In its most simple form, estate planning is all about peace of mind and giving you certainty about your assets being distributed to your beneficiaries, according to your wishes. But an effective and well documented Estate Plan could also save you (or your Estate) thousands in tax.

Family structures have become more fluid, therefore planning your estate has become more important in recent times – and often involves much more than just a simple Will. Family trusts, payouts of superannuation balances and the tax implications for beneficiaries can all be managed with a careful estate plan.

Seeking advice from a qualified financial planner is a crucial step in developing a proper estate plan. Developing a proper estate plan will ensure that:

• the tax payable is minimised on the income and capital gains earned on assets

• the right ownership and control of your assets passes to your intended beneficiaries, and

• your assets maybe protected if the beneficiary is involved in any legal difficulties (for example, divorce or bankruptcy).

A sound estate plan can assist in avoiding possible difficulties and disagreements for your beneficiaries.

Things to consider

Who gets what?  Have you thought about who will inherit which assets and in what proportions?

How will they pay off debt?  Have you considered whether you have accumulated sufficient assets to provide for your family and pay off debts if you die? If you think there is not an adequate amount, we can recommend several options to make up the shortfall.

Who’s in charge? Is there someone who has been chosen to manage your affairs for you if you’re injured or sick and unable to control your investment and lifestyle decisions?

Is it current? Your estate planning needs should be reviewed on a regular basis, and particularly when a significant event occurs such as commencing work, changing employment, getting married / divorced, birth of grand/children, starting your retirement, and the changed circumstances (including death) of any person you have included in your estate plan.

Estate planning is a vital part of your overall financial plan and it should not be left until it’s too late. These events (listed above) can be life altering for you and your loved ones and should prompt you to think about your estate planning needs and objectives.

Case study

Bob has $600,000 in his super fund and the entire amount is classified as a taxable component. He has been advised it is not an estate asset so it is not specifically included in his Will. Bob dies and:

• he does not have a binding nomination in place and has not nominated a reversionary beneficiary

• the Super trust deed sets default payments as payment to estate, and

• Bob’s Will splits all benefits 50 per cent to his wife (tax-free) and 50 per cent to his 40 year old daughter (which is subject to 15 per cent tax).

In this scenario, 50 per cent of Bob’s super is paid to his daughter and taxed at 15 per cent* ($51,000) instead of the entire amount being paid to his wife tax-free.

Potential solution: Bob could have specified in his Will a contingency for super. For example, all super to be paid to his spouse and include an offsetting amount to his daughter from other assets, which would have been much more tax efficient.

Adviser fp can provide you with a checklist to assist you with your estate planning objectives. If you would like to obtain one and/or to discuss your estate planning requirements, please (CLICK HERE) to arrange an obligation-free discussion with one of our team.