Estate Planning Uncovered by Melbourne Lawyer

Estate Planning uncovered by Melbourne Lawyer:

• What is Estate Planning all about?
• How will Danaher Moulton approach my Estate Planning?
• But how should I own assets?
• What are the phases that we regularly advise clients on?
• What assets form and don’t form part of the plan?
• What happens if you don’t make a Will?

What is Estate Planning all about?

Estate Planning is about planning your financial future to give you the peace of mind of avoiding pitfalls. The goal is to achieve financial goals whilst reducing risks to you and your family.

The essential part of estate planning is to identify your assets, how these are owned (personally or through another structure such as a trust or company).

What is my Estate Planning dependent on?

Estate Planning is dependent on various documents such as your Superannuation policy, title deeds to your property, your life insurance policy, your Self-Managed Super Fund, business agreements, and life changes and priorities.

How will Danaher Moulton approach my Estate Planning?

At Danaher Moulton we take a proactive and holistic approach to your estate plan. We believe the old adage is true that a “stitch in time will save nine”.  Put simply, an estate plan is money well spent that will save you money in the future and give you peace of mind.  The costs (including legal costs) of when something goes wrong can be significant.

But how should I own assets?

The answer to this depends on your circumstances at the time of acquiring the asset. The factors to take into consideration include:

1. Tax effectiveness (i.e. duty, land tax, capital gains tax and GST).
2. Asset protection from claims by creditors, your financial institution and bankruptcy.
3. Any potential family law proceedings.
4. Any potential claims against your estate.
5. Business relationships with others and the provision of personal guarantees.
6. Maintaining family assets and in particular long held assets as the family farm.

Generally throughout your life your circumstances will change significantly. With each change your estate plan must be reviewed and if necessary adjusted. Danaher Moulton assist you with this.

What are the phases that we regularly advise clients on?

The 3 phases that we regularly advise clients on are:

1. The asset acquisition phase
2. The asset protection phase and
3. The asset realisation phase

Asset Acquisition

Typically in this phase:

• You are young with a young family with more children likely.
• You have high debt and little extra income.
• You own your own home jointly and may own an investment property or shares.
• You are generally employed and not business owners and therefore have reduced risk.

Estate planning considerations include:

• Putting basic wills and powers of attorney with general classes of beneficiaries in place.
• Reviewing your superannuation and life insurance nominations.
• Transferring your principal place of residence into the name of the lower risk spouse.
• Negotiating with your financier regarding the possible transfer of assets.
• Conducting a personal risk audit that takes into account likely life changes in the coming 5 years.

Asset Protection

Typically in this phase:

• You own your own home with reduced debt and some income producing assets.
• You may own a business or an interest in a business.
• You have greater disposable income and a likelihood that further assets will be acquired.
• Your affairs are generally more complicated with trusts, SMSF’s, companies and business relationships.
• You may have provided personal guarantees.

Estate planning considerations include:

• Maximising asset protection by transferring assets to the person/entity of lowest risk. Issues include tax minimisation such for duty, GST, CGT (particularly for your principal place of residence) and land tax.
• Restructuring of debt and financial arrangements particularly with your bank to reduce the recourse the bank may have in the event of default.
• Identifying and reducing the risks in any personal guarantees provided.
• Identifying business succession issues and putting in place agreements that deal with the transfer of a business interest, the value of that interest and insurance options that assist in any buyout.
• Reviewing structures put in place in light of your then priorities.
• Ensuring tax effectiveness in the distribution of your estates under your Will through testamentary trusts and other measures and your superannuation, SMSF, trust and company structures.
• Considering and advising on the control of your entities in the event of death and incapacity.

Asset Realisation

Typically in this phase:

• You are older and looking to downsize.
• Retired and therefore at reduced risk of a creditors claim, bankruptcy or divorce.
• Low or no debt but may be asset rich and cash poor.
• Looking to dispose of assets either before or upon death.

Estate Planning considerations include:

• Simplifying your affairs.
• Transitioning into alternative accommodation.
• Pensions issues.
• Capacity issues of the person making the estate plan.
• Change in control of asset owning entities.
• The terms of trust deeds, SMSF deeds, company constitutions.

What assets form part of my estate?

Your property, company shares, personal chattels and assets owned as joint tenants if you survive your spouse.

What assets do not form part of my estate?

Trust assets, company assets, superannuation proceeds (unless your estate has been specifically nominated), SMSF (unless nominated) and assets owned as joint tenants if you don’t survive your spouse.

What else should I know?

1. You cannot give away trust, company or SMSF assets under your Will but you can give control of these entities to persons under your Will or by deed.
2. The control positions are generally as follows:
   1. For a trust the trustee, appointor and in some cases the guardian. The trustee has day to day control of the trust, the appointor may replace the trustee and the guardian may control distributions of capital and income from the trust.
   2. For a company it is the directors
   3. For a SMSF it is the trustee. However the SMSF Deed and SMSF nominations are very important in determining who takes your superannuation entitlement. Your Will is irrelevant to your SMSF. In Katz v Grossman a father gave his SMSF entitlement to his children equally under his Will but his daughter controlled the SMSF. She got everything and the other son got nothing.
3. Take advice before acquiring assets. If you get it wrong the additional CGT, duty, GST, and tax, legal, accounting and banking costs can be very expensive as well as the increased risk to your assets.
4. When you transfer assets by Will it is generally more tax effective than if you transfer assets when you are alive. There are also tax advantages in establishing testamentary trusts under your Will.
5. In addition to your Will you should plan for your future by having:
   1. Enduring Powers of Attorney (Financial, Medical Treatment) and Enduring Guardianship.
   2. If you own a company Company Power of Attorneys that deal with control of your company in the event of death or incapacity.
   3. A binding nomination under your SMSF deed or your deed amended so that your superannuation entitlement goes to the persons who you wish to benefit.
   4. A binding nomination under your life insurance policy.
   5. Business agreements that deal with the death or incapacity of either party and sets out how the affected person’s share in the business shall be dealt with.

What happens if you don’t make a Will?

If you don’t make a Will or if your Will inadequately deals with your estate then your estate (or the portion that has been deal with inadequately) will be dealt with in accordance with the Administration and Probate Act.

This Act sets out who receives your estate if no Will is made. Note:

1. If you leave a partner and no children your estate will go to your partner
2. If you leave a partner and children, your partner receives your personal chattels, the first $100,000 and a third of your estate with the balance divided between your children.

Read Jack and Jill’s true story on our webpage about what happened when Jack died suddenly without his estate planning in order. Disaster!

Where to from here?

Complete a Wills Questionnaire and have us provide you with an assessment of your estate planning needs and issues. It generally only takes 1 hour and after the hour you can decide if you continue with the estate plan or otherwise leave it for another day.

Rather than consider this an expense, consider this an investment in your successful future. Rather than worry about possible claims from creditors or a claim against your estate contact us and put in place the action plan to reduce these risks.

At Danaher Moulton we are your partners in your peace of mind and success.