WHAT DOES ‘ESTATE PLANNING’ REALLY MEAN, AND WHY IS IT IMPORTANT?
Most adults understand the basic premise of a will. Dividing your possessions among your family members and business partners has become a common and fairly straightforward process.
While your will is undeniably important, it does not constitute the only measure you can take to provide for your family, business or another beneficiary in the event of your death. In fact, estate planning encompasses many legal options.
In this post, we discuss several of the most common forms of estate planning as well as the benefits of an effective plan.
Common Components of Effective Estate Planning
At its most basic level, your will lists your property and designates which person or organization receives a particular piece of property after you pass away. Many additional estate planning measures, including trusts, which we’ll discuss below, can be included in your will. Others, like life insurance, do not fall under your will.
Below, we list several of the most common estate planning measures:
- Life insurance. Your life insurance policy likely represents one of your most valuable assets. You must designate a beneficiary in the policy itself.
- Medical directives. If you have specific medical needs or strong opinions about common medical procedures, you can create medical directives to enforce your wishes even if you become incapacitated. If you anticipate needing end-of-life care, but don’t have strong wishes, enduring power of attorney may work better for you.
- Power of attorney. Power of attorney allows you to guarantee that your finances, living situation and medical care are taken care of even if you can’t do it yourself.
- Superannuation. Your superannuation, which consists of any funds saved toward retirement or a pension, does not fall under your will. Like life insurance, you must designate a beneficiary separately. In some cases, a trustee will decide which of your dependents receives the settlement.
- Trusts. A trust allows you to set money aside that can only be retrieved under specific circumstances. For example, some trusts stipulate that the recipient must be of legal age to use the funds.
Your estate plan can also include who you would like to execute the plan, typically your lawyer or a trusted family member.
Reasons to Prioritise Complete Estate Planning
Complete, savvy estate planning has numerous benefits, especially for your loved ones. Early and effective planning allows you to do the following:
- Dictate who or what receives your assets, including family, business partners or your favourite charity.
- Plan ahead for funerary expenses, arrangements and other logistics which could strain your grieving loved ones.
- Provide for unforeseen circumstances that would prevent you from maintaining your affairs or making important medical and housing decisions.
- Reduce the legal costs associated with probate, ensuring your beneficiaries receive more money.
- Simplify the probate process, which ensures your assets reach your beneficiaries as quickly and tax efficiently as possible.
Not sure how well you’ve planned? Discuss your current plan and what you would like to add with your lawyer.
Estate planning represents one of the most important measures you can take to ensure that your hard work pans out as you would like it to over time. Consider adding any combination of the components listed above to improve your current plan.
Whether you don’t currently have a will or you have the beginnings of a solid estate plan, consult with a professional from Ramsden Lawyers to determine your best next step.