What is estate planning ? and do I need a Will?

Estate Planning – Much more than a simple Will.

With the ageing of the population, a greater number of clients are thinking more seriously about the consequences of passing on their accumulated wealth to the next generation. This by necessity does involve the preparation of a will. However, Estate Planning is more than this.

Besides our potential demise as a trigger, Estate Planning also involves itself in the emotional areas of incapacity, divorce and insolvency as well as the succession of business entities including superannuation, family trusts and companies; quite often to the benefit of some family members and exclusion of others.

“We are on the precipice of one of the most exciting times in succession (estate) planning. Over the next 20 years there will be the biggest intergenerational transfer of wealth ever.....Your clients will need to talk with someone about succession (estate) planning.”        Bernie O’Sullivan – Estate and Business Succession Planning 3^rd ed 2010 p1-105

With the above comments as a back drop and the recognition we need to provide more than financial advisory services to our clients, we at Strategic Wealth Solutions have developed a valuable service which will provide a detailed assessment and written report on all client estate planning matters.

Your solicitors will be able to refer to the estate plan so produced and be fully informed on the issues requiring their attention. We believe this will result in substantial savings to our clients as the initial discovery process of assets and the client’s intentions will have been fully documented avoiding additional cost to the client.

Below is a list of Triggers (whilst not exhaustive) which are Estate Planning issues that can be addressed in the review process. In reading this you should reflect on your own personal situation and determine whether you have taken all appropriate estate planning steps available.

Triggers for a detailed Estate Planning assessment

•       All change of life events and not just restricted to retirement. Large estates in particular need to ensure wealth goes to the desired beneficiaries.

•       Marriage asset protection (Family Law and Pre-Nups).

•       Observed changes in your cognition and elderly parents and loss of capacity – Power of Attorney, Power of Guardianship

•      Children with substance abuse problems. Protective trust provisions.

•      Inheritances and bankruptcy protection. Re-asses beneficiaries with financial difficulties.

•       Business structuring and intergenerational transfer of wealth and assets. Major asset usually outside the personal will.

•    Going overseas and becoming a resident of another country. CGT issues. Make a separate will in that jurisdiction.

•     Overseas assets inherited from non-resident relatives. What does that other country say must happen?

•       Parents lending substantial $ to children without proper documentation.

•       Step children. Excluded at law from superannuation when parents split.

•       Reversionary pension nominations or lack of them.– Be aware of Centrelink assessment issues re expected age assessments.

•       Adult beneficiaries of super. Taxation can impact here

Some of the more frequent mistakes made by people due to inattention to Estate Planning involve:

Instances where there are Estate Planning pitfalls

•       Superannuation Death Benefit Nominations (DBN). Get it wrong and $ disappear. Eg. Leaving superannuation DBN in the divorced spouse’s name and  leaving super to adult beneficiaries whilst other dependants are present

•     Engaging the wrong legal team. Inexperience can have frightful consequences

•     Thinking you can structure at last moment to avoid Family Law Act application in divorce proceedings.

•      Excluding certain family members from inclusion in the will. Get set for a Family Provision Claim. 12 months to make a claim against the estate.

•     People doing their own wills. Wills deemed ineffectual due to ambiguities in drafting can result in no will at all and the estate then subject to the state based intestacy regulations.

•     Thinking Estate Planning is the sole domain of wealthy clients. Even the most destitute amongst us can inherit or need protection from themselves.

•     No CGT rollover relief on assets if left upon death to a non-resident beneficiary.

•     Using an Australian based executor for a will containing mostly non resident assets can see that estate subjected to Australian CGT regulations. Eg New Zealand clients.

•     Australian residents with extensive overseas inheritances.

•     Domicile v Nationality v Citizenship. 3 distinct concepts but confused regularly.

•     Treating Non Estate Assets as Estate Assets eg gifting of property owned by a trust or a company.

•     Trying to control from behind structures. These days if you are deemed to control the asset in some way, very likely you will be deemed its owner ie. Norm Carey and Westpoint - See Richstar case

•     Be aware trustee companies and charities are very litigious. So careful when including them as beneficiaries. Will drafting very important here.

•     Notional estate concept. NSW only legislation - 3 years clawback of assets disposed of before death.

All of the above triggers and pitfalls have appropriate solutions and remedies. The diligent person who takes the necessary steps to protect their situations will be all the more better prepared then the tardy person who believes it can never happen to me.

We all know of Peter Brock the famous Australian racing car driver. Upon his death it was determined there were 3 wills in existence. In the end after legal proceedings and substantial cost to the estate it was deemed he died intestate – meaning his estate was dispersed in accordance with the laws of the State of Victoria rather then what he last intended.

Similarly Brett Whiteley died with confusion over what was to become of his estate. No-one could locate the will he had drafted himself and apparently “stuck” to the bottom of a drawer in his office.

And for a more recent example, it appears that cricket commentator Peter Roebuck died last year with out a will.

These are examples of high profile people making what are really silly and irresponsible errors. We at Strategic Wealth Solutions do not want any of our clients to have events of this nature impact on their spouses and children.

Estate Planning legislation is still mostly state based so there are subtle differences particularly in the intestacy provisions from one state to the next.

Also the law surrounding incapacity has marked differences in each state, and because of these differences it is important to determine where it is exactly you are domiciled and what mental capacity is present to ensure you can execute the most effective estate plan.

Please if you believe you need to assess your current estate planning situation we would welcome your further enquiry on these very important issues.

Contact us at Parramatta on (02) 9633 5255.

Also make sure you register for our Business Succession SHBC Brekkie discussion on the 13th March via the Chamber website - click here