Are your estate planning affairs in order?

Are your estate planning affairs in order?

19 December 2023

With the uncertainty of life, ensuring your estate planning affairs are up to date and in order is paramount to safeguarding your assets and providing financial security for your loved ones when you pass. Whilst estate planning may seem like a daunting task, it’s a critical step to minimise tax obligations and preserve your legacy for future generations.  

What is estate planning?

Estate planning serves as a comprehensive guide, outlining how your assets should be handled upon your passing. While you may have a Will clearly stating how you want your assets distributed, estate planning goes beyond a single document and gives you the advantage of addressing every detail of your individual situation in the most tax-efficient manner. Some key elements of your estate plan may include: 

  • Will

  • Testamentary trusts 

  • Power of Attorney 

  • Advance care directive 

  • Superannuation death benefit nomination 

  • Guardianship arrangements 

  • Business succession planning 

  • Tax planning 

  • Funeral and burial wishes 

How often should you review your estate plan?

A crucial aspect of estate planning is adaptability, ensuring that your plan aligns with your current circumstances and goals. AR Advisors Principal Jason Barbetti believes an estate plan should not be a one and done exercise, emphasising, ‘Your estate plan should be reviewed every three to five years to prevent any unintended consequences. Life is dynamic and you need to allow for changes in your personal or financial circumstances including marriage, divorce, the birth of children, starting or closing a business, or establishing trusts or companies. These life events should signal a review of your estate plan and a potential update.’ 

Reviewing your estate plan regularly contributes significantly to safeguarding your assets by securing wealth for future generations, ensuring accurate distribution, and minimising potential disputes or claims against the estate. It could also potentially allow you to take advantage of new opportunities or protections provided by changes in the laws.  

What are some of the tax planning considerations for estate planning?

Minimising the tax implications are a key component of effective estate planning. With taxation laws subject to change, failure to adapt your estate plan could lead to unnecessary tax burdens for the beneficiaries of your estate.  

Typically, beneficiaries will not pay tax on inheritances. However, selling inherited assets may incur capital gains tax. Seeking professional advice when estate planning can help to minimise the tax burdens through strategic advice. There are strategies your advisors can use such as Testamentary Trusts which can offer tax relief or strategic management of superannuation balances which can provide additional tax benefits.  

What are some common estate planning mistakes?

Estate planning can be a complex yet indispensable process, requiring careful consideration and strategic foresight to navigate the legal and financial intricacies. Common estate planning mistakes include: 

  • Failing to have a Will or neglecting to update it regularly 
    At a minimum, everyone should have a Will that is reviewed every three to five years to account for changes in personal and financial circumstances. Part of this process should be understanding all your assets and considering the debts you owe as these do not vanish upon death. 

  • Appointing the right Executor to your Will 
    This is an important role with the Executor administering your estate and distributing your assets to the beneficiaries. It’s important to talk to the person you intend to be Executor, as this role is not for everyone. Choosing a person within the same state as you will also help to facilitate a smoother administration process.  

  • Not considering superannuation 
    Superannuation is often overlooked as a bequeathable asset that can be protected upon death if properly prepared for. The distribution of superannuation upon death will depend on the terms of the fund, legislation or the trustee of the fund. In all cases, a Binding Death Benefit Nomination form should be prepared to ensure that an individual’s wishes in relation to their super are achieved.  

  • Leaving out or failing to consider the needs of your beneficiaries 
    It’s important to recognise that each beneficiaries' circumstances are unique and failure to tailor the estate plan accordingly may result in challenges to the estate. Incorporating Testamentary Trusts can be beneficial for high-risk beneficiaries with histories of addiction, bankruptcy or financial irresponsibility. Not only can a Testamentary Trust safeguard assets but it also allows for customisation, making them a valuable tool in a will maker’s toolkit. Another key consideration is to openly communicate your Will to your beneficiaries to avoid confusion and potential conflicts after you pass.  

Estate planning is a continual process, evolving with life’s changes. By staying proactive in your estate planning, you retain control over the distribution of your assets, minimising the risk of family conflicts and legal challenges.  

Estate planning professionals - we're here to help

At AR Advisors we understand that estate planning is a unique situation. Unlike other financial decisions, it involves a lot of emotions and can be a very complex and detailed process. We can help provide the understanding and guidance needed to make the right decisions for you, your loved ones and your family.  

If you would like to make sure that everyone will be looked after and your wishes respected once you pass, get in touch with us today to discuss how we can help with your estate planning.  

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