Without an estate plan, your clients’ assets may be distributed to people that they did not wish to be beneficiaries. It could also mean people they did intend to benefit from their estate miss out or end up paying more tax than they need to.

A valid will plays a vital role in any good estate plan. It’s the legal document that provides direction for the executor of your client’s estate in distributing their assets to their intended beneficiaries.

Some other useful estate planning tools include:

• life insurance
• a binding nomination for payment of a superannuation death benefit or life insurance, and
• a testamentary trust.

While the rules around creating and administering a valid will differ between states and territories, there are generally a few common requirements:

• it must be in writing
• it should be signed by the person making the will and two independent witnesses at the same time
• the witnesses should not be beneficiaries, or related to a beneficiary of the will
• witnesses must be aged at least 18, and
• the person making the will must be aged at least 18 (may be under 18 if married), and of sound mind.

While there are many do-it-yourself will-kits available, it’s recommended clients seek specialist legal advice to avoid gaps and complications and to ensure their will is valid.

Once your client has a valid will, there are several situations where it may become invalid or require a review. This depends on the relevant legislation in their state or territory of abode. Generally, a will should be reviewed:

• on marriage or divorce
• on entering or leaving a de facto relationship
• on having children, or if a child dies
• if a beneficiary or the executor dies
• where insurance cover, relevant super funds or investment balances change significantly, or
• if an asset covered by the will is sold.

A testamentary trust is a trust created by using a Will to allow trustees or executors to manage the assets within the estate on behalf of the beneficiaries for a period of time. It can have significant tax advantages for beneficiaries. It can also help protect clients’ assets from if financial or other difficulties arise, such as bankruptcy. That means a testamentary trust may be particularly useful for clients in business or that are otherwise vulnerable to a claim against them.

There are three types of nominations clients may utilise in relation to their super death benefit: non-binding, binding lapsing and binding non-lapsing (SMSFs also have additional options). In all cases, the nominated beneficiaries need to be your client’s legal personal representative or their dependant/s – such as their spouse, child or someone financially dependent on them.

With a non-binding nomination, following the member’s death the fund trustee will be guided by their nomination when distributing their super death benefit. The trustee, however, is not legally bound to follow the request.

However, if it’s a binding nomination, providing it is valid (i.e., all the required conditions are satisfied), the trustee must pay the benefit to your client’s nominated beneficiary/ies. It’s also important to review your client’s nominations at least every three years.

Nominations of beneficiary/ies for life insurance contracts are far less complex. The nomination remains binding until revoked or replaced. In Australia, the beneficiary must be a real person or formal entity – not the family pet.