Effective estate and succession planning is an important tool in navigating the intricate dynamics within families.
Families can be complex units, with the needs/possible claims from spouses, ex-spouses, de facto, children and stepchildren all part of the planning.
Appropriate estate and succession planning ensures that the accumulated family wealth is channelled into the hands of the intended beneficiaries in accordance with the wishes of the deceased.
In this guide, we’ll delve into the key facets of estate and succession planning, shedding light on essential considerations for safeguarding your family’s financial legacy.
Estate versus Non-Estate Assets
The first step in appropriate planning is identifying the individual’s estate and non-estate assets.
Estate assets are those assets that can be dealt with via your Will.
- 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 are assets that are dealt with separately from an individual’s Will.
- 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 (i.e., companies and trusts) directly.
- Assets held by the individual as Trustee.
Family Trusts are common vehicles for high-net-wealth family groups and are a useful tool for tax planning purposes.
For estate planning purposes, careful consideration must be given to who will control the Trust upon the individual’s passing. The controller of the Trust is generally the Appointor/Guardian, who can appoint and remove Trustees.
In addition, consideration must always be given to the Deed and specific provisions when considering control.
The unfettered right of the Trustee to do as he pleases is under real attack.
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 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 beneficiaries utilising lower concessional tax rates (including minor children).
- CGT discount available to Trustee so estate can accumulate capital gains.
- Imputation credits from dividends may be refundable.
A lack of appropriate planning and management can create unexpected and distressing outcomes for those left behind. Therefore, estate and succession planning can be a vital tool in wealth management and ensuring the family assets are distributed in accordance with the wishes of the deceased.
If you need any assistance concerning your planning or are considering a review of your existing Will, don’t hesitate to contact your Ledge Finance executive who will connect you with the team at Trove Group.
About the Author
Trove Group is a collection of professional specialists in growth, corporate, and taxation advice, based in Perth, Western Australia, from where we serve Australian and international enterprises and high net wealth individuals and family groups.