Whilst most of us don’t want to think about death and what happens when we die, it is worthwhile to think about it. Whether you want to provide for your family after your death and/or want to ensure that the process is as easy as possible for your family, you should consider estate planning.
Why is Estate Planning Important?
Estate Planning is essentially deciding what to do with your assets after you are gone.
You will need to work out how you divide up your assets whilst you are in good health both mentally and physically. When you pass, your family will have a difficult time coping with your loss – making it easy for them to handle your estate is really a gift.
If your estate is subject to taxes, a plan can help reduce or even eliminate these taxes allowing your family to keep most of your assets.
Estate planning takes into account a number of issues including:
- Emotional and lifestyle issues, including having a ‘Power of Attorney’ and appointment of a guardian in the event that the person may not always have the capacity to make decisions about financial and lifestyle matters;
- The passing of assets to heirs with minimum financial disincentives on their death;
- Ensuring the person has a will;
- The financial and emotional wellbeing of minor dependants as well as present and future financial needs of the person’s family, dependants, business and assets.
Estate Planning is most effective when there is collaboration between the person, their financial adviser, their accountant and their solicitor.
Drafting a will ensures your assets are divided and distributed according to your wishes. Simply put, a will details how you want your assets distributed, who inherits them, who will look after your children (if they are young) and even instructions about your funeral.
An estate planning strategy is not static and should be reviewed at intervals to meet changing circumstances, for example, a new will may need to be made in the event of marriage, divorce, entering or dissolving a de facto relationship, the death of an executor appointed under the person’s will; the sale of assets which are specifically mentioned or the birth of further children.
A testamentary trust is a trust set out in a will that only takes effect when the person who has created the will, dies. They are usually set up to protect assets.
Why should you create a testamentary trust?
- Beneficiaries are minors;
- Beneficiaries have diminished mental capacity;
- You do not trust the beneficiary to use their inheritance wisely;
- You do not want family assets split as part of a divorce settlement;
- You do not want family assets to become part of bankruptcy proceedings.
A trust will be administered by a trustee who is usually appointed in the will.
The expiry date of a trust will be a specific date such as when a minor reaches a certain age or a beneficiary achieves a milestone i.e. getting married.
There are many taxation rules that apply with estates and depending on the complexity of the will and structure of family trusts etc, it may be quite complicated. It is best advised to seek the services of a trusted financial adviser who can help you and your family minimise taxation when dealing with an estate.
For more information about estate planning, talk to us today.
This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.