3 Things to Have in Your Estate Plan
As it turns out most people spend more time planning vacation spots and choosing their next car purchase than they do planning for the day they leave this earth. While going on a trip and buying a new car is no doubt more exciting, without a well thought-out exit plan you could be leaving your family in a difficult financial position or with some tough calls to make.
When you think of estate planning the chances are getting a Will comes to mind although sometimes a Will shouldn’t stand alone. If you have people in your life that you care deeply about, putting together a well-constructed estate plan is one of the kindest things you can do for them.
In this post, we’ll cover what makes up a good estate plan and dive deeper into three core components.
What is a good estate plan?
A good estate plan should mean that when the time comes, all your stuff (aka assets) and your health can be managed by someone you have chosen, and that anything you own ends up where you wanted it to. A good estate plan should also limit unnecessary court visits and high legal fees, leaving your nearest and dearest to grieve, regroup and support one another. Depending on your situation and what you’re looking to achieve you may or may not need all three of the following:
A Will
A Trust
A property and/or personal care and welfare enduring power of attorney
Let’s dive a little deeper into each one.
A Will
A Will is one of the most common things people recognise when they think about estate planning, and that’s because it does play a big part. The basic premise of a Will is to settle your estate but it also allows you to name a guardian for your children (or fur babies), express your funeral wishes, leave meaningful gifts and even bequeaths to people and or charities close to your heart. If you want a say in who gets what of your stuff, or if you have young children that depend on you, in our opinion getting a Will is a must. Even if you have a partner/spouse it’s important to be aware that if you pass away, anything you own in your sole name won’t automatically get passed on to them. Without a Will, New Zealand legislation dictates who gets what and how much of what you leave behind. It’s a specific formula so depending on your situation; your stuff may not end up where you thought it would have. Not only that, the time and cost to administer your estate goes up by an estimated 50%, meaning it could be 12-18 months or more and upwards of $15,000 before it’s all said and done.
So when exactly do you need a Will? Just about everyone is going to need one at one point or another and it’s actually sooner than most people realise. You can get a Will as early as your 18th birthday, although most people get theirs sorted when they purchase a house, have children, get married or start worrying about their mortality. What’s important to remember is that once you have accumulated $15,000 worth of combined assets, you’re going to need a Will if you want to decide where it all ends up.
It’s easy to put off getting a Will earlier in life and that’s often because people don’t think anything drastic is likely to happen any time soon. Thinking of it this way is a big gamble, not on your life, but rather those you’re leaving behind.
Enduring Powers of Attorney
An enduring power of attorney (EPA) is a legal document that gives someone that we choose (called an attorney, not the same as legal attorney or lawyer) the ability to act on our behalf. You might consider getting an EPA if you want to give someone else the ability to make a decision for you in the case that you are incapable or unavailable to make the decision yourself.
There are two types of EPAs:
A property EPA enables decision making on financial matters such as money and property, bank accounts, paying bills, and buying/selling property. You can choose at what point you want your attorney’s power to kick in, whether it’s immediately, or only if you’re incapable to make the decision yourself.
A personal care and welfare EPA enables decisions about your health and wellbeing and can only take effect once a qualified health practitioner has confirmed that you’re not sound to make decisions yourself.
You can appoint the same person for both, however the authority must be appointed separately. An EPA has to be done when you’re still mentally capable so the best time to sort it out is now because you just never know what could happen (knock on wood). It is recommended that everyone 18 years and older have both types although many people choose to prepare their EPAs at the same time as they do their Will. (FYI, an EPA has no effect on your Will though it may be needed in order to make decisions which affect things like your property that will be dealt with in your Will).
Without an EPA, no one else would be able to deal with your property or financial affairs without a court order (that’s including family members and partners) and this process can be very costly and time-consuming. Additionally, there would be no guarantee that the person you would have preferred to be named your attorney is even chosen by the Court.
Trusts
There are all sorts of Trusts designed to address very different situations so in this blog we will just discuss one. A family trust is what you would put in place if you wanted to protect and preserve your stuff in order to benefit your family after you’re gone. Unlike a Will which outlines how you want your estate distributed when you pass, a trust becomes the legal ownership of your assets from the moment it’s created.
Typically people set up a trust to benefit from no longer owning the assets; for example, it could be used to protect your stuff from unwanted legal claims or risks associated with business failures, to set aside money for children or grandchildren, or to ensure your property is passed down to future generations (not their partners).
A trust has three elements:
trustees are the people who manage the trust,
the settlor is the person who creates the trusts and,
beneficiaries are those who benefit from the trust.
The trust deed (the legal document) outlines those involved (trustee, settlor and beneficiaries), and the instructions on how the trust will be managed. This process needs to be carefully written, preferably by a professional (someone like Perpetual Guardian). Depending on the instructions of the trust deed you could still use the assets within the trust, you just wouldn’t own them under your sole name. For example your house could be in a trust but you could continue living in it for as long as it’s stated in the trust.
A trust isn’t for everyone but depending on your needs it could be worthwhile having a conversation with a professional to see if that’s the right move for you.
Putting together an estate plan that works for you
Now that you know more about the 3 things that make up a good estate plan there’s nothing stopping you from getting started on yours. With any Footprint package, not only do you get the ability to create a Will online from the comfort of your own home, you also get exclusive access to discounts on trusts and EPA services through our estate planning partner Perpetual Guardian, so you can put together a rock solid estate plan that’s affordable for you now and protects your stuff and your whanau later on.
Feel free to browse our Will packages online or get in touch with us and our team will be happy to talk you through it.
