Wills & powers of attorney

Posted on 25 October 2019
Wills & powers of attorney

MoneySmart
(ASIC)

Preparing for your family's future

No-one wants to think about death, but it's important to decide what will happen to your assets when you die. Find out how you can give instructions to your family about your legal and medical preferences should you fall ill or lose the capacity to make those decisions yourself.

Estate plans

An estate plan includes your will as well as any other directions on how you want your assets distributed after your death. It includes documents that govern how you will be cared for, medically and financially, if you become unable to make your own decisions in the future.

You must be over 18 and mentally competent when you draw up the legal agreements that form your estate plan. Key documents might include:

  • Will
  • Superannuation death nominations (see Getting your super)
  • Testamentary trust
  • Powers of attorney
  • Power of guardianship
  • Anticipatory direction.

If you have made a binding nomination in your super or insurance policies, the beneficiaries named in those policies will override anyone mentioned in your will. If you have a family trust, the trust continues and its assets will also be distributed according to the trust deed, no matter what is written in your will.

Ask a legal professional to check your estate plan. A good estate plan should minimise the tax paid by your heirs, and help avoid any family squabbles.

Wills

A will takes effect when you die. It can cover things like how your assets will be shared, who will look after your children if they are still young, what trusts you want established, how much money you'd like donated to charities and even instructions about your funeral.

Your will can be written and updated by private trustees and solicitors, who usually charge a fee. Some Public Trustees will not charge to prepare or update your will if you nominate them to be the executor of your will. Other Public Trustees may only exempt you from charges if you are a pensioner or aged over 60. Check with the Public Trustee in your state or territory.

Smart tip

It's estimated that nearly half of all Australians die without a will, or 'intestate'. Don't let this happen to you. Make a will today.

You can buy will kits online but it's a good idea to ask a solicitor to review your will to make sure everything is in order. If a will isn't signed and witnessed properly, it will be invalid.

Keep your will valid and up to date as your legal rights change specifically, if you marry, divorce or separate; have children or grandchildren; if your spouse or beneficiaries die; or if you have a significant change in financial circumstances.

If you die intestate or your will is invalid, an administrator appointed by the court pays your bills and taxes from your assets, then distributes the remainder, based on a pre-determined formula, which may not be how you intended your assets to be distributed.

If you die intestate and don't have any living relatives, your estate is paid to the state government.

Testamentary trusts

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).

Powers of attorney

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.

Your legal and financial housekeeping

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
  • Will
  • 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.

The NSW Government's Planning Ahead tools website gives more detailed information on advance care directives, wills, power of attorney and enduring guardianship.

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.

Related links

Posted in: News  

No need for crisis action: Treasury boss

Posted on 24 October 2019
No need for crisis action: Treasury boss

Colin Brinsden
(Australian Associated Press)

New Treasury boss Steven Kennedy doesn't believe there is a crisis warranting immediate spending from federal government, saying he is "cautiously optimistic" about Australia's economic outlook.

Addressing senators in Canberra for the first time since taking on his new role last month, Dr Kennedy believes the policy settings are right for the economy to strengthen.

"I'm cautiously optimistic about the way the economy is going to strengthen," Dr Kennedy told the Senate economics committee on Wednesday.

While there have been widespread calls for the government to do more, with economic growth at its slowest in a decade, Dr Kennedy said stimulus responses like those seen during the global financial crisis are "uncommon".

"A feature of the current weakness in the global and domestic economy is heightened uncertainty among consumers and businesses," he said.

"Given this uncertainty, medium-term fiscal and monetary policy frameworks can play an important role and contribute to a stable and predictable environment that is supportive of growth."

He said the the tax cuts that were instituted this year are having a positive effect on the economy.

The Treasury secretary said the drought has taken its toll on economic growth, but employment growth has been very positive, even though this has not resulted a marked lift in wages.

He said while there are a range of explanations for this, whether it be a change in demographics, technological or globalisation, it was a global phenomenon.

He said the most sustainable way to get wages up is through labour productivity.

But he warned there is still the potential for global shocks.

He said the de-escalation in trade tensions between China and the US is a welcome sign, but the situation around the UK leaving the European Union remains unclear.

"I am in no better place than perhaps anyone here to comment on the Brexit arrangements, but if they were to resolve themselves they would all be providing an upside boost to the global outlook and that would assist Australia," he said.

Dr Kennedy has just returned from Washington where he attended International Monetary Fund meetings and said it was pleasing to hear some more confidence in the outlook, particularly in the US.

But European countries continue to suffer weakness.

Last week the IMF downgraded its growth forecast for Australia for this year down to 1.7 per cent from 2.1 per cent.

As of June, Australian economic growth was running at 1.4 per cent, the slowest pace in around decade.

In the IMF's latest regional outlook for Asia and the Pacific, released on Wednesday, the authority also noted the region's growth will continue to lose pace in the short-term.

"Real estate markets will need to be closely monitored and appropriate macroprudential measures implemented," the report states.

