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Estate planning - is your house in order? |
Benjamin Franklin once said, in life there are two certainties, death and taxes. Over time, a number of permutations have been made to this statement, including that the three certainties of life are death, taxes and change. It is this statement we wish to examine as part of our article in this issue of GPSpeak.
Death, as part of the human cycle is a question of when, not if. It is fair to say, that most of us do not consider this fact, particularly, when it comes to estate planning. The importance of a well considered and appropriate estate plan is paramount. Most people, when preparing their estate planning have a simple will, leaving their share to their partner and normally vice-versa. In some cases this may still be appropriate.
As part of this process, consultation with both your solicitor and accountant is recommended. When considering how your estate is to be dealt with there are a number of points for consideration. Issues that should be addressed include, but should not be limited to, the following:
1. Who will be reliant upon your estate? Do you have a young family?
2. Do you have children from a previous relationship? How are they to be provided for?
3. Will there be sufficient assets to provide an appropriate income stream for your family? Do assets need to be supplemented by appropriate insurance policies?
4. Who is the executor of your will? Do you need to appoint co-executors?
5. How much will your loved ones need to live on? Are there education funding requirements, etc?
6. What debts are currently owing? Will surplus assets readily cover these and provide an appropriate surplus? Are the assets realisable in an appropriate time frame?
7. Are your beneficiaries spendthrifts? Do they have gambling, drug or alcohol problems? Have you considered ways to protect them (or your wealth)?
8. Have you considered the implications of leaving assets to beneficiaries who may be in a financial crisis? Will their estate entitlement go to creditors?
9. Are potential beneficiaries experiencing matrimonial problems? What will be the implications in the event of a divorce?
10. Do some of your assets have potential capital gains tax liabilities accruing? Should this be taken into account when determining the split of assets?
11. Do you have investments through family trusts, family companies etc. Who is the appointor of your family trust?
12. How will your superannuation be dealt with on death? Superannuation is not normally an estate asset.
These questions and many more are usually in people’s mind, however, most people are reluctant adequately to address these very important issues.
As times change however, many more people are willing to examine the use of testamentary trusts to provide flexibility as part of their estate planning. A testamentary trust can provide asset protection to spendthrift beneficiaries, protect assets from creditors and provide protection in the event of divorce. Whilst testamentary trusts are not a new development, their use has become more prominent in modern estate planning.
Testamentary trusts also provide significant tax planning opportunities, which are not normally available as part of a simple will.
We would encourage all readers to examine closely their estate planning issues and consult their solicitor and accountant. All too often, after the death of a loved one, the family is left with not only the emotional stress of losing a loved one, but the ongoing financial burden due to inadequate planning.
Russell Franey is a partner at Thomas Noble and Russell.
The content of this paper is for general purposes only and cannot be regarded as advice.
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