Disclosure Statement: Durand Financial Services Pty Ltd and its advisers are authorised representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. General Advice Warning: The information contained within this website does not consider your personal circumstances and is of a general nature only. You should not act on it without first obtaining professional financial advice specific to your circumstances.
A testamentary trust is a trust set out in your will that only takes effect when you die. Testamentary trusts are usually set up to protect assets.
Here are some reasons why you would create a testamentary trust:
- The beneficiaries are minors (under 18 – 21 years old)
- The beneficiaries have diminished mental capacity
- You do not trust the beneficiaries to use their inheritance wisely
- You do not want family assets split as part of a divorce settlement
- You do not want family assets to become part of bankruptcy proceedings.
A trust will be administered by a trustee who is usually appointed in the will.
A trustee must look after the assets for the benefit of the beneficiaries until the trust expires.
The expiry date of a trust will be a specific date such as when a minor child reaches a certain age or a beneficiary achieves a certain goal or milestone (e.g. getting married or earning a specific qualification).
Appointing someone as your power of attorney gives them the legal authority to look after your affairs on your behalf.
Powers of attorney depend on which state or territory you are in: they can refer to just financial powers, or they might include broader guardianship powers. You will need to check with your local Public Trustee.
The different types of power of attorney are:
- General power of attorney is where you appoint someone to make financial and legal decisions for you, usually for a specified period of time, for example if you’re overseas and unable to manage your legal affairs at home. This person’s appointment becomes invalid if you lose the capacity to make decisions for yourself.
- Enduring power of attorney is where you appoint a person to make financial and legal decisions for you if you lose the capacity to make your own decisions.
- Medical power of attorney can make only medical decisions on your behalf if you become unable to do so yourself.
You can prepare a few other documents to help your legal appointees and family as you grow older, including an:
- enduring power of guardianship that gives a person the right to choose where you live and make decisions about your medical care and other lifestyle choices, if you lose the capacity to make your own decisions.
- anticipatory direction records your wishes about medical treatment in the future, in case you become unable to express those wishes yourself.
- advance healthcare directive (or living will) documents how you would like your body to be dealt with if you lose the capacity to make those decisions yourself.
The documents you choose to draw up will depend on your situation, and the responsibilities you’re happy to entrust to others. Get legal advice if you are not sure.
Choosing your powers of attorney
Nominate people that you know are trustworthy, financially responsible, and likely to be around when you need them.
Once your paperwork is in order, it will help your executor and family if you list the legal documents you have and where they are kept.
Here is a list of key documents to keep:
- Birth certificate
- Marriage certificate
- Enduring power of attorney
- Advance healthcare directive (also called a living will)
- Life insurance policies
- House deeds
- Home and contents insurance
- Deeds and insurance policies for any other real estate you own
- Bank account details
- Superannuation papers
- Investment documents (securities, share certificates, bonds)
- Medicare card
- Medical insurance details
- Pensioner concession card
- Any pre-paid funeral arrangements.
A good will and estate plan can help make sure your wishes are carried out after you die, or if you are no longer able to make your own decisions.