Estate Planning and Asset Protection
Written by Steve Landers
Estate planning involves creating a strategy to manage and distribute your assets after your death. It ensures that your wishes are honoured and that your loved ones are taken care of. Key components of estate planning include:
Wills: A will is a legal document that outlines how your assets should be distributed. It can also appoint guardians for minor children and specify funeral arrangements. Wills can include key provisions such as:
Testamentary trusts – which provide further control and asset protection for their beneficiaries and extended family.
Life interests – which can provide the use of assets for one’s lifetime before falling to the intended eventually beneficiaries of the will-maker. These are often used in ‘blended’ families.
Trusts: Trusts are legal arrangements where a trustee holds and manages assets on behalf of beneficiaries. Trusts can provide tax benefits, protect assets from creditors, and ensure that assets are managed according to your wishes.
Powers of Attorney: This legal document allows you to appoint someone to make decisions on your behalf if you become incapacitated. There are different types of powers of attorney, including financial and medical.
Probate: Probate is the legal process of validating a will and authorising the executor to distribute the estate. It involves proving the will’s authenticity and ensuring that debts and taxes are paid before distributing the remaining assets.
Key Considerations for Estate Planning
Tax Implications: Understanding the tax implications of your estate plan is crucial. Australia does not technically have an inheritance tax, but capital gains tax (CGT) may apply to the sale of inherited assets. There are also tax implications for the inheritance of superannuation for those under age 60 or if the super death benefit passes to financial non-dependents. It’s important to seek professional advice to minimise tax liabilities.
Domicile and Residency: Your domicile and tax residency status can affect how your estate is taxed and administered. Australian residents are taxed on worldwide income, while non-residents are generally taxed only on Australian-sourced income.
Cross-Border Assets: If you have assets in multiple countries, it’s essential to consider the legal and tax implications in each jurisdiction. This may involve creating separate wills for different countries or using international trusts.
Asset Protection Strategies
Protecting your assets from potential risks is a vital aspect of estate planning. Holding assets outside of the ‘estate’ limited the ability for claims on an estate. Claims can be made by anyone on an estate but are generally more successful where the claimant has a financial dependency on the deceased. Here are some strategies to consider:
Family Trusts: Family trusts can help protect assets from creditors and provide flexibility in distributing income and capital to beneficiaries. They can also offer tax advantages.
Superannuation: Superannuation funds are generally protected from creditors and can provide a tax-effective way to save for retirement. It’s important to nominate beneficiaries to ensure that your superannuation benefits are distributed according to your wishes.
Insurance: Life insurance and income protection insurance can provide financial security for your family in the event of your death or disability. Ensure that your policies are up to date and that the beneficiaries are correctly nominated.
Business Structures: If you own a business, consider using structures such as companies or trusts to protect your personal assets from business liabilities. This can also provide tax benefits and facilitate succession planning.
Seeking Professional Advice
Estate planning and asset protection can be complex, and it’s essential to seek professional advice to ensure that your plans are legally sound and tax efficient. A qualified estate planning lawyer can help you navigate the legal requirements in combination with your financial planner and accountant and create a comprehensive plan tailored to your needs. Contact our team to discuss your estate planning and asset protection needs. Our experienced team is here to help you secure your legacy and protect your assets for future generations.