Estate Planning

Estate Planning is a structured process that enables you to think about how you would like to look after the next generation, perhaps integrate your philanthropic interests, develop tax-effective strategies and importantly, to formalise your wishes in writing. You may also need to consider different scenarios, such as if you become less capable of making effective healthcare and financial decisions for yourself, who would you like to make those decisions for you? Preparing for the unexpected, gives you some peace of mind about the future.

Your Estate Plan

Estate planning includes strategic structuring of your assets, the preparation of a Will, appointment of an Enduring Guardian and and Enduring Power of Attorney. It also means keeping your Superannuation Death Benefit Nominations up to date so that they accurately reflect your wishes in line with growing or changing family structures, such as the addition of grandchildren. It is recommended to review your estate plan every 5 years or earlier in the case of major family events or change in assets.

Enduring Power of Attorney

Your Attorney is authorised to make legal and financial decisions on your behalf. You may:

appoint more than on Attorney
specify when your Attorney can act (immediately or only if you lose capacity)
impose limitations on your Attorney.

If you do not appoint an Attorney and you are unable to make economic and financial decisions personally, your family will have to make an application to the Guardianship Division of the NSW Civil & Administrative Tribunal to have a Financial Manager appointed for you. If the Tribunal is unable to identify a suitable Financial Manager, they may appoint an independent public official called the NSW Trustee & Guardian.

Enduring Guardian

An Enduring Guardian is effective only if you are incapable of making lifestyle, health and medical decisions personally. You may:

appoint more than one Enduring Guardian
impose limitations on your Enduring Guardian
provide directions on how your Enduring Guardian is to carry out their functions.

An Enduring Guardian has broader powers than a ‘Person Responsible’. If you do not appoint an Enduring Guardian, and in the absence of a Person Responsible, the NSW Civil & Administrative Tribunal may intervene and appoint a Guardian to make lifestyle, health and medical decisions on your behalf. If the Tribunal is unable to identify a suitable Guardian, they may appoint an independent public official called the Public Guardian.

Wills

In addition to expressing your wishes for the distribution of your assets, your Will needs to nominate an Executor, appoint a Trustee and may also appoint a Testamentary Guardian of your minor children and express wishes for the disposal of your remains. While you may own a range of assets, not all of them can be dealt with through a Will. Assets that can be dealt with by your Will include:

Family Home
Investment Property
Shares
Managed Funds
Cash at Bank
Loans

You can also direct certain assets into your Will, such as your Superannuation and also Life Insurance (outside of Superannuation). There are some assets that cannot be dealt with through your Will and therefore need special consideration in your Estate Planning. For example, for Family Trust Assets, consideration would need to be given to:

Who owns these assets?
Who is the Appointor in the event of death, loss of capacity or insolvency?
Can you guide what you want the Trust to do?

Family Trust Loan Accounts are also unable to be dealt with through your Will.

Testamentary Trusts

There are two types of Wills which may be enacted, a Standard Will or a Testamentary Trust Will. A Standard Will outlines your wishes and how you would like your estate to be distributed, but it does not protect beneficiary entitlements from events such as bankruptcy or relationship breakdowns and subsequent claims made under the Family Law Act. A Testamentary Trust is a trust created by a Will that only comes into play upon your death and aims to protect beneficiary entitlements. Proceeds of your Will are paid into the Trust where they are protected from claims related to bankruptcy. While a Testamentary Trust does not give absolute protection to claims made under the Family Law Act, it does reduce exposure. Testamentary Trusts also offer flexibility around distributions, which may offer tax advantages.

Taxation of Deceased Estates

There are a number of layers of taxation implications from the death of a family member. Firstly there is the Final Tax Return of the Deceased Person. Secondly there is the Tax Return of the Estate. Finally there are the tax liabilities for the beneficiaries in their personal capacities, or for the Testamentary Trust.

Different assets in a Deceased Estate may trigger different tax treatments. In the case of the family home, for example, some considerations are: How is the ownership of the family home structured? How will it be distributed? What is the future use of the family home? What are the Capital Gains Tax implications? And what about loss of the Main Residence Exemption?

Superannuation, overseas assets, donations and gifts all require consideration as different structures trigger different tax treatments. Tax obligations for a deceased estate may be complex, so it is wise to seek advice from your Client Manager at Enspira on how to structure your assets for optimum tax outcomes.