I am currently at the stage of life where I seem to spend every second weekend attending a baby shower. Planning for the arrival of a baby is a busy time and most first time mothers have long lists of things to do or buy. Given the significant change in family circumstances, estate planning should be added to the pre-birth to-do list. If you do not already have a Will that provides for your children, then expecting a baby is a critical time to think about your estate planning.
A Will sets out who is to receive your assets after your death. If you do not have a Will, then the law provides a formula (called the ‘rules of intestacy’) for how your estate is to be divided between your family members. In the ACT, if you are survived by both a partner and children, then your estate will be divided between them and your partner will be required to hold some of your assets on trust for your children until they become adults. This can cause huge problems for the surviving partner, who in most cases needs access to all available funds to help make ends meet after losing the income of the deceased partner. If you want to make sure your partner receives everything on your death, then you should make a Will specifying this.
In addition to dealing with the ‘who gets what’, a Will has the important function of nominating key decision makers, in particular, executors and guardians.
Your executor is the person who has the job of carrying out the terms of your Will. You can have multiple executors, in which case they must act together. The executor is responsible for securing your assets, making sure all your liabilities are paid, and distributing your estate to your beneficiaries. If your children are still minors, then it is the executor’s job to hold their inheritance on trust until they turn 18 (or whatever later age is nominated in the Will). While looking after the trust funds, the executor decides how the inheritance is invested and can release money for your children’s education and maintenance. The inheritance can only be used for the benefit of your children, but your executor controls the purse strings until your children become adults. The desirable qualities in an executor are that they are trustworthy, reliable, and organised.
If you have young children, then you should nominate a guardian to look after your children in the event that both their parents have died. The guardian makes parental-like decisions for the care and welfare of your children. The guardian can make choices such as: the medical treatment of your children; how your children spend their time; where your children go to school; and whether your children are raised in a particular faith. Nominating a guardian can be a tough decision. You should choose someone who is respectful of your wishes and who you trust to make decisions in the best interests of your children. It is a good idea to talk to your preferred guardian to make sure they are comfortable with taking on that role if required.
At the same time as making your Will, it is wise to put in place an Enduring Power of Attorney, which will nominate someone who can make decisions for you in the event that you become incapacitated in the future. This will mean that someone can decide where you live and what medical treatment you receive, as well as being able to deal with your finances to ensure that your children’s needs are provided for while you are unable to act for yourself.
Estate planning is an essential part of caring for your loved ones. Anyone who has children, or is planning for children, should have a Will and Enduring Power of Attorney.