significant change in their life such as a relationship breakdown.

The first step when we meet with you is to find out what you want and develop a thorough understanding of your objectives. This might be simple or it might be complex.

The next step is for us to take a good look at your financial situation in terms of your assets, liabilities and non-estate assets such as superannuation. We will also take a look at your family tree because that is a key element in planning to minimise disputes. We want to know what the relationship will be like between your family members, who you value or dislike, who is vulnerable and who has special needs or dependencies. This will help us identify where things could get messy for your estate and where relationship or communication breakdown could occur. This is an information-gathering phase which is primarily about understanding property and family relationships.

Next, we will make recommendations and provide you with advice about what documents or services you need to achieve your estate planning objectives in an effective way while avoiding pitfalls. At this point we know what your objectives are, what your finances and family looks like and we have identified where things could go wrong and can avoid or otherwise manage any of the risks that might be present.

We will then prepare the Will and any other required documents for your review and consideration. You may wish to consult with us for further advice, or make changes. 

Once you are happy with the documents, we will meet with you again to ensure that they are correctly signed and witnessed. 

Common missteps – the DIY Will

It is unfortunately common for individuals to feel confident about documenting their intentions without realising the limitations and risks involved. Regrettably, it is often only after the Willmaker passes away that people realise that elements of a will can not eventuate, that gifts in the Will have failed, or that there are many ways in which a Will can be contested.  Even for a simple estate, there are significant traps that DIY willmakers can fall into. This can result in costly litigation which causes significant financial loss to the estate and causes irreparable damage to relationships. 

When do I need to update my estate plan?

There are some key moments in your life when you should consider whether your estate plan is up to date and relevant. These might include:

  • A change in your relationship status (marriage, separation, divorce etc)
  • The birth or death of a family member or someone named in your Will or EPOA
  • A significant change to your financial situation (acquisition or disposal of a significant asset, starting a business, a new superannuation fund)
  • A change to your structures (companies, trusts)

Sometimes, no change will be required. Other times, a simple change or update is all that is required to ensure that your estate plan and associated documents still fit your situation and objectives. We can help you review and make any necessary changes to ensure that your Will, Enduring Power of Attorney, and any other estate planning documents,  continue to fit your needs and goals. 

Related: Who can make a family provision claim – ACT & NSW 

When superannuation doesn’t end up with the people it was intended for: blended families & government super

The DDCS wills and estate planning team are highly experienced and specialise in helping people navigate issues like these. To discuss your circumstances, phone our team on (02) 62127600 or fill in the contact us form and our team will be in touch.