The Importance of Estate Planning

estate planning

Why Estate Planning is more important than ever

What would happen if…

Life does not always go to plan. While we logically know that, most of us don’t plan for the worst. Not only is it a bit morbid and depressing, but the process of estate planning can be complicated and time-consuming too.

However, the downside of not planning is the potential for hard-earned assets to be squandered, family fall-outs, and money handed to the Government that could have been distributed in accord with your wishes. If you are a business owner, then the stakes are even higher.

As a population, planning is more important than ever because:

  • Our population is ageing – 1 in 7 Australians are now aged 65 and over (3.8 million)
  • The baby boomer generation represents only 25% of the population but hold 55% of the wealth
  • We are entering a period of intergenerational wealth transfer from the baby boomer generation
  • Over the last 25 years, there has been an explosion of wealth in Australia

What is estate planning?

Estate planning is simply identifying your assets and liabilities and what you want to happen to those assets if something happens to you. As part of that, you need to look at the issues that might arise and how best to manage them. All of this is then reviewed for tax outcomes and the legal requirements to provide the best care and protection for your beneficiaries.

If you are a business owner, there is also another set of issues to consider to ensure that the business can continue if you are not able to continue in your current role. Otherwise, your beneficiaries can take their share of the value accumulated in the business. This planning will protect your beneficiaries, the business, and your business partners.

Planning for the distribution of your estate involved protecting the assets you have worked hard to acquire and ensuring their safe and smooth transfer to your loved ones.

Estate planning does not have to be hard work, but it does have to be planned.

Reasons for careful estate planning

It’s also important to understand that actual wealth or the size of your estate is not the sole reason for estate planning. Estate planning is important for:

  • The care and maintenance of minor children.
  • Managing the respective rights and expectations of beneficiaries, particularly with blended families.
  • Avoiding disputes between family members.
  • Managing relationships outside of the immediate family.
  • Managing liabilities of the estate.
  • Managing assets which may not be capable of immediate realisation or where the value will be diluted by realisation.
  • The transfer of assets through generations.

Estate planning seeks to not only distribute the assets of your estate but do so in a way that protects the estate, addresses issues within the estate and fulfils your wishes.

Ten key estate planning considerations

An effective estate plan should:

  1. Give you certainty as to how your assets will be managed if you are incapacitated and unable to look after your own affairs.
  2. Establish how and when it’s best to distribute assets to your loved ones.
  3. Cater for the current and future needs of your beneficiaries.
  4. Protect your assets so that they pass to the right beneficiaries at the right time.
  5. Allow your beneficiaries to legally reduce capital gains liabilities on assets and reduce or eliminate tax on income generated from their inheritance.
  6. Allow you to minimise or avoid death benefits tax (which can be as high as 32 percent) when distributing your superannuation benefits.
  7. Protect your beneficiaries’ inheritance in the event of divorce or bankruptcy.
  8. Guard against undue waste and extravagance due to spendthrift tendencies, age, mental health, drug addictions, gambling or other vulnerabilities of a beneficiary.
  9. Distribute your assets to your intended beneficiaries, not to an in-law or former spouse, for example.

The basics of estate planning

Estate planning does not have to be hard work, but it does have to be planned.

Here are five key steps to get started:

  1. Make a will and keep it up to date
  2. Set up a Binding Death Benefit nomination or Non-lapsing Death Benefit nomination for your super
  3. Nominate a beneficiary for your life insurance outside super
  4. Understand the tax consequences of how your assets are distributed
  5. Appoint an enduring Power of Attorney (PoA)

For any questions or to discuss any of the above in relation to your personal situation, please contact us today.

How can Greenwich & Co help you?

Estate planning need not be complicated. We can assist you and help to give you peace of mind that your hard-earned assets will be protected.

At Greenwich & Co, our team of financial advisers and tax experts can work with you to tailor a plan that achieves your desired distribution of wealth in a tax-effective way. We can help you to develop a comprehensive estate plan that takes into consideration your wishes and the tax implications of passing on your estate.

Please contact us today.