This article is useful reading for everyone, especially those embarking on writing a will. Net Lawman host a number of other articles on wills. You can find them here:
What is estate planning?
Very simply, it's a way of ensuring that a person's estate is passed onto their beneficiaries in the most financially efficient and tax effective way possible.
Most people who work in this area include tax planning as a part of estate planning. They will also look at how you can get most use and enjoyment of your assets while you are alive, as well as providing for your beneficiaries. Net Lawman provides wills templates as well as low-cost, pre-paid legal advice.
Estate planning was initially used when there were death and estate duties. These don't exist anymore, but there are other taxes, such as capital gains tax, that make estate planning just as worthwhile now.
Estate planning has two main aims:
to try and avoid the likelihood of any next of kin suffering financially; and
to minimise the family-fallouts over who gets what.
An estate plan should:
be administratively simple to operate;
not be too expensive to maintain;
balance life-time enjoyment of assets/income with preserving assets for family after death; and
be regularly reviewed.
Using a trust
Leaving assets directly to another person is only one way of distributing assets through a will. The will must create a valid transfer of property in order to be effective. This means that the correct procedures must be used to make sure the correct people benefit.
Another, increasingly popular strategy is using a trust. Trusts are prepared by solicitors and accountants for many reasons - probably the most common is a family trust which allows a person to transfer assets out of their name while still keeping control of the assets. There is a link to the Net Lawman ‘trusts’ article at the end of this one.
It is common to include a trust as part of the will - this is called a testamentary trust. Benefits are:
maintaining social security entitlements;
ensuring that assets pass to children even if a surviving husband/wife remarries;
capital gains tax and income tax advantages;
providing for children with an intellectual disability or mental illness; and
protecting assets where a beneficiary becomes bankrupt or divorced.
There are few general rules about whether a testamentary trust will be best for you. It will depend on your individual circumstances and how you want to divide your assets on your death.
Is estate planning necessary?
This depends on your financial situation. For most people who have money in superannuation and a reasonable level of assets, it is certainly worth considering. It maximises the assets that are passed on after your death.
Examples of how estate planning could be useful are:
if you want to pass on a family business;
if you have a superannuation payout;
if you want to make a gift to a charity;
if you have capital losses;
where you have property which may be caught by capital gains tax, i.e. it was purchased before 19 September 1985;
where you have life insurance;
if there are family debts; and
where you want flexibility in distributing your assets, for example, there are more kids on the horizon or for tax purposes.
Where can I find an estate planner? You should find a local solicitor who deals in probate, wills and estate planning. Net Lawman provide document templates and low-cost, pre-paid legal advice, however, we do not deal in estate planning specifically.
If by chance you find some error of law or fact in any Net Lawman information page, do please tell us. We should also welcome your suggestions for new subjects for information pages. These notes:
Do not provide a complete or authoritative statement of the law;
Do not constitute legal advice by Net Lawman;
Do not create a contractual relationship;
Do not form part of any other advice, whether paid or free.