But in a media briefing on the region on Friday, deputy director for the IMF's Asia Pacific department Jonathan Ostry said he believes Australian policies have reacted appropriately to the slow down.

New Treasury boss Steven Kennedy doesn't believe there is a crisis warranting immediate spending from federal government, saying he is "cautiously optimistic" about Australia's economic outlook.

Addressing senators in Canberra for the first time since taking on his new role last month, Dr Kennedy believes the policy settings are right for the economy to strengthen.

"I'm cautiously optimistic about the way the economy is going to strengthen," Dr Kennedy told the Senate economics committee on Wednesday.

While there have been widespread calls for the government to do more, with economic growth at its slowest in a decade, Dr Kennedy said stimulus responses like those seen during the global financial crisis are "uncommon".

"A feature of the current weakness in the global and domestic economy is heightened uncertainty among consumers and businesses," he said.

"Given this uncertainty, medium-term fiscal and monetary policy frameworks can play an important role and contribute to a stable and predictable environment that is supportive of growth."

He said the the tax cuts that were instituted this year are having a positive effect on the economy.

The Treasury secretary said the drought has taken its toll on economic growth, but employment growth has been very positive, even though this has not resulted a marked lift in wages.

He said while there are a range of explanations for this, whether it be a change in demographics, technological or globalisation, it was a global phenomenon.

He said the most sustainable way to get wages up is through labour productivity.

But he warned there is still the potential for global shocks.

He said the de-escalation in trade tensions between China and the US is a welcome sign, but the situation around the UK leaving the European Union remains unclear.

"I am in no better place than perhaps anyone here to comment on the Brexit arrangements, but if they were to resolve themselves they would all be providing an upside boost to the global outlook and that would assist Australia," he said.

Dr Kennedy has just returned from Washington where he attended International Monetary Fund meetings and said it was pleasing to hear some more confidence in the outlook, particularly in the US.

But European countries continue to suffer weakness.

Last week the IMF downgraded its growth forecast for Australia for this year down to 1.7 per cent from 2.1 per cent.

As of June, Australian economic growth was running at 1.4 per cent, the slowest pace in around decade.

In the IMF's latest regional outlook for Asia and the Pacific, released on Wednesday, the authority also noted the region's growth will continue to lose pace in the short-term.

"Real estate markets will need to be closely monitored and appropriate macroprudential measures implemented," the report states.

But in a media briefing on the region on Friday, deputy director for the IMF's Asia Pacific department Jonathan Ostry said he believes Australian policies have reacted appropriately to the slow down.

Posted in: News  

Make your money last in retirement

Posted on 17 October 2019
Make your money last in retirement

MoneySmart
(ASIC)

There are ways to stretch your retirement income to make your money last as long as possible.

Consider getting financial advice

Depending on your circumstances, you may want to seek financial advice to maximise your retirement income. For instance, if you have a substantial amount of super and want to invest some of it, a finance expert can help with investment options and tax advice.

Diversify your investments

With many retirees living beyond the age of 90, it's a good idea to invest at least some of your money in assets that will grow over time, like shares and property. This will help ensure your capital will grow in value to keep pace with inflation and your income needs. Spread your investments to avoid financial heartache in the future.

Manage your spending

A simple way to make your money last longer is to watch your spending. Use the budget planner to see how you currently spend your money and see where you can cut back to save for special items.

Take advantage of your entitlements

Even if you don't get the Age Pension, you may be eligible for other benefits, such as travel concessions, cheaper medicines and reduced council and water rates. The Seniors Card will also give you discounts on travel and some retail services. See our webpage on Over 55s your money.

Also see the Department of Human Service's Commonwealth Seniors Health Card webpage for more information.

Work part-time

Part-time work is a good option to ease into semi-retirement before fully retiring, or a way to keep extra income coming in. Here are some benefits of working part-time:

  • Conserve your super balance -  as you will be earning an income, you won't need to draw as much from your super and can continue to contribute to the balance.
  • Earn an income before the Age Pension -  if you are not yet eligible for the Age Pension, working part-time allows you to semi-retire but still have some income.
  • Tax incentives - if you are aged 55 or over you may be able to take advantage of a transition to retirement strategy, which allows you to supplement your pay by drawing down from your super after you have reached preservation age. You pay no tax on your super income from age 60 and your employer will continue to top up your super.
  • Government incentives -  earning extra income will potentially reduce your Age Pension; however, the Government has incentives to encourage people to work past the pension age. See Centrelink's work bonus scheme for more information.
Posted in: News  

What is an ETF?

Posted on 30 September 2019
What is an ETF?

Money and Life
(Financial Planning Association of Australia)

Like the idea of effortlessly investing in a lot of listed companies at low cost, with a minimum investment outlay, and the potential to achieve good returns? If this sounds like you, then it could be worth exploring the benefits of buying what are called ETFs (Exchange Trade Funds).

