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Estate Planning – Essential for everyone

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estatePlanningEssential-5When you think of estate planning what comes to mind? For most of us, it immediately conjures up thoughts of death. Who wants to think about death when you have a whole life to live? Understandably, we often push estate planning to one side and focus on more pressing concerns such as looking after our family, paying our bills and generally living life.

 

If you change your view slightly, however, it’s easy to see estate planning in a more positive light. If you have loved ones that depend on you and if you want to ensure that they are properly cared for, estate planning should be important to you.

 

Estate planning basically ensures that the wealth you have worked hard to build is protected. It reduces the stress on your loved ones or beneficiaries by ensuring that when you pass away or become incapacitated, your wealth is transferred to them smoothly, tax effectively and according to your wishes.

 

Essential for everyone

The word estate can bring to mind images of vast properties and millions of dollars, but you don’t have to be wealthy to have an estate plan. You also don’t have to wait till you’re older to get your estate affairs in order.

 

Estate planning is essential for everyone, particularly if you:

 

Are the parent of minor children Have family members with special needs Have recently bought or sold major assets Have a family trust, self-managed super fund or business, and

Care about your health care treatment.

 

Why estate planning is important

Estate planning is vital if you want to:

 

  •               Avoid probate – this is often a lengthy process where your assets are frozen and cannot be transferred to your loved ones until the courts determine if your Will is valid and enforceable
  •             Minimise tax
  •              Protect your beneficiaries and your assets, and
  •             Avoid beneficiaries fighting over who gets what.

 

More than just a Will

Estate planning is also more than just having a Will. If you already have a Will, then you’re off to a good start. Most people, however, make the mistake of believing their Will covers all of their assets.

 

In reality, jointly held assets, trust assets and superannuation are excluded from Wills and should be considered as part of a comprehensive estate plan.

 

A comprehensive estate plan should include:

Having a valid and up-to-date Will Nominating your beneficiaries for your super Listing beneficiaries for your insurance policies Naming guardians for minor children

 

Setting up testamentary trusts to reduce tax liabilities for your beneficiaries, and

 

Choosing a power of attorney to look after your financial and personal affairs if you become incapacitated.

 

Get your affairs in order

The best time to get your estate affairs in order is now. We can help you set up an estate plan, ensuring you have a valid Will and enough insurance. We can also help you find the most financially and tax effective way to distribute your assets after you pass away.

 

Source I IOOF

Do you provide for a family member with a disability?

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Disability AwarenessIn Australia, almost 20 per cent of people have a disability and this number is only increasing with an ageing population1. So who will look after your loved one when you are no longer around?

 

This includes not only their financial affairs, but their personal affairs  such as care and rehabilitation as well. It also raises the question, ‘who becomes responsible for that person’?

 While caring for a family member with a disability can be very rewarding, it’s also a huge responsibility and, in some cases, a full-time occupation.

Simply leaving money or the balance of your estate to a family member with an intellectual disability may not provide them with an adequate level of financial support. In fact, it could do more harm than good. It could disqualify them from access to important Government entitlements. Not only that, but if the money is accessible or they are easily influenced, it could be spent too quickly and ineffectively given their long term needs.

However, by engaging a specialist estate planner and a professional trustee company you can help prevent this from happening. A specialist estate planner can help you structure your estate appropriately and will consider the following issues:

  • Control and protection of financial affairs (for example ensuring ongoing income and payment of bills)
  • Healthcare (who makes the important medical decisions?)
  • Housing and wellbeing decisions (who decides on day-to-day expenses?)
  • Lifestyle maintenance (what are their routines, likes and dislikes, etc)

By appointing a professional trustee, they can make important financial or medical decisions on behalf of your relative with an intellectual disability, when you are no longer around.

While it’s the requirements of the intellectually disabled person that are of significant concern, it’s also important to consider the other family members’ needs, including brothers and sisters. Having a clear and effective plan means that when the inevitable does happen, you can be sure that all the important issues have been considered and subsequently addressed and that there are clear processes in place to ensure continuing care as well as financial stability.

Having a plan in place and appointing a professional trustee not only protects the vulnerable person and provides for them throughout their lifetime, but gives you and your family certainty and peace of mind.

Don’t leave it to chance, or to your family to work out, ask us today how you can plan for the future needs of your family.

Source | IOOF

1 Australian Bureau of Statistics, Disability, Ageing and Carers: Summary of Findings, 2003

This communication has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and you should seek advice from your financial adviser before making any investment decisions.

Wealth Health Checklist

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Wealth-CheckAre you keeping your finances healthy by doing the right thing at the right time? Taking the best action at the optimum time can be crucial to your financial future.

 

 

Accumulators (aged 25–45)

Start a monthly investment plan

  • ‘Pay yourself first’ rather than create unrealistic budgets.
  • Salary sacrifice into super while other financial obligations are low and stop when current needs are more important.
  • Use any pay rises to fund your regular savings.
  • Be clear about what you’re saving for and the best structure and investment options for that.

Control debt

  • Reduce unnecessary spending.
  • Pay off the credit card, it’s probably costing you more than 15% pa interest.
  • Consider consolidating credit card debt into a personal loan and potentially paying less interest. If you do this, resist the temptation to accumulate more debt into your credit card.

Check out the government co-contribution

  • If eligible you could get up to $500 added to your super for free every year.

