How Does A Complete Estate Plan Work Together?

Quick Answer

A complete estate plan is not one document and it is not simply a collection of documents.

It is a connected set of decisions and arrangements that operate at different stages.

While you are able to make your own decisions, you remain in control.

If financial, personal or treatment decisions later need to be made for you, an Attorney or Enduring Guardian may act within the authority you have given.

When you pass, those appointments end. The Executor’s role begins, while some assets may pass through joint ownership, superannuation nominations or other arrangements.

If an inheritance remains in a Testamentary Trust, a Trustee may continue managing it for the beneficiary.

The people, documents and pathways may change. The purpose of the plan is to keep your considered intentions connected through each stage.

Introduction

At the beginning of the Knowledge Bank, we asked:

What do I want to happen while I am able to make my own decisions, if I become temporarily or permanently unable to do so, and after I pass?

The articles that followed considered the individual parts of that question.

We looked at Wills, incapacity planning, superannuation, property ownership, blended families, beneficiary needs and Testamentary Trusts.

Each subject answers a different part of the planning.

The final question is how those separate answers become one practical plan.

Estate planning works across time.

Different decisions may need to be made. Different people may have authority. Different assets may follow different pathways.

The plan is complete when those parts have been considered together and each one supports the intended outcome.

The Plan Through Four Stages

Stage 1 — While You Can Make Your Own Decisions

You remain responsible for your own financial, personal, lifestyle and treatment decisions.

During this stage, you can:

• decide what you want the plan to achieve;
• choose the people who may act later;
• prepare the documents giving them authority;
• decide who should benefit after you pass;
• check how your important assets are owned; and
• align your superannuation and other arrangements with the wider plan.

An immediately operating Enduring Power of Attorney may allow an Attorney to assist with financial or property matters during this stage.

That does not remove your own authority. You continue making and directing your own decisions while you remain able to do so.

Stage 2 — If Assistance Or Substitute Decision-Making Is Needed

Circumstances may change temporarily or permanently.

An Attorney may deal with authorised financial and property matters under an Enduring Power of Attorney.

An Enduring Guardian may make authorised personal, lifestyle or treatment decisions when you cannot make the particular decision yourself.

The roles are different and neither person receives unlimited authority.

You should continue making every decision you remain able to make.

Authority changes only to the extent required. Your wishes, interests and circumstances remain the guide.

If capacity later returns, you resume making the decisions you are again able to make.

Stage 3 — When You Pass

Your Enduring Power of Attorney and Enduring Power of Guardianship end.

Your Attorney and Enduring Guardian no longer have authority under those appointments.

The Executor appointed in your Will then becomes responsible for administering the assets forming part of your estate and carrying out the Will’s instructions.

However, not every asset necessarily enters the estate.

For example:

• property owned as Joint Tenants may continue to the surviving owner;
• superannuation may be paid under a beneficiary nomination or a decision by the fund;
• family trust and company assets remain governed by their own arrangements; and
• life-insurance benefits may follow the policy terms.

The handover is therefore not simply from the Attorney to the Executor.

The Attorney and Enduring Guardian stop acting. The Executor and the separate asset arrangements take over their respective roles.

Stage 4 — After The Estate Has Been Administered

Some beneficiaries may receive their inheritance directly.

When that occurs, ownership and control pass to the beneficiary and the estate plan’s control over those assets generally ends.

Other assets may remain in a Testamentary Trust.

The Trustee then continues holding and managing them under the terms of the Will, sometimes for many years.

A direct inheritance completes that part of the plan. A Testamentary Trust allows that part of the plan to continue through the Trustee.

The appropriate outcome depends on what the inheritance is intended to achieve and the circumstances of the beneficiary.

Different People, Different Authority

Different people may carry responsibility at different stages.

The same person may hold more than one appointment.

For example, a daughter may act as Attorney during her parent’s lifetime and later become the Executor.

She does not act under both roles at once.

Her authority comes from the role that applies at that particular stage.

Understanding that distinction helps avoid uncertainty about who may act and when their authority begins and ends.

Different Assets, Different Pathways

A complete plan does not require every asset to follow the same pathway.

A home may pass to a surviving Joint Tenant.

Superannuation may be paid directly to a spouse.

Personal investments may pass through the Will.

A child’s inheritance may remain in a Testamentary Trust.

Those outcomes may be entirely intentional.

The important questions are:

• Has each pathway been identified?
• Is the outcome understood?
• Does the combined result reflect the person’s overall intentions?

The separate arrangements do not need to produce identical distributions.

They do need to form one considered outcome rather than a collection of assumptions.

What Makes An Estate Plan Complete?

A complete estate plan does not mean having every available document or the most complicated structure.

It means:

• the person’s objectives have been identified;
• the required decisions have been addressed;
• suitable people have been appointed for the relevant roles;
• substitute appointments have been considered;
• important assets have a known pathway;
• authority can move between stages without an avoidable gap;
• the documents and arrangements do not contradict one another; and
• the plan remains practical for the people expected to carry it out.

Completeness is therefore different for every person and family.

A straightforward situation may require relatively simple arrangements.

A more complex family, asset or beneficiary position may justify additional structure.

The documents should follow the needs of the plan rather than become the starting point.

How Does The Plan Remain Current?

A plan designed around today’s circumstances may stop working as intended when those circumstances change.

A review should be considered when:

• relationships or family responsibilities change;
• health or decision-making capacity changes;
• an appointed person passes, becomes unavailable or is no longer suitable;
• assets, ownership, superannuation, trusts or businesses change; or
• objectives and intended beneficiaries change.

A periodic review is also sensible even where no obvious event has occurred.

The purpose is not to replace documents unnecessarily.

It is to confirm that the existing decisions, appointments and asset pathways still reflect the current plan.

Are The Connections Still Working?

A useful review looks beyond each document and asks whether the connections between them still work.

Consider:

• Does the Will still reflect the intended distribution?
• Are the Attorney, Enduring Guardian, Executor and Trustee still suitable, willing and available?
• Are appropriate substitutes named?
• Have ownership arrangements or beneficiary nominations changed?
• Does each major asset still follow the intended pathway?
• Are any parts of the plan inconsistent with one another?
• Is any arrangement more complicated than it needs to be?
• Would the people expected to act understand their roles?
• Do they know where the current documents and important information are kept?

A document may remain legally valid while becoming practically outdated or disconnected from the rest of the plan.

The review is complete only when the individual parts and the links between them have both been considered.

Final Thoughts

Estate planning is not a collection of documents waiting in a folder.

It is a continuing plan for how decisions will be made, how authority will change and how assets will move as circumstances change.

While you can make your own decisions, you remain in control.

If you need assistance, the people you selected may act within the authority you gave them.

When you pass, those roles end and the Executor and other asset arrangements carry the plan into its next stage.

A Trustee may then continue managing an inheritance long after the estate itself has been administered.

Life changes. Circumstances change. The people carrying out your wishes may change. Your intentions shouldn’t.

The purpose of a complete estate plan is to keep those intentions clear, connected and workable through every stage.