Estate Planning Checklist: 6 Steps to Protecting Your Assets and Your Family’s Future

Estate planning is an important aspect of preparing for the future. In this process, you make decisions and legally formalise the management of your assets in the event of your passing or becoming unable to make decisions for yourself.

By creating a comprehensive estate plan, you ensure peace of mind, knowing that your family and assets will receive proper care and attention in the future.

Let's delve into the recommended steps in the planning process.

1. Create an inventory of your assets

When planning your Will, it’s important to understand how all of your assets are owned and to include in your estate plan all valuable and sentimental items that you want taken care of in a certain way or to be inherited by specific people. Take ample time to compile this list, as it can turn out longer than anticipated.

Assets which need to be added to your inventory include:

• Bank and investment accounts
• Business interests including partnerships, family trusts, etc.
• Superannuation and pension accounts
• Shares and investment policies
• Personal and investment real estate
• Life insurance policies
• Vehicles
• Household items – collectibles, art, antiques, sentimental items
• Also include a list of debts – mortgages, loans, credit cards.

You can use digital and hard copy asset inventory tools and templates to assist you in consolidating everything in a single location.

Consider using Microsoft Word or Excel to create an inventory, or software like Net Simplicity's Visual Asset Manager.

This enables you to effectively track asset changes. However, ensure that you store the information in a readily accessible location for future reference.

2. Identify beneficiaries and heirs

When forming your estate plan, deciding on beneficiaries and heirs is one of the most important factors.

Although these terms are often used interchangeably, it is crucial to recognise the distinct legal disparities between them.

An heir refers to someone who is legally entitled to inherit your assets in the event of your passing, specifically if you don’t have a valid Will or if your assets are held in Trust.

Heirs receive your assets according to a legally predetermined order of relationship because they are directly related to you (i.e. they are your next-of-kin). For instance, your spouse takes precedence over your children, regardless of whether they are biological or adopted.

On the other hand, beneficiaries are individuals whom you specifically designate in your Will to receive a particular asset. You can choose anyone as a beneficiary, including charitable trusts or friends. By naming them in your Will, their claim to your assets surpasses that of your heirs.

By explicitly naming those you want to inherit your assets, you can prevent potential complications in the future. For example, if you have a close relationship with your niece and wish for her to receive a specific asset, including her in your Will ensures that she inherits the asset before your spouse, children, parents or siblings.

3. Create a Will

Making sure your Will clearly expresses your intentions is vital and isn’t something you should leave to chance. While you have the option of purchasing do-it-yourself Will kits, engaging an experienced lawyer ensures that you receive legal advice and comprehensive documentation of your wishes, with no room for ambiguity, and may avoid arguments and challenges later on.

To make a Will, you must be 18 or over and capable of making legal decisions. Engaging in estate planning before encountering health issues means you can fully consider your options and set out your wishes clearly.

For the document to be legally valid, it must be signed by the person making the Will and correctly witnessed. It is important to note that beneficiaries should not serve as witnesses during the Will signing process as their entitlement to the assets in the future may be impacted if they are seen to have influenced you in the making of your Will.

4. Establish one or more Trusts

Trusts can be a useful way of protecting your assets, particularly larger assets like property. Trusts are valuable in managing inheritances for beneficiaries who are minors, have disabilities, are irresponsible with money, or come from blended families.

Additionally, there are tax benefits associated with Trusts, as they provide protection against capital gains and income taxes. By distributing the Trust’s income among the beneficiaries, the Trust can spread its tax obligations between beneficiaries with lower income levels to reduce the amount of tax payable on the Trust’s income each year.

A Trust can be set up to hold assets during your lifetime (often referred to as a Family Trust) or it may be part of your estate plan and set up by your Will to receive the inheritance you intend to  leave to one or more of your beneficiaries. A Trust set up by your Will is commonly referred to as a Testamentary Trust.

We also recommend seeking financial and professional advice from your accountant when thinking about setting up a Trust. There are different types of trust structures and seeking professional advice from your accountant can help you to choose the right structure for you and will ensure that you understand how your Trust will work for you in the future.

5. Assign Power of Attorney

Granting someone Power of Attorney provides you with the assurance that a trusted individual will act on your behalf in the event of your incapacity. Before you assign them the authority to manage your assets and make financial and health-related decisions for you, you should ensure that you have confidence in their ability to prioritise your interests.

A General Power of Attorney can act on your behalf, although it can’t be used if you become incapable of making decisions or acting independently in the future.

In this case, assigning an Enduring Power of Attorney allows them to continue helping you even if you subsequently become incapable.

It’s important to complete Enduring Power of Attorney documentation before you become unable to make your own decisions, as you can no longer appoint an attorney at that stage.

If you lose capacity without an Enduring Power of Attorney in place, then someone you may not have chosen to manage your assets may become the person who makes an application to the Victorian Civil and Administrative Tribunal (VCAT) for power to handle your financial affairs and that individual will have mandatory (and sometimes onerous) reporting obligations to VCAT.

6. Regularly review and update your estate plan

It is important to check that your estate plan remains effective for your needs, by regularly conducting reviews with your lawyer, who will handle updates swiftly.

It is recommended that you review and update your estate plan at least once every three to five years, although you have the option to do so more frequently if desired.