What is Estate Planning?

Estate Planning is the process of working out, with the aid of your advisors:

  • how you can ensure financial security for you and your family whilst you are alive; and
  • choosing the best options to provide for your beneficiaries to inherit from your estate after you have died.

What is involved in Estate Planning?

Estate plans should be tailored to meet each person’s individual needs. Typically, the process will involve the following:

  • Getting an overview what your goals and objectives are for the remainder of your life and for after you die.
  • Getting an understanding of your what you do in your life and what your assets and liabilities are. It is important to see what assets or wealth you own that can be passed on as an inheritance under a Will and what will not. Superannuation, properties co-owned as joint tenancies, businesses or investments held in Companies or Trusts will not necessarily be able to pass to beneficiaries through your Will, so working out how to pass such assets to your beneficiaries requires particular attention.
  • It is important to have a look at the Articles of Association and any shareholder agreements and other documentation relating to the conduct of any companies or trusts that hold assets for you or in which you have an interest.
  • Looking at the financial and other needs of your family members and business associates and others who may be financially or emotionally affected by your death and considering how you consider those needs. Such concerns often arise in the case of so-called “blended families”.
  • Considering any particular needs or concerns regarding dependants or other beneficiaries who may be vulnerable because of things like mental or physical disabilities or psychological or emotional problems or forms of addiction.
  • Looking at ways to protect assets, if necessary, for the benefit of family members in the longer term in the event of potential problems like bankruptcy or divorce.
  • Considering ways to minimise the effect on beneficiaries of income, capital gains, or other taxes.
  • Drafting and discussing documents to give effect to each person’s estate planning goals.

This process should usually involve other advisors, such as accountants, financial or business advisors.

What is the point of Estate Planning?

The old-fashioned way to make Wills usually involved the deceased estate being left to the surviving spouse or, if that spouse had died, then for the estate to be divided equally amongst the surviving children. Although there is nothing inherently wrong with that, it can sometimes ignore ways to protect the interests and needs of the beneficiaries that can result from careful estate planning, such as the following:

  • Leaving assets to a beneficiary who subsequently has financial, or marriage problems can result in the beneficiary ending up losing the inheritance (e.g. through bankruptcy or divorce). Such risks can be minimised or avoided through good estate planning.
  • A Will can be drafted to give the beneficiary some flexibility in legally managing tax issues that may arise from an inheritance. This can help to prevent the beneficiary from inheriting unwanted tax issues that can arise from those more old-fashioned types of Wills.
  • There are ways to address concerns that can affect child beneficiaries whilst they wait until they are old enough to inherit. Wills can be drafted to address financial, educational or other issues that can arise whilst they are growing up.
  • There are other kinds of problems that can arise from the simple old-fashioned style of Wills. They may not cater for things like a beneficiary potentially losing a pension after receiving an inheritance.

Estate Planning is ongoing

The process of Estate Planning should not be seen as something you do only once. An estate plan should be reviewed and revised over time to address changing circumstances affecting family and finances. These can come from changes in the law or changes in other things like a person’s health, age, wealth, business, marriage, family composition or other life needs.

For more information on how our Wills & Estate Planning lawyers can help you with Estate Planning, please contact our team at craddock@craddock.com.au.