Dear Subscribers,

Welcome to our December Quarter 2008 E-Newsletter - Estate Planning & You

In this issue we discuss the importance of basic estate planning tools, which seek to protect and enhance the security of a person's wealth or assets in the event of death or disability. Having a will is a most obvious one, but also putting in place a power of attorney and appointing an enduring guardian are also important.

Business & Succession

Large companies these days spend considerable time and energy addressing workforce and succession planning. They identify critical roles in their business and what succession process is to apply as key staff come and go. Whilst not to the same level, smaller private firms will generally seek advice on business structure from their accountant, albeit usually at the time of inception. Increasingly, though, even smaller/family based companies are seeking advice on how to transition wealth either inter-generationally or to structure their business on a more secure footing for asset protection reasons.

As we move from the corporate/business environment to look at the individual, estate planning for the person is less analysed and reflected on than it is these days in the case of business structure - whether large or small.

DIY Proliferation

There has been a proliferation in recent times of do-it-yourself (DIY) kits in just about every area of home and lifestyle need - homemade wills and powers of attorney are no exception. Most stationery sections of newsagencies these days are well equipped to allow the consumer to draft one themselves. Much has become consumerable, and for many individuals, this has been a positive thing to provide access and de-mystify the process for dealing with one's estate in the event of death or disability.

Whilst the consequences for most household DIY products which do not cut the muster rarely prove disastrous, mistakes which attach to not properly drafting one's intention in a will or complying with the legal formalities necessary to create a power of attorney or both can be more serious. The worst that can probably happen if mum forgets to water the mushroom kit, or the garden patio fence starts to lean because dad did not dig the holes deep enough is that they are likely to be the bunt of their friends and neighbour's jokes at their next BBQ. If a will does not properly set out a person's intention, and as a consequence provides inadequate support to a family member, there is the potential for a legal challenge later. In the case of an invalidly executed power of attorney in NSW (only certain persons are able to witness the appointor's signature) the family may be forced to apply to the Guardianship Tribunal to allow them to manage the person's affairs. This can be a protracted process.

It is human nature to take short cuts, but with these types of instruments, it is usually not the individual that has created them that has to live with the consequences. This is often left to the loved ones and close family members to pick up where there is a gap or oversight in intention after death or major crisis in the personal circumstances of their friend or family member.

DIY fixes tend also to drive a 'set and forget' approach - with estate planning this can be dangerous because we all know that life also has a peculiar way of bringing change over time to one's personal circumstances. Yet it will probably come as no surprise that Australians spend more money over time on hair care products and car cleaning aids than what they do on lawyers fees to review and update their personal documents in the event of a major change to their life circumstances.

Estate Planning Tools

These days' estate planning tools have a broader reach than the traditional will (and increasingly testamentary trusts) and the varieties of power of attorney (general or enduring). They can also involve the appointment of a guardian for minor children (both before and after death), guardianship of one's person in the event that medical and accommodation decisions can no longer be made and advanced health care directives which can deal with directions not to be resuscitated or that life support is not to be administered in the event of terminal illness. Consideration should also be given to the role superannuation plays on death as this is not an asset that can be left by will unless there is a binding death nomination that directs the trustees to pay the entitlement to the estate. The structuring of assets in the name of joint tenants and family discretionary trusts constitute other vehicles.

What is clear is that any estate plan must be tailored to meet the individual needs of the person. In this process the emotional needs of family and loved ones also should not be overlooked when settling an estate plan. Some beneficiaries may not be comfortable with elaborate structures to administer. Some may prefer more direct control over assets and in others there may be a need for immediate cash support to assist a dependent partner or children.

Conclusion

For many smaller private and family based companies, the issues which evolve around succession are interlinked with the personal circumstances of those who founded and often continue to run them. Whether this is the case or not, or whether the environment is a larger corporate context, the next time you are thinking about business structure, don't forget to spend some time on the 'legal health' issues which relate to you.

Hill & Co lawyers is able to provide advice across the whole range of estate planning services.

Our March Quarter edition will discuss climate change and how this is affecting planning decisions in development applications.

PETER HILL