Australia: Is your Estate Plan up to scratch?

The importance of having a Will is fairly well understood – we all know that we need one in order to ensure that our assets are distributed in accordance with our intentions upon our death.

Unfortunately, there are other aspects of estate planning often overlooked, which can be broadly summarised as:

  • Those "lifetime" estate planning documents which focus on looking after you and your affairs during your lifetime; and
  • Dealing with assets of "yours" which may not be able to be dealt with through your Will.

Lifetime Documents

The "lifetime" documents are your Enduring Powers of Attorney (EPA), Enduring Powers of Guardianship (EPG) and Advance Health Directives.

The two Enduring Powers enable you to appoint a trusted person, or persons, to make decisions on your behalf, in specific circumstances.

By making an EPA, you can appoint a person (or persons) to act as your attorney. An attorney has the power to make decisions in relation to your financial and property affairs.

You can personalise your EPA to suit your particular circumstances.

Some people (called "donors") choose to appoint their attorney so that the attorney has the immediate authority to act on their behalf. This can be quite useful in instances where the donor is overseas, or physically unable to do something.

Alternatively, some donors choose to limit the attorney's authority, so that the attorney only has the power to act if the donor loses their legal capacity and is unable to make decisions regarding their financial affairs.

It is commonly misunderstood that an attorney appointed under an EPA can make decisions regarding their donor's medical treatment and lifestyle. This isn't correct – it is a guardian appointed under an EPG who can make these decisions.

A properly appointed guardian can choose whether their donor has a particular medical treatment, or whether the donor is going to move into a nursing home (for example).

If it doesn't suit you to delegate a decision regarding your medical treatment to another person, you now have the ability to make an Advance Health Directive (AHD). Within this document you can elect whether you consent or refuse to particular medical treatments, in particular instances. For example, people with certain religious beliefs or terminal illnesses may have views about the medical treatments they wish to receive, and by making an AHD they can ensure that they have control over such treatments.

By making an AHD you can ensure your wishes will be followed by your medical practitioner, in the event that you are unable to make, or voice, those wishes.

Not all of the lifetime documents will suit everybody. It is important however, that everybody considers whether it is something that would be useful to them, and their affairs.

Assets That Fall Outside Of Your Will

As one of your biggest assets, it is important to factor your superannuation into your estate plan.

Superannuation will not automatically be dealt with by your Will.

How your superannuation will fall upon your death will vary depending on what type of fund your superannuation is held with, the terms of your fund's trust deed and who you leave behind.

More often than not, you will need to distribute your superannuation entitlements by a "death benefit nomination". Through this document, you will be able to forward your entitlements to your estate, or directly to particular people. However – be warned – not all superannuation trust deeds have the same requirements for binding nominations and unless the requirements as set out in the deed are strictly adhered to, the nomination might be ineffective. In the recent 2015 case of Munro v Munro [2015] QSC 61, the Supreme Court of Queensland considered whether a nomination was valid. In this case the deceased had completed a death benefit nomination form stating that his superannuation entitlements were to go to "trustee of [his] deceased estate". The trust deed and the legislation (Superannuation Industry (Supervision) Act 1993 (Cth)) both required the nomination to be made either to the deceased's dependants or to his "legal personal representative". Because there is a different between a trustee of a deceased estate and a legal personal representative, this nomination was found to be invalid.

Mr Munro's unfortunate wording demonstrates how critical it is to ensure that you have properly completed your binding nomination.

Separate to superannuation entitlements, some people have assets within trust or company structures. These assets might feel like they belong to you, because you paid for them and you have always been the person in control of them, however – they may not be yours. When you pass away, these assets will carry on in those trusts or companies, and they will not fall within your estate and will not be distributed in accordance with your Will.

What you are able to control in relation to these types of structures is – who you are going to leave in control in your place. Every trust and company will have a different set of rules that will guide how you can nominate a successor controller, so there is no one answer.

It is important to get proper advice to ensure that you can be confident that your estate plan will result in your dependants and the people who you wish to provide for, being adequately protected.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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