A Guide to Effective Estate & Succession Planning
Appropriate estate and succession planning is an incredibly important tool in ensuring that the family wealth is directed into the hands of the desired beneficiaries in accordance with the wishes of the deceased.
Families can be complex units, with the needs/possible claims from spouses, ex-spouses, de facto, children and stepchildren all part of the planning.
Estate v Non-Estate Assets
The first step in appropriate planning is identifying both the estate and the non-estate assets of the individual.
Estate Assets
Estate assets are those assets that can be dealt with via your Will.
These include:
- Properties held solely or as tenants in common
- Shares in companies held directly, including Trustee companies
- Loan accounts to and from Trusts and other entities
Non-Estate Assets
These are assets that are dealt separately from an individuals Will.
These include:
- Assets held as joint tenants (ownership automatically transferring to the surviving tenant)
- Superannuation entitlements upon death, unless paid to the estate
- Life insurance paid to a nominated beneficiary
- Assets held by particular entities (ie. companies and trusts) directly
- Assets held by the individual as Trustee
Family Trusts
Family Trusts are common vehicles for high net wealth family groups, being a useful tool for tax planning purposes.
For estate planning purposes, careful consideration must be given to who will control the Trust upon the passing of the individual. The controller of the Trust is generally the Appointor/Guardian, who has the ability to appoint and remove Trustees.
In addition, consideration must always be given to the Deed and specific provisions when considering control.
The un-fettered right of the Trustee to do as he pleases is under real attack.
Family Companies
Where shares in family companies are an estate asset, these shares may be held by Testamentary trusts to reduce income taxes on future capital gains and dividends.
Family Provision Act
A deceased must make adequate provision for relevant persons, or else there is a risk that these persons may contest the Will pursuant to the powers under the Family Provision Act 1972.
There is significant planning that can be done to reduce these risks.
Testamentary Trusts
Testamentary Trusts can be of great benefit for estate planning purposes, with advantages such as:
- significant asset protection;
- family law defences; and
- taxation benefits such as:
- increased number of beneficiaries utilising lower concessional rates of tax (including minor children)
- CGT discount available to Trustee so estate can accumulate capital gains
- Imputation credits from dividends may be refundable
Summary
Estate and succession planning is a vital tool in wealth management and ensuring the family assets are distributed in accordance with the wishes of the deceased.
Lack of appropriate planning and management can create unexpected and often distressing outcomes for those left behind.
Should you require any assistance with respect to your own planning, or are considering a review of your existing Will, please contact the team at Trove Group.
