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Estate Planning Essentials: 10-point checklist for soon-to-be retirees in Australia

Estate planning is a crucial part of preparing for retirement, ensuring your assets are managed and distributed according to your wishes. For pre-retirees in Australia, understanding the essential components of estate planning can provide peace of mind and security for your future. This guide outlines the key considerations for soon-to-be retirees looking to plan their estate effectively.

1. Review Your Will

A Will is the cornerstone of any estate plan. It outlines how your assets will be distributed after your death. Ensure your will is up to date and reflects your current wishes. Consider the following steps:

• Update Beneficiaries: Make sure all beneficiary designations are current. This includes any changes due to marriage, divorce, births, or deaths. Things can get awfully mess—and stressful—for your loved ones if this is not up-to-date when you pass.
• Appoint an Executor: Choose a trusted person to execute your Will. This person should be reliable, capable, and willing to take on the responsibility.

2. Establish a Power of Attorney

A power of attorney (POA) allows someone you trust to make financial and legal decisions on your behalf if you become incapacitated. There are two main types:

• General Power of Attorney: Effective immediately and remains in effect until you revoke it or become incapacitated.
• Enduring Power of Attorney: Remains effective even if you become incapacitated, making it essential for pre-retirees.

3. Create an Advance Health Directive

An Advance Health Directive (AHD) is a legal document that outlines your preferences for medical treatment if you cannot communicate your wishes. This directive ensures your healthcare choices are respected and provides guidance to your loved ones and medical professionals.

4. Consider a Testamentary Trust

A Testamentary Trust is established through your will and comes into effect upon your death. It can provide tax benefits and asset protection for your beneficiaries. This type of trust is particularly useful if you have:

• Minor Children or Grandchildren: Protects their inheritance until they reach a specified age.
• Beneficiaries with Special Needs: Ensures they are financially supported without affecting their government benefits.
• Vulnerable Beneficiaries: Can offer protection for beneficiaries in business, with complex family situations, or addictions
• High Income Earning Beneficiaries: Sometimes an inheritance can create a tax problem for beneficiaries. A Testamentary Trust could be helpful in this situation.

5. Review Superannuation Nominations

Superannuation is a significant part of many Australians’ estates. It’s important to ensure your superannuation benefits are directed according to your wishes – this applies to standard superannuation accounts as well as Self-Managed Superannuation (SMSF). Sadly, we have seen families fighting in court over nominations that have not been updated.

There are two types of nominations:

• Binding Nomination: Legally binding and requires your super fund to pay your benefits to the nominated beneficiaries.
• Non-binding Nomination: Acts as a guide for your super fund, but they have discretion over the final decision.

6. Understand Tax Implications

Estate planning involves understanding potential tax implications to minimise the tax burden on your beneficiaries. Consider the following:

• Capital Gains Tax (CGT): Assess the CGT implications of transferring assets to beneficiaries.
• Superannuation Tax: Understand the tax treatment of superannuation death benefits, especially for non-dependent beneficiaries.

7. Plan for Digital Assets

In today’s digital age, consider what will happen to your digital assets, such as social media accounts, online banking, and digital photos. Provide instructions for accessing and managing these assets in your estate plan.

8. Communicate Your Plans

Ensure your loved ones are aware of your estate plan and understand your wishes. Open communication can prevent misunderstandings and conflicts. Consider holding a family meeting to discuss:

• Your Will: Explain the main provisions and the reasoning behind your decisions.
• Funeral Wishes: Share your preferences for funeral arrangements to guide your family.

Some families like to have a family meeting with their Financial Planner so that everyone understands what needs to be done and who to talk to in the event that something unforeseen was to happen.

9. Regularly Review and Update Your Plan

Estate planning is not a set-and-forget process. Regularly review and update your estate plan to reflect any changes in your circumstances, such as:

• Life Events: Marriage, divorce, births, and deaths.
• Changes in Assets: Buying or selling property, changes in investments.
• Legal Changes: Amendments to estate planning laws and regulations.

10. Seek Professional Advice

Estate planning can be complex, and seeking professional advice is crucial. Consult with:

• Financial Planners: Help you understand the financial implications and integrate your estate plan with your overall retirement strategy.
• Tax Advisors: Provide guidance on minimising tax liabilities for your estate and beneficiaries.
• Estate Planning Lawyers: Prepare your documentation and ensure everything is legally sound and reflects your wishes.

Our team at Hendrie Group can provide all the above services for you to make sure everything will work out according to your wishes. It’s complex process that needs to be planned and coordinated with the help of experienced advisors and experts.

Your next step

Get in touch to make a time for us to review your will, establish powers of attorney, and run through any tax implications that apply to your estate. We’ll document and put in place a comprehensive estate plan tailored to your situation.

We’ll then make sure your plan is regularly updated and that you communicate with your loved ones to give you and them peace of mind and security for your future.