While ETFs are by nature complex investment products, think of them as simply a basket of securities such as listed companies (aka stocks). In very simple terms, when you buy an ETF, you're actually buying a microscopic version of a particular market index.

Let's explain how that works. If you invest $500 in an ETF that's linked to a certain stock market index, let's say for example, the S&P ASX 200, that means your $500 is split up to closely reflect the largest 200 companies on the ASX.

How much of your $500 is invested in each stock depends on its actual weighting on the S&P ASX 200 Index.

For example, if the big miner BHP Billiton accounts for 10 percent of the S&P ASX 200 Index by market capitalisation (ie how much its listed stock are worth), then 10 percent of your $500 will be invested in this stock, and so on according to the weighting of the other 199 stocks on this index.

What are the benefits and risks of investing in ETFs?

For starters, there's a lot of variety to choose from when investing in an ETF. You can buy an ETF that tracks a basket of stocks on either a local or overseas stock market. Alternatively, you can even buy an ETF that instead of tracking the performance of a stock market index, tracks either currency exchange rates or the price of a single commodity, like gold or silver.

Secondly, by tracking a market index, your investment is exposed to much greater diversification than buying just one stock. ETFs typically cost you less in fees because their operating expenses are usually considerably lower than other investment products.

The other beauty of buying ETFs is that the (stock) price changes throughout the day (aka in real-time) and you can decide to buy and/or sell your ETFs at any time without entry or exit fees (while the stock market is open).

Another benefit of buying ETFs is you can do so with a minimum up-front investment. As an investor in ETFs, you'll also receive valuable tax breaks under the capital gains tax (CGT) discount rules. Then there are indirect advantages including franking credits that flow through to you directly via regular distributions.

Despite the benefits of buying ETFs, it's important to remember that they are designed to track a stock market index (or asset class), and if that stock market index falls in value, the price of your ETF would fall by the same amount.

Similarly, if you decide to buy an ETF that tracks an international stock market index, you need to find out how the entity operating the ETF manages their exposure to overseas currencies, and how your investment is protected if those currencies weaken against the Australian dollar.

How can you invest in ETFs?

ETFs are listed entities, and as such can be bought or sold just like any other listed company anytime during the stock exchange's trading hours. You can buy as many or as few ETFs as you want. But remember, broker fees will apply and the smaller the parcel of ETFs, the higher the proportion of overall costs the fee will be.

You can buy ETFs by contacting your stockbroker or financial planner, or by trading through an online broker.

Posted in: News  

Tax cuts buoy confidence, but risks remain

Posted on 19 September 2019
Tax cuts buoy confidence, but risks remain

Angus Livingston, AAP National Economics Writer
(Australian Associated Press)

Tax refunds are flushing through the economy and consumer spending intentions are rising but Josh Frydenberg warns global tensions pose real risks.

The treasurer warned businesses on Tuesday evening about the impact of the United States and China's trade war, and the conflict with Iran, on Australia's economy.

"Now in times of global economic and political uncertainty, it is more critical than ever to provide stability and certainty in our economic settings and not get drawn into overreacting," Mr Frydenberg said in a speech to a business lobby event on Tuesday.

The Reserve Bank of Australia also revealed in its board meeting minutes it kept the official cash rate at one per cent because of concerns about low wage growth and international tensions.

The RBA said the decision was based in part on the unemployment rate, which has stayed at 5.2 per cent for several months.

"At the same time, wages growth had remained low and there were few indications that wage pressures were building," the RBA said.

"Members judged that it was reasonable to expect that an extended period of low interest rates would be required in Australia to make sustained progress towards full employment."

The Australian Bureau of Statistics revealed residential property prices fell 0.7 per cent in the June quarter, taking the total value of Australia's 10.3 million residential dwellings down $17.6 billion to $6.6 trillion.

"The falls in Melbourne were driven by detached dwellings, while attached dwellings drove the fall in Sydney," ABS chief economist Bruce Hockman said.

There was some positive news from the Commonwealth Bank Household Spending Intentions research, which showed a significant lift in consumer positivity is under way.

"Spending intentions are improving in Australia, with a combination of income tax refunds and a stronger housing market leading the charge," CBA chief economist Michael Blythe said.

"Significantly, the home-buying spending intentions series has moved back into positive territory and this should help drive a further improvement in retail spending intentions in the months ahead."

But the ANZ-Roy Morgan weekly Australian Consumer Confidence index paints a different picture.

It recorded a 4.8 per cent slide in people's expectations for their finances over the next 12 months.

"While households feel okay about their current financial situation, they are clearly quite worried about the outlook, for both their own finances and the economy," ANZ economist Felicity Emmett said.

Mr Blythe said the tax refunds flowing into CBA accounts were about 40 per cent above "normal" levels.

"The boost to household spending power is larger and coming through sooner than originally expected," Mr Blythe said.

"The better news is that this tax refund money seems set to flow through to consumer spending."

Posted in: News  

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