Covid -19 makes us realise that circumstances beyond our control can change our priorities unexpectedly. The current pandemic is a reminder of the significance of having our affairs in order.
The most important estate planning documents that everyone should have in place during times of uncertainty are:
- Will
- Power of attorney
- Appointment of an Enduring Guardian.
What happens when a person dies without a valid Will or has no Will at all?
If no Will is made, then the Will-maker will die intestate. When dying intestate, the deceased’s assets will be distributed in accordance with pre-determined formulae set out in legislation in each state and territory.
Essentially, the rules of intestacy provide for a specific order of distribution to the deceased person’s next of kin. Those who receive an inheritance will depend on the individual and family circumstances of the deceased.
The distribution of an intestate estate generally reflects the moral expectations of society, but not always the wishes of the Will maker. There are numerous reasons why a Will-maker may have wanted to leave out an expectant beneficiary or indeed include non-family members in the distribution of his or her estate. For a variety of reasons, the testator may also have wanted to allocate unequal shares to beneficiaries whom under the legislation would otherwise share equally.
Dying intestate therefore cannot guarantee that the Will-maker’s assets will be distributed as he or she intended.
Risks of using a ready-made Will kits
A person using a ready-made Will kit, may also end up dying intestate. Whilst using a ready-made Will kits to make a Will may seem a cheap and easy option, a ready-made Will, may expose your estate to certain risks such as:
- Validity of the Will. For example, the capacity of the testator, the signing of the Will, etc may cause doubt as to the validity of the Will.
- Failing to make adequate provisions for family members or dependants, especially in the case of blended families, may expose your estate to a family provision claim.
- Taxation implications. For example, you have left something to a beneficiary who pays tax at a higher marginal tax rate, the beneficiary may end up worse off by inheriting under your Will.
- Lack of ability to deal with self-managed superfund issues.
Capacity
The question of mental capacity is an important consideration in estate planning. Capacity may become a contentious issue simply due to age, deteriorating health or a combination of both.
To make or update a Will, prepare a power of attorney or appoint an enduring guardian, a person must have mental capacity Person’s capacity is one of the key elements to ensure the validity of such estate planning documents and limit the possibility of these documents being challenged on the grounds of capacity.
Enduring Power of Attorney (‘EPA’)
A Power of Attorney is a legal document that enables you to give a trusted person (‘the attorney’), authority to make legal and financial decisions on your behalf. You may authorise your attorney to enter contracts, sign cheques, dispose of property, appoint an agent, and make certain financial decisions on your behalf. EPA can be used even when you have capacity.
Appointment of an Enduring Guardian (‘AEG’)
AEG is used where a person has lost capacity and becomes incapable of making decisions in relation to their own medical treatment or lifestyle choices.
If you lose capacity, it is important to have all authorities in place, so if necessary, you attorney or guardian have the necessary authority to make all relevant health and financial decisions on your behalf.
In the event of your death, it is important that your loved ones are provided for adequately.
For this reason, you should not leave your affairs to chance, as the consequences or taxation implications could be disastrous.
If you need any assistance contact one of our lawyers at info@legallysmart.com.au or call 02 8332 6126 for a no-obligation discussion and for a specific legal advice.
Disclaimer: This article is for information purposes only, and it is not intended to be a legal advice.