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Four key estate planning documents that everyone should have in place

In these uncertain times, it’s now more important than ever to ensure that you, your spouse and your parents have wills and powers of attorney in place. Our Estate Planning experts take you through the four key documents you need to protect your family.

Nobody likes thinking about it, but in the face of coronavirus, it’s now essential to ensure you and your family have a plan in place to take care of your affairs if one of you were to become ill or pass away. An estate plan ensures that your assets are passed on to the people you care about most, and that important decisions are made by those you trust.  To create an estate plan, you’ll need to have the following key documents in order: 

1. A will

What is a will?

A Will is a legal document that sets out how you want your estate (i.e. your assets, including property, cars, shares and cash) to be distributed on your death. A will can be made by anyone 18 and over, who has mental capacity to understand what they are doing. Wills have several formal requirements, the critical being that they are in writing and signed by the will-maker in the presence of two independent witnesses. 

Why is a will important? 

If you pass away without a valid will in place, you’ll be deemed to have died ‘intestate’. Your next of kin will need to make an application to the Supreme Court for what is called “letters of administration”. Depending on the size and complexity of your financial affairs and your personal circumstances, this can be a costly and time-consuming exercise. 

The Administration and Probate Act sets out a default position for how estates are distributed if the deceased hasn’t left behind a valid will. In summary, if you pass away and:

  • have a partner but no children, then 100% of your estate will be distributed to your partner
  • have a partner and have children, then 100% of your estate will be distributed to your partner (different rules apply if you have children from different partners)
  • have children but no partner, then your estate will be distributed equally to your children
  • have no partner and no children, then your estate will be distributed equally to your parents
  • have no partner, no children and no parents, then your estate will be distributed equally to your siblings 

If you don’t have a partner, children, parents or siblings, then your estate will be distributed to your grandparents, failing that, your aunts and uncles, and failing that, your first cousins. If no relatives survive you, then your estate will be distributed to the Crown. 

If you don’t want your estate distributed in accordance with this hierarchy, then you need to have a valid will in place. 

A well-drafted will can also ensure that the right people benefit from the right assets at the right time (the three ‘Rs’).  Specifically, tax-effective distributions can be made from one or more discretionary will trusts, superannuation can be dealt with tax effectively and the right people can be appointed to control and then hand over control of trusts to your loved ones. 

2. An enduring power of attorney (EPOA)

What is an enduring power of attorney?

This document allows you to appoint a person or persons to make decisions about your personal and financial matters. 

You can appoint your attorneys to make financial decisions on your behalf (e.g. paying bills, dealing with bank accounts), personal decisions (e.g. where you live) or both. Your EPOAs can take effect immediately, or can commence at a later date, such as when you no longer have capacity to make decisions.

Attorneys need to be 18 or older and must not be insolvent or provide health care or accommodation services to you. Your financial attorneys also need to disclose to you whether they’ve been found guilty of an offence involving dishonesty.  

If you appoint more than one person to act as your financial and personal attorneys, you can specify how you want them to make decisions. For example, you can specify that they need to act jointly (together), severally (separately), jointly and severally (together or separately) or that decisions need to be made by a majority of attorneys.  

You can also set out specific instructions to your attorneys regarding things like:

  • making gifts on your behalf to relatives 
  • entering into conflict transactions 
  • making payments to any dependants you have, like children

Attorneys have obligations under the Powers of Attorney Act 2014 to act honestly, exercise reasonable skill and care, keep accurate records and accounts, and not use their position for profit.   

Why is an enduring power of attorney important? 

If you travel a lot or have periods where you’re uncontactable, having an EPOA in place can assist in time-sensitive situations where a document needs to be signed by you, or a decision that affects you needs to be made.  

If you don’t have an EPOA in place and you become incapacitated, your family or someone you know will need to make an application to VCAT to appoint someone to make decisions on your behalf.  This can be a costly and time-consuming exercise, especially if another family member objects or seeks to apply to become the guardian and/or administrator. 

3. An appointment of medical treatment decision-maker 

What is a medical treatment decision-maker?

As the title suggests, this document allows you to appoint someone to make medical decisions on your behalf in the event you’re unable to. 

Your decision-maker must be at least 18 and should be someone you trust to carry out your medical decisions and preferences. You can appoint more than one person to be your decision-maker, but only one person can act at any one time. 

An appointment must be in writing and be signed and witnessed in accordance with specific requirements under the Medical Treatment Planning and Decision Act. 

Why is a medical treatment decision-maker important?

If you don’t have an appointment of a nominated decision-maker in place, then the Medical Treatment Planning and Decision Act effectively nominates someone for you. Your decision-maker will be the first adult from the following default list who is ready, willing and able to take on the responsibility:

  • your spouse or domestic partner
  • your primary carer
  • your adult child
  • your parent 
  • your adult sibling 

The above default list is unlikely to suit everyone’s circumstances. If you don’t want the above people making decisions on your behalf, then you should make sure you have a valid appointment in place. 

4. An advanced care directive (ACD)

What is an advanced care directive?

This is a document in which you can give people legally binding instructions about future medical treatment you wish to receive and refuse. This document will be referred to by your medical decision-makers and health practitioners in circumstances where you can no longer make decisions about your own treatment. To make an ACD you need to be 18 and over and have decision-making capacity.  

The document is made up of two sections - an instructional directive and a values directive. 

A values directive is a statement about your values and preferences for medical treatment. Such preferences relate to what’s important to you. Is it important that you stay at home as long as possible? What worries you the most about your future? Do you have particular spiritual, religious or cultural preferences or requirements?

An instructional directive provides specific details and instructions about treatment you consent to and/or refuse. To be binding, instructional directives need to be as specific as possible. Because of this, ACDs must be witnessed by at least one person who is a registered medical practitioner.  

Why is an advanced care directive important? 

If you have particular health concerns or views on the types of treatment and medical intervention you wish to receive and not receive, then having an ACD in place can reassure you that your wishes will be carried out in the event of illness or injury. An ACD can also alleviate the pressure on your family and medical treatment decision-makers in making decisions on your behalf. 

If you don’t have an ACD in place, then in the event of serious illness doctors will determine what treatment you receive based on their assessment and recommendation. This could include medical treatment that you do not wish to receive. 

BlueRock can help you prepare your estate planning documents so that you plan ahead for peace of mind. 

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