Estate Planning: Protect your legacy, now & for future generations
Estate Planning: Protect your legacy, now & for future generations
A Will isn't necessarily enough to make sure your assets are passed on the way you want them to be.
But a good family succession plan is.
Family succession planning is a way of ensuring your assets are passed onto your loved ones in the most efficient and tax-effective manner possible.
A good family succession plan lets you decide how to pass on your assets while helping to avoid family disagreements over who gets what.
There is a lot to consider including the preparation of a Will, appointing a power of attorney, and setting up a testamentary trust – so it’s a good idea to get some professional help!
The Will
A Will is the foundation of good family succession planning. It says when, where and how you would like your assets distributed.
The idea is for you to decide how your assets are to be divided and to help avoid any disputes over who gets what.
A Will is a legal document signed by you (often called the testator or testatrix) and two witnesses – who are not beneficiaries.
An important consideration for the Will is to contain a short explanation of your decisions. This may reduce the potential for a legal dispute once the Will is read. It can also be a good idea to discuss these things with your loved ones so they understand the reasoning behind your choices.
A financial adviser can help structure a Will and discuss the relevant financial implications, as well as assess the changing value of the assets contained in the Will. Your Will should be reviewed any time your circumstances change.
Wills and Trusts
Unfortunately, having a Will may not be enough to ensure your assets are passed on the way you want them to be.
A Will generally only deals with the distribution of assets personally owned by you.
Determining the ownership of assets is crucial. You may assume that you own an asset when in fact you own it jointly, or it is owned by a structure such as a company, super fund or other trust.
Joint assets not included in the Will automatically fall to the surviving owner.
Including a trust as part of your Will is becoming an increasingly popular option. The advantages include maintaining social security entitlements, ensuring assets pass to children even if a surviving husband/wife remarries as well as capital gains tax and income tax advantages.
A testamentary trust can also help provide for children with an intellectual disability or mental illness, and can protect assets when a beneficiary becomes bankrupt or divorced.
The need for, or effectiveness of, a trust may depend on what assets are available and what instructions are left in the Will.
A good financial adviser can help you navigate the complexities and give you the options available based on your circumstances.
Your insurance and superannuation benefits
Life insurance and superannuation are generally not covered by a Will.
Many super funds have tight restrictions on who can be a beneficiary. It is important that you are aware of these restrictions when planning your estate, otherwise the person you wish to receive your super may not be eligible to receive it directly from the fund.
Super benefits are taxed differently depending on who they are paid to.
It may be a good idea to leave your super to a particular beneficiary and non-super assets to another.
Leaving assets to loved ones – not the tax man
It’s important to consider tax implications so the tax man doesn’t end up being your biggest beneficiary. A good family succession plan will provide ongoing minimisation of income tax for your beneficiaries, allowing the opportunity for deferral of tax liabilities, including Capital Gains Tax (CGT).
Understanding whether an asset should be passed into a trust or sold by the end beneficiary can prove valuable from an income tax and CGT perspective.
Capital Gains Tax, which applies to many assets, can have a substantial impact when a beneficiary sells an asset received from the deceased’s estate. If not considered carefully, beneficiaries may not be treated fairly.
Flexibility of distribution from a testamentary trust allows the taxable income of the estate to be managed more effectively.
Cover all bases
A poorly planned estate can result from circumstances such as:
a plan not reflecting the circumstances of the beneficiaries, such as the need for asset protection and tax effectiveness
lack of thought on ownership and the structures under which assets are owned
not considering debts
a lack of thought about the tax consequences of certain decisions.
Family succession planning is a very important part of everyone’s financial future.
To ensure you have all bases covered, contact Matthew McCabe of Newcastle Advisors on 0410 581 424 with your estate planning questions & concerns.
Our Newcastle financial planners also have offices in Sydney and help clients across the local areas including Newcastle Financial Planning(Merewether financial planning, The Junction financial planning, The Hill financial planning, Bar Beach financial planning, Newcastle West financial planning, Hamilton financial planning, Adamstown financial planning, Redhead financial planning, Whitebridge financial planning, Kotara financial planning, New Lambton financial planning, Mayfield financial planning), Maitland Financial Planning (Morpeth financial planning, Lorn financial planning, Rutherford financial planning, Aberglasslyn financial planning, Metford financial planning, Beresfied financial planning), The bay (Medowie financial planning, Fern Bay financial planning, Fullerton Cove financial planning, Anna Bay financial planning, Nelson Bay financial planning, Shoal Bay financial planning, Tea Gardens financial planning, Hawks Nest financial planning), Lake Macquarie Financial Planning (Cardiff NSW financial planning, Glendale financial planning, Speers Point financial planning, Fennell Bay financial planning, Bolton Point financial planning, Coal Point financial planning, Toronto financial planning, Valentine financial planning, Belmont financial planning, Eleebana financial planning, Warners Bay financial planning, Caves Beach financial planning), Hunter Valley Financial Planning (Muswellbrook financial planning, Scone financial planning, Pokolbin financial planning, Cessnock financial planning, Singleton financial planning, Broke financial planning, Rothbury financial planning), Central Coast Financial Planning (The Entrance financial planning, Bateau Bay financial planning, Berkeley Vale financial planning, Tuggerah financial planning, Wamberal financial planning, Terrigal financial planning, Erina financial planning, Avoca financial planning, Gosford financial planning, Woy Woy financial planning, Picketts Valley financial planning) & Sydney Financial Planning (Castle Hill Financial Planning, Rouse Hill Financial Planning, Dulwich Hill financial planning).
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