Guide to estate planning

We break down what estate planning is, how it’s different from a will and the strategies you can put in place to ensure your family is looked after in the future.   

Planning for the future is important for whatever life stage you’re at. Whether you’re moving in with a partner, thinking about starting a family or looking ahead to retirement it’s important to have a financial plan in place. Estate planning is a major part of your overall financial plan and is so much more than just writing up a will. We look at some of the common questions around estate planning and how it can help you and your family. 

What is estate planning?

Estate planning is the process of setting up your estate so your assets such as property, shares and insurances pass onto your beneficiaries in the most efficient and effective way. 

This may involve a variety of estate planning strategies, such as establishing trusts, restructuring your investments, setting up superannuation beneficiaries and reviewing your life insurance policies. 

Why is estate planning important? 

Estate planning is a way to ensure that if you were to pass away your family assets are distributed to your nominated beneficiaries according to your wishes. By setting out exactly how you want your estate to be structured and distributed, you can bring peace, security and clarity to your loved ones. Plus, any likelihood of disputes between family members or loved ones will be minimised. 

What’s the difference between estate planning and a will?

Both estate planning and a will give instructions to your loved ones on how you want your assets to be distributed when you’re not around but a will is only one part of the jigsaw piece in estate planning.  

Essentially, a will sets out what you want to leave to whom as well as guardianship details, such as who would look after any underage children or financial dependants. It primarily covers assets you own in your personal names and any dependants you look after.

Estate planning, on the other hand, covers a broader scope and goes into more detail. It deals with family assets that may be held in a company or trust and how they will be structured, distributed, or managed upon your death. An estate plan seeks to ensure the continuity of control over assets and businesses that may not be in your personal names but that you control so they can continue on even when you’re gone. An estate plan could also include identifying who will have authority to manage your finances and businesses if you are no longer able to control them due to mental incapacity or death. It can also set out how family assets will be managed if your children are too young or not mature enough to inherit them upon your death.

What does estate planning cover?

Estate planning generally covers the structure, distribution and transfer of all family assets, which may include your investments, superannuation and life insurance. It would appoint the people who will look after your estate - the executor of your will - who will ensure that the instructions are followed, including dealing with the control of any trusts.

Most estate plans also include other matters relevant to the end of life, such as powers of enduring attorney, powers of enduring guardianship and advanced health directives. This ensures that, if you’re unable to make decisions for yourself, someone can make them for you, according to your wishes. 

The goal of estate planning is to give you peace of mind, so that you and your loved ones are ready for whatever may happen—be it illness, accident or death. 

Who would benefit from estate planning?

There’s a common misconception that estate planning is for the wealthy, however anyone who controls assets such as shares, property, jewellery, has a superannuation fund or a life insurance policy would benefit from having a plan in place that deals with how these should be distributed and who they should go to once they . 

Likewise, anyone who has financial dependants such as children, parents, a spouse or other family members would also benefit from estate planning to ensure those who depend on them continue to get the adequate care into the future. 

Also, anyone who has a direct or indirect share in a business would benefit from an estate plan that outlines what should happen to the control and management of that business if they are no longer around.

Family estate planning strategies for blended families

Blended families are becoming the norm in Australia as divorced parents are joining to form their own, unique unit. But unfortunately family estate planning for blended families can be complicated. Usually, there are children, spouses, properties and assets from at least two marriages to take into account—all bundled together in a web of complex and fragile relationships. 

Only assets under a particular person’s estate will be dealt with under their will. Any assets outside of a person’s estate cannot be distributed between various children or different partners. That’s why it’s so important to leave clear, unambiguous plans. To prevent future challenges and disputes, family estate planning takes into consideration how assets in blended families can be distributed to ensure legal and financial obligations are met. 

Estate planning strategies for family members with a disability 

The thought of leaving behind a family member with a disability, whether it’s a child, a sibling, or a parent, can be incredibly worrying. When it comes to estate planning for this, there’s no one-size-fits-all solution. When estate planning, it's important to have clear instructions to ensure your vulnerable loved ones are financially looked after. You will need to take into account a range of factors, from their physical, emotional and social needs, to medical and carer bills. It’s also important to think carefully about the years to come, and about how their needs might change over a lifetime.  

What role does life insurance play in estate planning?

A life insurance policy can play a vital role in estate planning, by providing the funds to help ensure your estate plan can be put into effect the way you want it to. This money can go towards meeting a variety of expenses, including accommodation and daily living costs for any financial dependants such as a child, a spouse or parents. It can also go towards paying for school fees and paying off debts, including personal loans and mortgages. 

If you already have a life insurance policy in place, then be sure to review it during the estate planning process, to ensure you have sufficient cover to meet your needs and that the proceeds go to the intended beneficiaries. 

Estate planning and preparing for the future 

It can be tempting to put off estate planning for a rainy day. Most of us don’t want to think about illness, accidents and death. But, the sooner you manage your affairs and obtain professional financial and legal advice on your estate plan, the sooner you’ll be able to relax—and more thoroughly enjoy the present with your loved ones. 

After all, family estate planning strategies can help you prepare your family for the unexpected. With the right structures in place, the assets you’ve spent your life building are more likely to go to the people you intend, in the right way, with maximum benefit and minimal conflict. 

Learn more about how life insurance can help protect your loved ones into the future. 

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