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Are Your Personal Affairs In Order?
People often delay or spend inadequate time planning their personal legal affairs. You have a responsibility to your family to ensure that your legal affairs have a current "warrant of fitness". Otherwise, in the event of illness, an accident or untimely death, you can expose your family to uncertainty, delay, extra cost and possible unhappy consequences.
A personal warrant of fitness generally comprises three primary components and a fourth one that is optional. They are as follows:
1. A Review of Ownership of your Assets
There are three types of joint ownership namely a joint tenancy, a tenancy in common and a joint family home.
The feature of a joint tenancy is that if one of the joint tenants dies, the surviving joint tenant becomes the sole owner of the property no matter what the provisions are in the deceased’s will.
Unlike a joint tenancy, a tenancy in common means that on the death of one owner the surviving owner does not automatically take ownership of the share of the deceased - that share is distributed in accordance with the provisions of the deceased’s will.
A joint family home is a more sophisticated form of a joint tenancy. A joint family home has the advantage that once it has been settled as a joint family home for two years, the owners have a limited form of protection against creditors. An earlier commencement date for that protection can be obtained if settlement as a joint family home is advertised in the Public Notices column of a local newspaper.
2. Enduring Power of Attorney
The effect of an enduring power of attorney is to authorise the person or persons named as an attorney to act on your behalf in relation to your property and/or your personal care and welfare if you lose mental capacity. An enduring power of attorney is automatically revoked by the death of the person who appointed the attorney or attorneys.
3. A Will
Every person aged over 18 years (younger if married) of sound mind can make a will. Generally a will covers funeral/burial/cremation wishes, the appointment of trustees, the appointment of testamentary guardians for infant children and the beneficiary or beneficiaries who are to inherit property from the person making the will.
4. A Family Trust with a Memorandum of Wishes (Optional)
The basic features of a trust are that persons (trustees) hold or control property not for their personal benefit but for the benefit of others (the beneficiaries). The trustees are required to administer the trust property in a prudent manner as prescribed by the trust deed and in accordance with the requirements of the Trustee Act.
There are a number of benefits in establishing trusts. These include:
(a) A trust can preserve assets for successive generations and can also allow flexibility in dealing with changing circumstances of family members.
(b) Trusts are a means of protecting assets from creditors, disgruntled relatives and government user pay charges.
(c) There may also be tax advantages in establishing a trust.
A memorandum of wishes may be left by the settlors of the trust. While a memorandum of wishes acknowledges the full discretion of the trustees of the trust, the memorandum can set out clear wishes of the settlors.
Once you have your warrant of fitness you need to review it regularly and particularly if your circumstances change e.g., marriage, death of a family member, inheritance or change in financial circumstances.