Estate Planning

Estate Planning 

More Than a Simple Will!

Estate Planning is far more than the writing or implementation of a Simple Will; it is the creation of a legacy.

Very often, given a broad objective, a lawyer will write a Will to achieve your desired outcomes. But how much thought has gone into ensuring that outcomes do not have repercussions – that too much tax may be paid, that assets handed on do not finish up in the wrong hands, or that creditors do not wipe out what was intended to provide a legacy or valuable financial support to a loved one?

How much is it worth to ensure that the assets we have accumulated through blood, sweat and tears do not finish up in the wrong hands or creating conflict amongst those we leave behind?

We encourage all people considering their estate planning to focus on the process, not the event, and value not the cost.

So what does that mean?

The process of estate planning includes;

· protecting your assets whilst you are alive.

· recognising what would happen to your estate in the event of your death under your current arrangements.

· creating your estate “vision” which is in essence capturing an image of your preferred outcomes in the event of your death. The estate vision is often the hardest part, especially when you are in your second marriage (or relationship) and there are children from a first marriage or when there are potential beneficiaries with special needs such as one parent families, or children with a disability.

· taking action to bridge the gap between where you are and where you want to be.

You may find yourself in the position of juggling your own wants and desires with the needs and wants of your partner or agonising over a way to care for special needs beneficiaries whilst ensuring that others are not disadvantaged.

This is where the concept of fair is not always equal comes into play.

And once that vision is captured, how are we going to ensure that the outcomes we want are achieved with the utmost efficiency is terms of minimising the impact of taxes on superannuation proceeds, income and capital gains?

It’s tempting and perhaps natural to be swayed by the negative influences of others when comparing the apparent complexity and cost of implementing an estate plan with a tax effective Will against a Simple Will.

But a Simple Will can produce an expensive estate.

The process of estate planning includes evaluation of the threats to your effective estate distribution, issues that may have immense impact on your preferred outcomes. Take superannuation for example. Superannuation is not distributed, in the first instance, in accordance with your Will – it is a non-estate (non-Will) asset. So without taking due care, you may finish up leaving your superannuation to the wrong person and that can cost tens, if not hundreds, of thousands of dollars.

And your superannuation may not go where you want it to go without a binding nomination.

And is there enough money in the estate to fund what you want to achieve? Is insurance required?

The decision to leave assets to nominated beneficiaries directly or through testamentary trusts will depend upon a number of issues – not least of which is the size of the estate. Use of well drafted testamentary trusts (Will trusts) may afford valuable protection against predators (relationship based) and creditors (business based) and facilitate tax planning to minimise capital gains and income tax.

Taking into account the fact that not all decisions on distribution (such as guardianship strategies) can be resolved overnight, recognising that planning your estate is a process to be dealt with over time, rather than an event which comes and passes, is an important mind set that assists in overcoming obstacles and procrastination. It recognises that sometimes a Will may not be perfect, but implementing one, or reviewing an old and inefficient one, is a great deal better than doing nothing and dying intestate, or failing to take advantage of appropriate strategies.

A well thought out and documented estate plan provides certainty and choices and minimises the potential conflict that can disrupt a family. It does more than provide the potential to preserve assets and provide a legacy, it puts your house in order and can enhance the financial lives of those you leave behind.

So when considering what might be some of the most important decisions you will ever make, focus on the value you create now and for the future, not just a cost which is a fraction of the benefit.

©Michael Sayer