Like the name suggests, and estate plan or will is your plan for what happens to you and your assets when you die. It may sound morbid, however an estate plan is a crucial part of financial fitness and because if you do not have a will, your assets will be distributed based on the laws of you state and this may not have the desired outcome. Also if you do not have a will it will be more complicated for your loved ones when you die and they will have the pressure of making decisions on your behalf as they are grieving.
A will can set out:
What your funeral wishes are – This can include how you would like your body dealt with, for example burial in your preferred cemetery or having your ashes scattered in the sea
How your assets are divided – Who gets your assets, this could be one person or many people, it could also include entities such as charities. You can include details on how to deal with specific assets (such as a house) and also consider alternative recipients if the original recipient is unable to receive the gift.
Conditions around any of your gifts – You can lay out conditions for your gifts. For example you may wish to give assets to children and only give them access to it once they reach a certain age.
Create new entities – you can create trusts using your will to hold part of your estate for specific purposes. Using the example of children a trust could be established with the children as beneficiaries so that the money is managed and protected until the children are older.
Who will execute your will – You executor will be responsible for ensuring your wishes in the will are carried out. You will need to specify your executor in your will. It can be a close relative or friend or alternatively it can be a professional such as a lawyer or a trustee company.
Separate to the will, but equally important for financial fitness is consider how your wishes could be carried out if you were unable to do so due to injury or illness.
Enduring power of attorney – you can appoint someone (much like an executor of your will) to act in a financial capacity on your behalf. The enduring power of attorney will only activate if you are unable to act yourself. Whilst it may not be binding in the same way as a will, you can leave instructions or discuss with the person that you appoint the principles that you would like them to apply when making decisions on your behalf.
If you do not have an enduring power of attorney it can be very difficult for your partner/family to access any of your money if you are incapacitated. Often they will need to apply to state authorities and complete a hearing to get access which is time consuming and stressful.
Guardian – you can also appoint someone specific that you would like to make any medical decisions on your behalf. It is important that you have discussed your wishes with the person that you appoint so that they can carry out your instructions. If you do not have a guardian medical decisions will usually be made by the next of kin.
It is possible to purchase DIY will kits some that also include enduring power of attorneys online [note: could not find will kits at Australia Post] and this is better than nothing. You can also seek professional advice to complete your will and this is advisable if you have significant assets or more complicated personal circumstances (children from a prior marriage etc).
The most important thing is to ensure that your will is correctly executed and discuss your wishes with those that you have appointed as executor/guardian/attorney. Also let people know where your most recent will can be found and keep it updated following significant life events.