• Estate planning

We could start with the old saying that there are two things in life that are certain: death and taxes. This may be true. You cannot control taxes, but you can have a say in what happens to your assets on your death.

Estate planning is not a subject to be taken lightly.  What you decide or don’t decide now will impact on those you leave behind:  financially and emotionally. 

Having a Will is not the sole consideration in estate planning.  If you have a business, assets in a trust, superannuation accounts, insurance policies etc. in place, these must all be considered as part of your estate planning to ensure the structures are able to continue as desired or that your legacy is left to the people you intended to benefit.

Let’s consider the different aspects of estate planning.

Your Will

Everyone should have Will regardless of how simple or complex your financial affairs are.

We often find that business owners don’t have a will, and if they do, it does not adequately cover their current personal or ultimate beneficiary’s circumstances.

If you pass without a Will, without a valid Will or, if you do have a Will and all the beneficiaries have passed before you, you are said to have passed intestate.  What does this mean?  Effectively the distribution of your assets is made in accordance with the Administration Act 1903 (“The Act”) in Western Australia.  The consequences of this can be and usually are undesirable.

Consider this:  a family is made up of Mum, Dad and 2 children aged 1 and 5.  The family home is owned by your spouse.  Sadly your spouse passes without a valid Will.  How would you feel finding out that the family home will pass only one third to you and two thirds to your minor children?  Was that your spouse’s intention?   The situation above is a simplistic one but when a business is involved this can be disastrous.  When you consider all the assets that you own, what impact would this have?  It is easy to consider the financial impact, what about the emotional fallout on your loved ones in not being provided for? 

Having an unsigned Will can have unintended consequences too.  For example the Supreme Court has ruled that an unsigned Will was invalid.  The assets included a farming business with debt attached to it and farm land.  The son ran the farming business and the daughter had nothing to do with it.  The resulting distribution of assets was such that the land was split equally between the two adult children, but the business debt remained with the son.  One of the problems they now have is that the son has been left with the debt (in the business) with only a half ownership in the property so it is quite likely that they will have to sell the property to repay the bank debt.  If they had signed the Will it would be a very different story.

When considering your estate, you need to ensure you have carefully considered who the Executor will be and whether you need joint Executors or a “back up” person.  You should also consider if and when a Power of Attorney is required/appropriate.  A Memorandum of Wishes may be desirable to ensure your family are informed of matters that are not covered in the Will.

What are your Assets?

We like to think all assets we have acquired are ours.  Reality is if you put assets in the name of a trust, those assets are not yours to deal with in your estate.  Over the years wealth has built up in many trust structures.  Does your trust deed have the appropriate appointors and successive appointors?

Businesses need to have a succession plan in place to ensure they continue to operate day to day.  Most people would not want a party who had no interest in the business suddenly having control of the business.

Does your superannuation fund balance form part of your estate or do you have a valid binding nomination in place? 

Planning opportunity

Structures can be set up via your Will to provide flexibility and tax desirable consequences for assets that you own.

What you need to think about

Consider where your wealth is held. What structures you currently have in place?  Are those assets truly yours? If they are, who would you like to leave them to?

Without a properly structured Will, containing instructions for the executor about your wishes and consideration for various circumstances such as protection for beneficiaries, (including commercial and matrimonial risks), your legacy could be in jeopardy.  Careful planning can ensure beneficiaries receive what is intended.

Having a Will in place is not a “done and dusted” subject either.  What are the consequences of making a Will before getting married? Or what if you get divorced after making your Will? 

Your Will should be reviewed regularly, say every two-three years, to ensure that it deals with your assets in the manner that you desire.  You should consider any changes in your family situation and your personal assets.