Understanding the Basics: What is an Estate Plan?

MBA Financial StrategistsLatest ArticlesEstate PlanningUnderstanding the Basics: What is an Estate Plan?

Understanding the Basics: What is an Estate Plan?

Estate planning is a critical component of financial health, ensuring your assets are managed and distributed according to your wishes. This blog will introduce you to the essential elements that make up an effective estate plan. By understanding the components of estate planning, you actively distribute your assets according to your specific wishes.

The Key Components of an Estate Plan

Creating a comprehensive estate plan involves several key elements that work together to manage and distribute your assets exactly as you envision. Here’s a closer look at each component:

Wills and Testaments

A  will is critical in any estate plan, serving  as the primary  document for directing the distribution of your assets upon  your death. It determines who inherits your property—be it family, friends, or charities—and specifies care provisions for minor children, actively respecting your parental wishes.

Moreover, having a clear and legally valid will greatly reduce complexities for your heirs, facilitating a smoother probate process.

This document also allows you to appoint an executor, who will manage the estate settlement according to your directives, ensuring that your final wishes are carried out precisely as intended.

This careful planning not only protects your legacy but also provides reassurance and clarity to your loved ones during a difficult time.


Trusts are a vital component of estate planning, offering a versatile framework for asset management and protection. By establishing a trust, you actively protect your assets from probate, lower estate taxes, and dictate the terms of asset distribution to your beneficiaries.

Trusts can be tailored to meet various goals, such  as preserving wealth for future generations, providing  for a family member with special needs, or supporting charitable efforts.

They also afford privacy, as the details of a trust typically do not become public record, unlike the contents of a will. This makes trusts an attractive option for those seeking discretion in managing their estate.

Powers of Attorney

A power of attorney (POA) is a crucial legal instrument in estate planning, designed to ensure the management of your affairs should you become incapacitated. This document grants a trusted individual—the attorney-in-fact—the authority to make decisions on your behalf, encompassing financial matters, medical care, and even day-to-day activities.

You can customise the POA to become active only under specific conditions, such  as a medical diagnosis of incapacity, which allows  you to control when  it takes effect.

Establishing a POA is a proactive step that maintains your autonomy by ensuring that decisions are made according to your preferences and values, even if you can no longer express them yourself.

Benefits of Effective Estate Planning

Effective estate planning offers several key advantages, including:

  • Tax Advantages: Substantially reduces potential tax liabilities for your estate and beneficiaries by utilising specific strategies such as gifting and trusts, which can minimise estate taxes and maximise inheritance for your heirs.
  • Avoidance of Probate: Helps bypass the costly and time-consuming probate process, allowing for quicker and more private asset distribution, thereby avoiding public disclosure of estate contents and values.
  • Asset Protection: Ensures that your assets are safeguarded from legal disputes, creditor claims, and potential litigations, providing structured protection that keeps your estate intact for your intended beneficiaries.
  • Holistic Financial Strategy: Integrates with other critical aspects of financial planning, such  as retirement planning and insurance coverage, ensuring a well-rounded approach that addresses all potential financial needs and risks.
  • Peace of Mind: Offers you and your loved ones the reassurance that your financial wishes are documented, legally robust, and will be followed, reducing the burden on family members during a challenging time.

Common Misconceptions about Estate Planning

Estate planning is surrounded by myths that can hinder effective planning. Here are some common misconceptions:

  • Only for the Wealthy: Many believe estate planning is only for the wealthy, but it’s crucial for anyone wanting to manage their assets and legacies, regardless of the estate size.
  • Wills are Sufficient: While wills are important, they are just one part of a comprehensive estate plan that may include trusts, powers of attorney, and healthcare directives.
  • Too Young to Plan: People often think estate planning is for older adults, but unexpected life events can occur  at any age, making  it essential for everyone.
  • Once Done, Always Done: Estate plans should be reviewed and possibly adjusted due to life changes like marriage, divorce, or the birth of a child.
  • No Need if Not Rich: There’s a misconception that estate planning is unnecessary if you don’t have significant assets, but it’s about protecting what’s important, ensuring your wishes are honoured, and providing for your loved ones.

How MBA Financial Strategists Can Help

At MBA Financial Strategists, we specialise in creating tailored financial plans that reflect your unique financial and personal circumstances. Our team of experienced financial advisers will facilitate your estate planning needs by referring you onto our trusted estate planning referral partner that can provide comprehensive services, including wills, trusts, and powers of attorney, ensuring your assets are protected.

If you’re considering creating an estate plan and need expert guidance, contact MBA Financial  Strategists today.  You can reach us at (08) 8357 3999 to schedule a consultation or book an appointment online with a financial planner who fits your needs, helping  you to effectively manage your legacy.

MBA Financial Strategists Pty Ltd ABN 13 008 285 756 is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327, Australian Financial Services License and Australian Credit License No 232706. This article contains information that is general in nature.  It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.