ESTATE PLANNING AND POWERS OF ATTORNEY

WILLS

A will is a legal document allowing you to direct the way in which your assets will be disposed of after your death. An existing will remains in force unless a new will is made or the testator (the person making the will) marries (or remarries) or is divorced. In order to be valid, a will must be in writing, signed by the testator and properly witnessed by a person who is neither a beneficiary, nor the spouse of a beneficiary under the will.

Therefore when preparing a will, you should consider who you would like to receive all or part of your estate when you die, and who will benefit if any or all of your beneficiaries should predecease you.

You should also be aware of the impact of capital gains tax upon deceased estates. Any assets sold by your executor could be subject to capital gains tax, which may reduce the amount paid to the beneficiaries. If assets are transferred to beneficiaries after your death, then they may have to pay capital gains tax when they eventually sell the assets. Capital gains tax is explained more fully below in the taxation section.

Once your wills have been drawn up, it is essential that they be reviewed on a regular basis.

Executor
The executor is the person who has the legal responsibility to ensure that the instructions in the will are carried out. It is therefore important that your executor be someone who understands your wishes and has the capacity to see that they are carried out. It is also important to nominate an alternative executor in case your chosen executor predeceases you. The executor has a number of responsibilities including obtaining probate, paying debts and taxes, compiling financial statements and distributing assets to the beneficiaries.

Beneficiaries
A beneficiary is any person whom you wish to benefit from your will. For example, you can leave specific items of property or investments to specific individuals either within or external to your family.

Trustee
The executor of your will is also the trustee of your estate, however it is possible to appoint additional trustees as well. The job of the trustee is to implement the terms of your will by making distributions to beneficiaries and ensuring that any investments of the estate are appropriate and according to any guidelines that you wish to establish. Funds can be held in trust for beneficiaries who are incapacitated or minors.

Testamentary Trusts
A testamentary trust is simply a trust established by a will. This means that part or all of your assets need not be distributed after your death, but can instead be held in trust for specific beneficiaries under your will. This means that the testamentary trust could be used as means of providing income to certain beneficiaries. If those beneficiaries are minors, they will not be subject to the usual punitive levels of tax (at rates up to 66%) normally paid by minors.

A testamentary trust also provides a safe haven in the event of bankruptcy as its assets are not accessible to creditors. Furthermore, assets held in a testamentary trust are not counted under Centrelink's asset test.

ENDURING POWERS OF ATTORNEY

A power of attorney is a document, which allows one person to legally act on behalf of another. The power of attorney can be quite specific in that it may be limited to certain actions or to a certain period of time. Alternatively, it can be unlimited, in which case it endures until, it is revoked by the person who granted it. Thus enduring powers of attorney are often used in anticipation of incapacity brought about by accident, illness and other reasons. A power of attorney can be revoked at any time by the person who initially granted it.