Consider using a mortgage offset account

  • This could reduce your loan interest while giving you access to the cash if you need it.
  • Make sure you have sufficient death, disability and income protection insurance.

 Builders/Pre-retirees (aged 45–65)

Stay cash flow positive

  • Live within your means.
  • Reduce the mortgage and other non-deductible debt such as credit cards and personal loans. This may free up cash flow for other investment opportunities.
  • Consider part-time work for a non-working spouse.

Increase contributions to super

  • At age 50, the concessional (pre-tax) contribution cap is $25,000.
  • Consider transferring non-super assets to super. You’ll need to take into account any capital gains tax on the transfer and the super rules covering what assets you can transfer.

Split income where possible to save tax

  • Consider investing money in the name of the spouse who pays the lowest tax.
  • Consider splitting super contributions between spouses. Up to 85% of concessional contributions within the contribution cap, including Super Guarantee and salary sacrifice contributions, can be split.

Look into a pre-retirement pension if you’re aged 55 or more

  • Consider salary sacrificing, and drawing down regular income from your super to replace the lost income – this saves tax and builds your super without affecting your cash flow.
  • Make sure you have sufficient death, disability and income protection insurance. Also consider taking out trauma insurance.

Retirees (aged 65+)

Ensure you don’t run out of money

  • Understand your plan for spending in retirement – set a budget for essential expenses and additional lifestyle expenses and how you’ll fund each.
  • Ask yourself if you’ve invested your assets too conservatively – maintaining and growing your capital today can help you provide the income you’ll need in the future.
  • Consider whether you need to downsize your home.
  • Investigate how your income and assets affect your Centrelink benefits. Simple changes can help ensure that you maximise your total income.
  • Consider setting up investments to help grandchildren with education costs, a deposit on their first home or an investment nest egg. You’ll need to include this in your retirement spending or estate plan.
  • Think about aged care now. When the time comes, decisions often have to be made very quickly, so plan ahead for which care options you’d like to use and how they’ll be paid for.

Review your estate plan

  • Consider a Non-Lapsing Death Benefit Nomination for your super or a reversionary beneficiary for your pension.

Ensure your Wills and enduring power are in order.

Death and Taxes!

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Two things in life are certain: death and taxes

DeathNTaxesWhen someone passes away, although there are no official death duties, beneficiaries often inherit tax liabilities as well as assets. But there are ways to minimise these potential tax liabilities, reducing the effect of at least one of life’s certainties.

First steps

The first step in minimising any tax liabilities is to appoint a legal personal representative (LPR) for the deceased. They will need to obtain a new tax file number for the estate and then file a ‘date of death’ tax return. This will be for the period from death until the end of the financial year and every financial year after that until the administration of the estate is finalised.

Tax on inherited assets

Inherited assets which were purchased before 20 September 1985 are not subject to tax. Nevertheless, if the asset is sold in the future, the beneficiary will be taxed on the increase of value between the date of death and the date it was sold. This could be a substantial sum if the beneficiary is on a high marginal tax rate.

One way around this is to have the estate sell the asset at time of death. This means the asset will incur capital gains tax, but the tax-free threshold will apply, minimising the tax debt.

If the asset was the family home of the departed, it could be exempt from capital gains tax if it becomes the primary residence of a beneficiary or if it is sold within two years of the date of death.

Tax on superannuation death benefits

Dependants of the deceased will receive the superannuation death benefit free of tax. But adult children do not automatically qualify for this tax concession.

They need to prove to the Australian Taxation Office that their relationship with the deceased involved financial dependency.

Tax on invested income

After a person passes away, their assets will continue to earn investment income. This income will need to be declared in the tax returns the legal personal representative files each financial year until the assets are disbursed.

One way to gain tax advantages is to set up a Testamentary Trust when creating the Will. This will not only provide beneficiaries greater flexibility in distributing capital and income, but may protect the asset from legal proceedings, such as marital breakdown or bankruptcy. Income generated by the trust can be allocated among the beneficiaries in a tax-effective manner.

Getting advice

Although there is some level of inevitability in death and taxes, the taxes incurred after someone passes away can be minimised. To find out more on how to minimise tax liabilities on inherited assets, talk to your adviser.

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Leave a lasting legacy

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Your will. Your Legacy

We all like to think we’ll leave a lasting legacy. But without a valid will, there’s a good chance your most memorable legacy could be a costly court battle over your estate. Dying without a professionally drafted, up-to-date Will opens the door to the confusing and often expensive world of intestacy.

It’s a world in which lawyers could be the key beneficiaries while family, friends and even business associates are left emotionally and financially drained.

A valid Will specifies how you would like your personal assets (or ‘estate’) distributed following your death. It works in concert with the rest of your estate plans, which can be used to make provisions for children – as well as yourself while you are alive, through various powers of attorney and guardianship.

Despite the importance of a Will, it’s estimated that around 45 per cent of Australians don’t have one. Among those that do, many could find their Will doesn’t meet strict legal requirements, effectively leaving loved ones no better placed than if there was no Will at all.

Having a watertight Will plays a vital role in wealth management. Yes, there is a cost involved in having your Will written by a skilled legal representative. But this could be a tiny fraction of the costs racked up by loved ones if they have to fend off unexpected claims on your estate.

Knowing that your final wishes are set in cement can bring priceless peace of mind to those who matter in your life.