Will preparation sometimes brings us in contact with terminally ill people. Such clients have often been given life expectancy time frames and wish to ‘get their affairs in order’. Whilst everyone’s circumstances are different there are some ‘essential documents’ that should be put in place to ensure that your wishes both before and after you die are respected and it may be appropriate to gift certain assets now to minimise taxation imposts and/or the need for a grant of Probate.
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Will
You may not need a Will if you are able to gift all of your assets while you are still alive. There is less room for confusion if you decide to give away your important belongings while you are alive.* If this is not a practical course of action then it is imperative to have an up to date Will that includes the appointment of appropriate executors. Advice should be sought on how to deal with your assets. Joint ownership of property, family trusts, superannuation, life insurance and your children (whether biological or step-children) need to be considered when the Will is drafted.
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Advance Care Directive
An Advance Care Directive (ACD) enables you to write down your wishes and instructions for future health care, end of life and personal matters and/or to appoint one or more persons to make medical and lifestyle decisions for you if you are unable to do so yourself; ie, if you are mentally incapacitated. The ACD enables you to ease the pressure on your family by nominating who should make decisions.
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Power of Attorney
This document enables you to appoint someone to make legal and financial decisions for you if you are unable but it is important to understand that it can be made ‘effective immediately’ rather than only in the event of your mental incapacity. If you are sick in bed but still mentally capable it may be helpful and practical to have someone able to pay bills, access funds to pay for your treatment and deal with other legal and financial matters.
What to do about Superannuation?
Often superannuation is a person’s biggest cash asset therefore it is important to consider your superannuation as part of your estate plan. If you have a dependant spouse and dependent children you should have a binding death nomination in place to ensure the funds go swiftly and directly to your spouse and/or children without the need for Probate.
If there are no tax dependents however (for example, no spouse and only adult children) a terminal illness may be a reason to consider withdrawing your money from the super fund. You can then gift the money to whoever you wish whilst still alive and thereby avoid the tax payable by adult beneficiaries in receipt of super funds. Alternatively the money can simply be deposited into your bank account and it will form part of the residue of your estate to be distributed according to your Will.
Each super fund’s eligibility criteria for the payment of income protection insurance, lump sum disability payments and life insurance benefits should be clearly ascertained to enable you to make an informed decision about how to deal with your super. See also our article: “Superannuation and Estate Planning”
If you wish to discuss any of the issues in this article please contact Emma on 8362 6400 or email Emma Marinucci. Join our mailing list to receive updates and advice on current issues.
*If you receive a pension then you should seek advice about how gifting assets will affect your entitlements
