Estate planning may be the most important thing you start today to take care of your family in future.
Unfortunately, many people put off any form of estate planning until it’s too late or they have no choice. If it’s forced on you, you’ll likely be operating under sub-optimal conditions such as during a significant health event where getting your affairs in order may feel like the last thing you feel like entertaining. So let’s try and avoid that situation.
There are many things to consider when Estate Planning. In this article, we’re going to discuss the basics of Estate Planning, what to consider, why you should start planning now and how Carlile Dowling can help you.
Reasons to commence Estate Planning
Estate Planning is the process of preparing your financial affairs and for the distribution of your assets, pre and post-death. There are many reasons why you would want to complete estate planning, including:
- Protecting your assets from creditors
- Reducing the tax implications on beneficiary income from an estate or trust
- Improving your chances of receiving rest home subsidies
- Avoiding relationship property claims on children’s inheritance
- Preparing for the potential reintroduction of estate and gift duty, and capital gains tax
- Benefiting from testamentary freedom – ensuring your estate assets go to people you intend to benefit.
Key points to consider when Estate Planning
The process of creating an estate plan can be daunting, but if you have the right resources and time invested in making it work for your family’s future needs then there are many ways that will benefit everyone involved. Examples include: establishing trusts to accomplish specific goals; putting enduring powers-of attorney into place when a medical event or incapacitation occurs; getting professional support from somebody who knows what they’re doing – a lawyer!
Estate planning tools:
- A Will – everyone needs one.
- Power of Attorney – everyone should have this.
- A Trust – if you need one.
- Rest home subsidies – are worth exploring.
- Medical Directive and a Living Will – everyone should have one.
Let’s explore each of these in a little more detail.
1. Creating a Will
An important aspect of estate planning is a Will which allows you control over how your assets are administered after your death. No matter what your stage of life having a Will is crucial. If there’s no written legal document, then your assets will be distributed according to intestate succession which probably won’t match what you would have wanted for yourself or your loved ones’ futures.
What do you need to do to make a simple Will?
If you have very simple needs, a Will can be arranged with your lawyer relatively quickly. If your requirements are more complex, you will need more in-depth legal advice.
Perhaps the most important part of making a Will is choosing who you want as an executor. They’re the person or persons you choose who have the duty to administer your Will. You need to trust that they will carry out your wishes as intended.
Equally important are the people who will benefit from your Will, such as your spouse, children and extended family. Your Will also allow for bequests, gifts in charity, and funeral wishes with respect to cremation or burial arrangements. If you have infant children it is very important to consider who will be their guardian.
Your Will is the key to ensuring that your loved ones are looked after and you can leave behind a legacy for future generations.
2. Power of Attorney
Whilst thinking about your future, it’s an ideal time to put Enduring Powers of Attorney in place.
A power of attorney is an important legal document that allows someone else to make decisions on your behalf if you become incapacitated. Your capacity is generally determined by a Geriatrician.
There are two different types of EPAs. One for property, the other for personal care and welfare. It is important to note that the property EPA can (if you choose) either take effect while you are mentally capable or only if you lose capacity. Whereas a Personal Care and Welfare (PC&W) EPA can only take effect if you lose capacity.
For a property EPA you can appoint more than one attorney to act at the same time but PC&W only allows for one attorney to act.
One of the most important decisions during this process is deciding who will be your attorney(s). It’s essential that you choose your attorney(s) wisely because they’ll be the ones who step in when needed to make financial decisions, manage your property affairs, and personal care and welfare matters on your behalf.
We take our responsibilities to our clients seriously. We believe that as lawyers we have two key responsibilities: Defend your rights and Advocate for your future desires.
3. Trusts
Trusts are a type of financial tool that can be used in estate planning. They allow you to protect assets and ensure they’re used or disbursed as desired. A Trust is a legal document that you (as Settlor) transfer property to a Trust for a Trustee to hold legal title to the property for your designated beneficiaries.
It’s important that you regularly review your trust to confirm it is still fit for purpose. The new Trusts Act is now in place which means you’ll need to review it ASAP.
When reviewing your Trust, some questions you might ask include:
- Are the Trustees an appropriate fit for the Trust?
- Have I included the appropriate beneficiaries?
- Are there beneficiaries included that need to be removed?
- Do any of the older trustees wish to retire?
- Should I wind up and distribute the Trust?
If you have a trust, remember to put in place a Deed of Delegation and Power of Attorney allowing someone else to make trustee decisions if you are unable to. This is different to an EPA.
4. Rest home subsidies
Not everyone will require hospital-level rest home care during their lifetime. Your health dictates whether this will be the case.
If you do need care, the general principle is that if you can afford to pay for your care then you are expected to pay. The application process includes both an asset and income test. If you’re 65 or older, are single, or both you and your spouse require care then you must not have assets over $239,930, either individually or jointly.
If you have a spouse and you require care but your spouse does not, then you can elect for an alternative option of retaining maximum assets of $131,391 in addition to keeping your family home and car.
If you have a Trust then it is important to review it. Even if you transfer assets to a family trust, this does not necessarily mean you will avoid paying for your care.
5. Medical Directive and a Living Will
Finally, you should also consider making a medical directive (also known as an Advanced Directive) and a living Will. A medical directive is a written legal document or oral directive that allows you to specify your wishes for medical treatment if you are unable to make decisions yourself. The advanced directive forms are available from your local District Health Board.
A living Will is similar to a medical directive, but it only comes into effect if you are physically ill or unable to make this decision yourself. You can make a Living Will at the same time as making a standard Will.
These options are very personal decisions that we’re happy to discuss in more detail with you.
Where to from here?
As you can see, establishing an Estate Plan is a process that requires deep consideration and expert legal support. It’s not just about making sure you have your affairs in order with the proper documentation, but also creating strategies for managing wealth or distributing assets should something happen to you during this time period when most people are still very much alive.
We’re here to help. Please call Richard Natusch on 06 835-9367 or email richard@cardow.co.nz.
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