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Estate planning is front of mind for many of our clients, and I suspect for many high net worth Australians. Top concerns include how to adequately distribute estate assets and how to protect family wealth from being squandered or lost to non-family members.
There are many options available to ensure your assets pass to desired beneficiaries when you die, from owning assets jointly, the use of binding death benefit nominations in superannuation, to the use of discretionary trusts and testamentary trusts.
Importance of a Will
First and foremost, your Will is key to estate planning. A Will is a document that sets out your plan for your assets, to whom they should go to and when. It also nominates a person or people (executor) to carry out your wishes when you have died. The executor is generally assisted by your solicitor to carry out their duties.
If you have concerns about the dissipation of assets by future generations, consider including testamentary trust provisions in their Will. Such trusts are established by the Will after your death, and can provide protection and limitations on access to estate assets and the income generated from those assets. These can be helpful when an estate is likely to be distributed to minors, spendthrifts or those who experience difficult in managing finances.
Superannuation is not covered by your Will; superannuation, and the insurance held in your fund, do not automatically become part of your estate. Instructions in your Will in relation to the distribution of your superannuation benefits are therefore not valid.
To be sure about the distribution of your superannuation following death, you need to put in place a valid binding death benefit nomination (BDBN). A binding death benefit nomination can only be made in favour of your spouse or children, or to your estate via your legal personal representative (your executor). Without a binding death benefit nomination in place, the trustee of your super fund has discretion as to where your benefits are paid, which may or may not be in accordance with your wishes.
A BDBN usually lasts for three years before it requires updating, otherwise it will expire. Self-managed super funds (SMSFs) are an exception and can have non-lapsing binding death benefit Nominations.
It is important to note there are also taxation implications should your superannuation be paid to an adult child. The taxable proportion of your superannuation benefits attracts tax at 15 per cent, plus Medicare (a total of 17 per cent tax) prior to distribution.
A Will and superannuation arrangements are just two options that can be implemented to safeguard your estate however estate planning can be complex and requires a holistic view of all your affairs. Seeking advice through a financial planner is important, as they will take an overall view of your affairs and are experienced in working with other professionals to ensure an appropriate outcome for the individual.
The information provided in the above article is general in nature and does not take into account your own specific circumstances. You should seek the advice of an appropriately qualified professional prior to acting on any of the strategies discussed.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email firstname.lastname@example.org or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.