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Estate Planning: Consider all options in your Will and avoid significant implications

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There can be profound implications for not carefully considering all options in a Will. A Will can’t do more or less than the legislation allows and cannot give away what you do not own.  It is a legal document that directs the administration and disposal of your assets after death and should comply with strict formalities to be valid. Your sole assets are covered by your Will but not joint assets, a family trust, your superannuation fund or assets owned by a company.

 It is important to make sure you get the correct advice especially for assets owned by other entities. A Will should direct a trust deed to give the Public Trustee the power to distribute trust assets, not only distribute capital to the named beneficiaries who are living at the time of distribution.

With the appointor’s consent, the Public Trustee should be able to wind up the family trust and seek to distribute trust assets. Things to consider include naming the owner as a beneficiary of the trust, tax implications of distributions of capital and income and not gifting property that you do not own, among others.

Make sure that your non-personal assets are distributed to your intended beneficiaries by putting in place control measures in companies, super funds and trusts that you have an entitlement in.

A well drafted SMSF trust deed will allow members to control the distribution of their super entitlements on their death in several ways such as BDBN, death benefit rule, reversionary pension or appointment of a death benefit guardian. 

Meanwhile, the beneficial entitlement in a unit trust depends on the units held in that trust so your Will should provide your beneficiary your entitlement in the trust. Discretionary trust entitlement lies at the trustees’ discretion and should appropriately structure the trustee and appointor of the trust so beneficiaries will receive benefits from it. Lastly, the beneficial entitlement in a company lies with the shareholders and directors. You should appropriate provisions for the transfer of shares upon a person’s death.

You should also consider incorporate testamentary trusts in your will. Testamentary trusts have tax, control and other advantages that make them an effective estate planning tool. It is created by a Will for a greater level of control over the distribution of assets to beneficiaries.

Taking an inheritance via a testamentary trust may have significant tax advantages especially if the beneficiary has a high personal marginal tax rate, a partner on a lower income, minor children or grandchildren or children or grandchildren with no or lower taxable income. CGT and stamp duty on transfers of assets may be reduced as well.

Testamentary trusts can deal with super or life insurance proceeds in a more tax effective manner and help protect assets against the beneficiary’s creditors, estranged spouse of relatives. It can allow assets to be managed by family or professionals for the benefit of a beneficiary who is temporarily incapacitated. It can maintain assets within lineal descendants and stagger payments to beneficiaries over time.

A Will normally appoints an executor to carry out the terms of the will, pay any debts, determine the assets of the estate and distribute assets to beneficiaries named in the Will. The executor should locate the latest version of a Will, consult with a lawyer and arrange the funeral. He/she should keep a record of assets and distribution and may claim costs incurred in administering the estate.

For more information about estate planning in Australia, contact us to discuss your particular circumstances.

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Disclaimer: This article contains general information; before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs. Click for more detail regarding this disclaimer.


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