are you financially well organised?
Estate Planning Demystified www.financiallywellorganised.com info@fwo.net.au
Estate Planning Demystified One of the most important stages in your foundation plan to becoming Financially Well Organised is to have a detailed Estate Plan. This is your contingency plan to deal with the assets, you own and or control, in accordance with your wishes. Often a lot of hard work and sacrifice has gone into acquiring the assets and savings you have. Therefore it is essential that you have a plan in place to ensure your assets are distributed to the intended recipients, so that they may enjoy them once you have passed away. History has provided many examples of where poor or no planning in this area has meant that assets of the deceased have gone to unintended recipients, leaving intended family members with little or no entitlements. A personal Will deals with assets you own in your name and how you want them distributed to nominated beneficiaries when you are gone. However as a business owner or investor you may have accumulated assets through entities you control such as a trust, company or superannuation fund.
Michael Ward Partner FWO Chartered Accountants
The assets in these entities are in the name of the trust, company or superannuation fund and not your own name, so these assets will not be covered by your personal Will. If you control a trust, it is usually because you are the trustee and or appointor of the trust. The appointor under a Trust Deed has the ultimate power because generally they have the power under the Trust Deed to remove and appoint a new trustee to the trust. You need to make sure that the Trust Deed has appropriate clauses to appoint a new appointor of your choice in the event of your death and that this is also addressed in your Will. This way (after your death) the new appointor will make sure the trustees of the trust control and safeguard the assets of the trust for the benefit of the beneficiaries in accordance with your wishes. The only assets in relation to a trust that are covered by your Will are any unpaid beneficiary entitlements or loans owing to you by the trust (if any). If you control a company, it is usually because you are a major shareholder in the company by virtue of the percentage of issued shares you own in the company. The assets owned by the company that you control are not covered by your personal Will. The only assets in relation to a company that you control and are covered by your Will are the shares you own in the Company and loans owing to you by the company (if any).
Your Will needs to nominate executors who you trust
You need to make sure that your Will addresses who you want your shares transferred to in the event of your death. Whoever receives these shares will continue to control the company and ultimately decide what happens with the assets owned by the company. Shareholders own the company and have the ultimate power as they can remove and appoint the Directors (day to day managers). It is vital that you declare in your Will that the shares are to be transferred to someone who you can trust and who you ultimately want to benefit from the assets owned by the company. Any interest you have in a superannuation fund is an entitlement to benefits subject to satisfying a condition of release under the superannuation fund Trust Deed. A superannuation fund is controlled by it’s trustees. The assets of a superannuation fund do not form part of the assets to be dealt with under your Will. In the event of your death, there is normally a death benefit entitlement payable, subject to the determination of the superannuation fund trustees. It is not an automatic payment to your deceased estate. Greater certainty can be obtained by nominating a beneficiary to your death benefit entitlement or executing a Binding Death Nomination to ensure the trustees of the superannuation fund payout benefits in accordance with your wishes. Death benefits paid to your surviving spouse or tax dependent children are tax-free. Death benefits paid to your non-tax dependent children or other relatives are subject to tax. Your Will needs to nominate executors who you trust will carry out your wishes in managing and distributing the assets and income of your deceased estate. The use of Testamentary Trusts in Wills (trusts created under the Will as a result of death) has become popular as a way of minimising income tax on future earnings and controlling access to income and capital of beneficiaries where there are issues of disability, maturity, divorce, marriage, blended family members or protection from potential creditors that may exist now or in the future. All these issues should be considered in drafting your Will. A personal Will only deals with matters after death, but what can be done to protect ownership and control of your assets if you become unable to manage your affairs, physically or mentally, prior to your death? The solution is to assign suitable Enduring Powers of Attorney for financial and health needs. Basically, you appoint people you trust to become your Attorney and make decisions on your behalf for health and financial matters from the time you are declared unable to do so yourself. If you wish, you can choose to nominate different attorneys to deal with health matters than those you nominate to deal with your financial matters.
There are many important issues to consider in developing an appropriate Estate Plan. You need to consider not only the assets you own but also the assets you control. You also need to consider the prospect of being incapacitated prior to death and who should look after your health and financial decisions on your behalf.
Your Estate Planning Checklist •
Cover all aspects of your financial structure as your Will can only deal with assets in your name
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Ensure the right people are in control of your assets and the entities that own them
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Ensure your Will is prepared by a suitably experienced Estate planning Lawyer and consider all aspects of your financial affairs in developing your Estate Plan. It must be prepared as part of your Financially Well Organised Strategy.
An effective Estate Plan will make sure your wishes pre and post death for the assets you own and or control will be dealt with in accordance with what you have outlined. By ensuring your Estate Plan addresses your wishes and protects your family you are on your way to becoming Financially Well Organised.
For more information on becoming Financially Well Organised contact: Michael Ward Partner FWO Chartered Accountants michael@fwo.net.au (07) 3833 3999
Ground Floor, Green Square North Tower 515 St Paul’s Terrace, Fortitude Valley QLD 4006 GPO Box 81, Brisbane QLD 4001 www.financiallywellorganised.com Ph: 07 3833 3999 Fax: 07 3833 3900 info@fwo.net.au