When it comes to Wills and Estate planning, making a difficult situation easier for those we leave behind is a big motivator to get it right. There’s more to Estate Planning than preparing a Will that outlines a division of assets. It includes strategies for dealing with your assets – and not just the ones that form part of your Will. It should be a holistic and carefully planned approach that works to protect your estate and the interests of those you leave behind – your beneficiaries. Estate planning also includes nominating someone to make important lifestyle and financial decisions on your behalf if you’re unable to.
With ownership and taxation implications associated with many bequests, it’s important that a Will is prepared by an advisor with experience in associated legislation to ensure assets are transferred in the most efficient and tax-effective manner.
If you already have a Will in place, now is a great time to review it. Check that your current Will addresses fundamental modern estate planning issues like the ones we’ve mentioned below.
Although there aren’t taxes on inheritances, there may be taxation implications for a beneficiary if inherited assets are sold or if they produce income. This can be the case for surviving spouses who no longer have the ability to share income and proceeds from sale of assets in a tax effective way. A testamentary trust can assist by structuring beneficiary inheritances in a way that may minimise taxation commitments.
Discuss Testamentary Trusts with your Estate Planning Expert.
By distributing inheritances with no thought for subsequent action or implications, there may be situations where a beneficiary’s inheritance could be at risk. Examples of this include bankruptcy proceedings (of which inheritances can be taken) or a relationship breakdown. There are tools that can be used to protect inheritances from these kinds of actions. These tools, called discretionary testamentary trusts can significantly reduce the risk of loss of an inheritance. This type of trust doesn’t come into effect until after a person’s death. Usually the trustee has full discretion about distributions to beneficiaries and assets may only be protected while the trustee has full control. The separation of control and benefit is what enables testamentary trusts to protect assets from legal action.
Discuss Testamentary Trusts with your Estate Planning Expert.
As the second largest asset after your home, Superannuation needs to be considered during any form of Estate Planning. But many people don’t realise that Super is classed as a non-estate asset. This means it cannot be distributed to beneficiaries via your Will. Your decisions relating to your super distribution will need to be communicated with a death benefit nomination lodged with your super fund. You can read our in-depth article about Superannuation and how it fits into Estate Planning here.
Discuss Binding Death Benefit Nominations with your Estate Planning Expert.
A Will that has deemed to be unfair in the eyes of the beneficiaries can be a catalyst for expensive and drawn out arguments among family members. Individuals contesting the Will may be concerned about gifts or loans offered during your lifetime and the fairness of subsequent asset division. By considering these issues in advance and making appropriate directives, you may be able to avoid these disputes for your family. Called a hotchpot clause, it is often used as a way to ensure dependents are treated equally. This type of arrangement requires someone knowledgeable in the clause and its technical aspects.
Family trusts have become popular for individuals and professionals in recent years due to their asset protection and taxation benefits. Failing to address control of family trusts is a common issue when a Will is prepared by someone who doesn’t specialise in Estate Planning. Assets held within family trusts can’t be passed on as part of your Will, however it is still prudent to consider it in your planning and mention it in your Will. Control is determined by the provisions of the Trust Deed of your Family Trust. If your Will has no mention of passing control of your family trust, it’s important to review the Trust Deed and update your Will to include provisions about control of the Family Trust.
Discuss Family Trusts with your Estate Planning Expert.
Do you have concerns that some of your chosen beneficiaries may be too young, incapacitated, or unable to manage their inheritance properly? There are simple yet effective measures that can be put into place to prevent inheritances being wasted. Protective trusts are a way to ensure that the ones who need help the most are provided with assistance when it comes to their inheritance.
Discuss Protective Trusts with your Estate Planning Expert.
Not all Wills are created equal. What works for your neighbour, your cousin, or your colleague may not necessarily work for you. A Will is as unique as your own personal situation.
The laws surrounding estates can be complex and this is why it’s important to get appropriate legal, financial and taxation advice to ensure you and your family’s interests are protected.
This blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.