Estate Planning – Why is it important?

Posted on November 14, 2016
by Angela Bernardi in Accounting Blogs
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It is important for all of us to ensure that the assets we have accumulated over our lifetime are left for the benefit of those people or institutions we wish to support, and left in the way that is most beneficial to the recipient.

Your Will plays a large part in your estate distribution, so you need to make sure it is up to date, valid and correctly reflects your wishes. Having a well drafted and thought through Will can save your beneficiaries a lot of trouble and heartache.

Points to consider when drawing up your Will

  1. What do you own? And will these assets pass through your estate?
  2. Who will be the executor (personal representative) of your will?
  3. Who will be the guardian of your children?
  4. Who do you want to leave your estate too?
  5. Do you want your estate to go directly to your beneficiaries or will you use a Testamentary Trust?

What is a Testamentary Trust?

This is a trust created in a person’s Will, which is activated upon the death of that person. Instead of assets passing directly from one person to another, the assets are passed to the Testamentary Trust and then administered by the designated trustee – usually a family member, a trustee company, accountant or a solicitor. A Testamentary Trust has a number of benefits including:

  • Asset protection
  • Keeping assets within your family line
  • Managing tax liabilities through income flexibility – The trustee of the Testamentary Trust can choose how to distribute income from year to year. This enables the trustee to take advantage of lower marginal rates of tax of one or more potential beneficiaries.
  • Marginal rate of tax for minors – Minors qualify for tax concessions on income they receive from a testamentary trust.

Some items to consider outside your Will

  • Superannuation – Is a Binding Death Benefit Nomination to the trustee of your superfund appropriate? If so, is this in favour of a particular beneficiary or your estate?
  • Life insurance – Have you designated a beneficiary in your policy? If so these funds will not pass through probate.
  • Owning property as Joint Tenants – If you own a property as a Joint Tenant, upon your death the surviving Joint Tenant(s) acquires the whole property automatically and as such the property does not pass through the estate.
  • Small business or partnership – This may be subject to a buy/sell arrangement with the other partners. In these circumstances your share of the business may automatically pass to the remaining partners (usually in exchange for the proceeds).
  • Power of Attorney/Enduring Guardianship – This is a legal document that appoints another person to make legal and/or medical decisions on your behalf. This power is particularly useful should something happen where you are temporarily unable to sign documents.

These are only a sample of considerations surrounding estate planning. Estate planning can be complex and it’s a good idea to seek the professional advice and assistance of both a financial adviser who understands your affairs and a solicitor experienced in such matters.

Contact BLG Business Advisers online today or call (02) 4229 2211 to discuss your estate planning needs.

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