Estate planning – what should I do before I die?
Make sure that what you have is left to who you want.
A robust estate plan will ensure your wealth is transferred smoothly and taxed effectively.
For many people, wills and estate planning discussions are something that tend to be put off until tomorrow, next week or next year. We get it. No one wants to think about their own mortality and discussions about it are uncomfortable.
Even if you have a current will (which almost half of Australians do not), it may not apply to all of your assets. Complications can arise depending on where your assets are held. For example, did you know that in some cases superannuation may not even form part of your estate?
Estate planning essentially comes down to three questions: What do I have, who do I want to have it, and what will the implications be for that person?
As your accountant, we’re in a unique position to have a full picture of your financial affairs as well as having expertise in tax and business considerations. Read through our case studies to get a better idea of how we can help.
Isn’t Everything covered by my will?
Thomas came to see us about his estate planning and was surprised to find out that his will only covers assets owned by him personally. He had trusts and companies and had assumed they were covered too. Unfortunately, this is not the case.
Similarly, for his company, the assets owned by the company could not be included in his will. Some of the shares in his company were held by him personally so he could gift those in his will, but some were held by trusts, so we had to pass control of the trusts to the beneficiaries.
Estate Planning can be complicated when there are substantial assets and complex business structures in place. Seeking professional advice from an Estate Planning lawyer and accountant will ensure your hard-earned assets are passed to your intended recipients.
Getting the timing right
Estate planning isn’t only about dealing with your will. Sometimes the best transitional plan is to execute part of your estate plan sooner rather than later. Doing this ahead of time can mean your assets and business interests are transferred with more certainty. However, those family members may not be ready to take over, or there may be other issues to consider.
Suzanne had two children and unfortunately one of them, Anna, had a substance abuse problem. Suzanne’s business was going well and her other child, Dave, was working in it and contributing long hours to see it grow. Her concern was that she wanted to be fair to both children but also thought Dave deserved to be rewarded for his efforts. It was a tricky situation and one which was causing her some anxiety.
There were many other complications in this situation. Families are complicated, estate planning is even more so. But we can guarantee you that you’ll have peace of mind if you take steps now to minimise your family’s stress when you leave them.
Testamentary Trusts
Assets left to an individual are “up for grabs” once in the recipient’s hands. In the event of a divorce, it’s possible this inheritance would be added to the matrimonial asset pool and split up. In the case of a bankruptcy, a trustee would have full access to the inheritance to repay debts. One way to protect this is by setting up testamentary trusts as part of your will.
In Suzanne’s case we set up these Testamentary trusts as a way to future proof her children’s inheritance. Suzanne felt very strongly that what she had accumulated was for her children and grandchildren and not for anyone else. A testamentary trust was her way of carrying out her wishes. It also gave the family the added advantage of potentially reduced tax if the beneficiaries are children under 18.
Having the Tough Conversations
Talking with your family about the intentions for your estate, while difficult, is important to ensure you desires can be honoured. Having the tough conversations now means you have communicated your wishes and may prevent an unintended outcome.
We’ve sat down with families on countless occasions to go through the pros and cons of various scenarios of what an estate can look like. It can be eye opening for the will makers. They are trying to be fair, but the children may not see it that way if you’ve never had a discussion with them about your wishes or their intentions.
Having the conversation also means you can do things such as preparing an Enduring Power of Attorney so that financial and medical decisions can be made for you should you become incapacitated.
Further help:
If you have any questions, feel free to contact Marsh & Partners to discuss the options. You can reach us on (07) 3023 4800 or at mail@marshpartners.com.au.
