Accounting For Psychologists Newsletter #4

Hi and welcome to the October newsletter of Accounting for Psychologists,

This month we’ll look at estate planning for yourself and your business.

Good news!  Our book “Sorted.  Financially Well Organised” is now available. The cost of the book is $15 + postage. Here is the link to the online store for you to purchase the book: https://www.openbookhowden.com.au/product/sorted-financially-well-organised/ 

If you are in Adelaide, pop into the office grab one from our front office, and you’ll save the cost of postage! 

While you are here book in for a chat and we can catch up on your financial goals.

“Sorted” provides practical information and easy to use worksheets and checklists to help you become financially well organised in each of the eight key areas of personal finance: Personal Budgeting

• Savings
• Investments
• Taxation
• Debt
• Insurance
• Retirement
• Estate Planning

You can download the extract of Chapter 1: Personal Budgeting here: https://www.sheridans.net.au/media/website_pages/sorted/Sorted-chapter-1-extract.pdf

Important Dates for Tax

Wills, Power of Attorney, and an Advance Care Directive

The recent death of Queen Elizabeth sadly reminds us that no-one is immortal. Is your Will up to date?  What about your Power of Attorney and Advance Care Directive?

My wife and I have just met with our lawyer and reviewed our Wills and our documents about who will make decisions making if we become unable to.  To be honest, we had been putting it off but having completed the process it feels really good to know that it’s all in place. 

In this newsletter, I’ll explain the basics of Estate Planning for everyone and look at some of the things you’ll need to consider as a business owner. 

Hang on, why is my accountant talking to me about my estate plan?  Well, as your accountant I feel it’s my responsibility to help you to optimise your finances.  An absolutely integral part of that is having an estate plan for your personal finances and for your business.

No one really wants to think about worst case scenarios, but by setting up a Will, Power of Attorney, and an Advance Care Directive you’ll be helping your loved ones to make decisions in difficult situations and making sure that your assets are distributed as you think best. Do get a lawyer assist you in doing this, so that it’s all done properly leaving no room for ambiguity. 

The following information is aimed at everyone over 18.  Then I’ll take a quick look at how it can affect business owners. 

Will

A Will is a legal document specifying how you want your assets, including your house, money, and personal belongings to be distributed after you die.  It also includes your wishes regarding care for your minor children.

Having a Will means you can ensure that your assets will go to the people you care about and that the people you choose will administer your estate.  It will make it easier for your loved ones to deal with your affairs when you are gone.

When making a will you need to consider:

Executor – This is the person, or people, you choose to carry out the directives in your Will. They can be a friend, a member of your family or a professional like a lawyer, accountant, or professional executor. You can legally appoint up to four executors, although two is the usual number with one as the principal and the other as a back-up if the principal is unable to act. 

Being someone’s executor is an honour, but it is also a responsibility, so speak with the person or people you choose and check they are comfortable to do it.  Generally, executors are not paid but they may be a beneficiary of the Will, or a special clause can be added to the Will specifying payment.  Executors can engage professionals like lawyers or accountants to help them and these fees are taken care of by the estate. 

• Beneficiaries – Make a clear list of the people or charities you would like to receive your money after you die.  Be specific so there can be no mistakes in identity.  
• Specific gifts – Would you like to leave a major asset (like your house) to a specific person?  Are there any items of sentimental value or jewellery that you would like a specific person to have?
• Guardianship of your children - If you have children under 18, or dependents, you need to name a guardian for them in your Will.
• Care for your pets

Enduring Power of Attorney

This is a legal document allowing you to appoint a family member, a close friend or a professional, to look after your legal and financial affairs if you become incapacitated and unable to make decisions.

If you don’t have an Enduring Power of Attorney and you become incapacitated, your loved ones will not be able to make decisions on your behalf.  They will need to apply to the Guardianship and Administration Tribunal to be appointed as your guardian which can be a stressful and costly process.

Advance Care Directive

An Advance Care Directive is a legal document that allows you to write down your wishes, preferences, and instructions for your future health care, living arrangements, personal matters, and end of life in the event that you suffer serious illness or incapacity. In this document you nominate one or more people to make these types of decisions for you if you are not able to.

It’s not something to put off, so utilise the free government service in your state right now to register your preferences and nominate your substitute decision makers online. You can find links to your state or territory’s Advance Care Directive forms at Advance Care Planning Australia.  You can review it with your lawyer later on.

https://www.advancecareplanning.org.au/create-your-plan

Laws vary in different states and territories, so I recommend you find a local lawyer to help you with this.  If you’re in Adelaide, I can put you in touch with a lawyer specialising in Estate Planning. At this stage, I don’t have any contact interstate yet. So, if you have anyone that you would recommend, please let me know.    

Business Owners Contingency Plan

If you’re a self-employed psychologist, you’ll also need to consider what will happen to  your business and your patients if you become incapacitated or die. The major psychology organisations in Australia recommend preparing a Contingency Plan for your practice where you appoint another psychologist to take care of your patients and your business.

If you were to become incapacitated or die suddenly, the executor of your Will or the person acting for you with Power of Attorney will notify your appointed person to put the Contingency Plan in place.

The Contingency Plan will outline various things  that the appointed person will take care of on your behalf including clients, access to and storage of client records, and informing relevant peoople and organisations of your incapacity or death.

Your executor will need up-to-date contact details for your appointed person. If you have an office manager, it would be prudent to make them aware of what you have in place.

Be sure that your Will and your Enduring Power of Attorney are in sync with your Contingency Plan, so that there are no legal complications between your executor, or the person acting for you with Power of Attorney, and the person you appoint to take care of your clients and your business.

Of course the things you need to consider will depend on the amount of risk your clients will undergo if you become unable to treat them (someone dealing with suicidal thoughts would clearly need more urgent treatment than someone requiring an educational assessment) and the skills your executor or the person acting for you with Power of Attorney has (perhaps they are a qualified psychologist).

There are also whole range of practical considerations that will need to be taken into account for your Contingency Plan. When the time comes your appointed person will need to be able to access your diary or calendar and your professional records.  This may include passwords to your computer, keys to your filing cabinet and so on. 

Clients

Your current clients will need to be sensitively notified of your incapacity or death and offered alternative health care providers. Clients should be informed of what will happen to their records, where their records will be stored and for how long. This must all be done in a way that respects client confidentiality.

Client Records

Your plan should include instructions for locating patient files and clear instructions for saving or destroying them, as appropriate.

Informing Organisations

Your appointed person may need to inform your staff, colleagues, and practitioners who refer to your practice.

They will also need to notify your insurance provider, the registration board and any professional organisations you belong to.

Payment for the Appointed Person

Discuss with your appointed person about how they will be paid for their time and expenses. It could be one-off payment from your estate if you have died, or an ongoing fee for service if you are incapacitated.

A Contingency Plan is definitely something you need to discuss with your lawyer and your executor to make sure all your bases are covered.  Be sure to review it every year or so to make sure that it’s up to date.

That’s all for this month.  As always, feel free to contact me or the team if you have any questions.

Happy Halloween everyone,

Fairuz