Estate planning, or ‘life planning’ as we call it, isn’t just a tool for wealthy families. Estate planning is useful for all of us, many of us accumulate a substantial estate reflecting a lifetime commitment to work. It is our interest and our family’s that we don’t waste unnecessary money on tax or expose your hard-earned assets to potential risks and otherwise accommodate families to future conflicts and disputes.
Life planning covers your future estate, assets, and tax planning. Generally, the easiest place to start is with your Will. Your will is central to your estate plan, and there are mechanisms which can be included in your will to ensure that your family are all adequately provided for.
You can choose a simple Will or a testamentary discretionary trust, which is a special type of discretionary trust that is created by a person’s Will. The Trust comes into existence after the will-maker dies. Instead of passing the assets directly to the beneficiary, the executor transfers the assets into a discretionary trust to be held by a separate trustee for the benefit of the beneficiary (and a general class of beneficiaries).
There are a number of benefits that come with the creation of a testamentary discretionary trust, some of which include:
1. TAX PLANNING
An advantage of a testamentary discretionary trust is that the trustee of the trust can stream the income earned from the trust assets through to a class of beneficiaries in the most tax-effective way. This usually includes immediate family members such as children.
2. ASSET PROTECTION
When a testamentary discretionary trust holds assets, your beneficiaries are protected from being at risk of personal liability such as from creditor claims, the application of bankruptcy or family law claims. This is because the trustee has legal ownership and uses their discretion to distribute any income or capital to the beneficiaries and until they receive that share, they do not own the asset.
3. PROTECTION OF GOVERNMENT ENTITLEMENTS
Finally, if your beneficiary is receiving Centrelink entitlements now or in the future, trust structures can be used to preserve those entitlements, reflecting separate ownership.
All estate planning solutions need to be tailored to your personal circumstances. For personalised estate planning advice and to organise an initial meeting with one of our legal team, please contact us.
Kayla Kennedy – Solicitor