Introduction

Many years ago whilst working as an accountant in the beautiful seaside town of Busselton Western Australia, I learned about estate planning as part of my financial planning studies. The unit was very interesting because it combined content from different fields including financial planning, law, accounting and tax. I realized that estate planning complemented my technical background and varied career experiences.

My interest led me to transfer within the firm to the Perth division specialising in estate and succession planning. This was an invaluable experience. At the time the division was one of the only of its kind in Australia and I was able gain expert knowledge from my colleagues. I also had the opportunity to explore and experiment with ways of combining tax, financial planning, estate and succession planning issues to produce a cohesive and comprehensive solution for clients.

Estate planning is challenging from both a technical and emotive point of view. Family dynamics, different generational perspectives and dealing with the difficult topic of death make estate planning a challenging and rewarding specialization.

Interestingly the awareness and appreciation of the need for estate and succession planning advice have grown rapidly since I started my own personal journey.

A Foundation of Wealth Management

Why Estate Planning Is Important

  • Baby Boomers

Due to our ageing population in Australia it is estimated that $407 billion dollars worth of property ownership (Bank west Financial Indicator Series Report 2010) will be transferred over the next fifteen years. All this will be taking place when statistics suggest that less than 50% of the population have a valid will (NSW Trustee and Guardian). This is the first generation in Australian history to be passing on such a high level of wealth. The generation receiving the wealth in turn will have further financial decisions, because their children are facing increasingly high costs of housing and education.

  • Legacy Planning 

To successfully transfer wealth from one generation to the next requires more than comprehensive tax, estate and financial planning strategies to be in place. Legacy planning involves preparing your beneficiaries for their inheritance and transferring family values as well as family wealth.

  • Timing

The time at which your beneficiaries receive their inheritance can have a major impact on their lives. Careful consideration needs to be given to when you will leave your assets to them and each decision will depend on your own family circumstances.

  • Quantity

The amount of wealth you leave to your beneficiaries will also depend on your family circumstances. Some of your beneficiaries may have greater needs than others and the concept of fairness versus equality needs to be give a lot of thought.

In some instances leaving all your wealth to them may more harmful than leaving a smaller amount. Considerations such as leaving a portion of your wealth to charity needs to be balanced out with how much to leave to your beneficiaries.

  • Flexibility

An ideal estate plan will allow flexibility to minimize the impact of taxation and also to protect assets for your beneficiaries. Finding the right combination of flexibility and asset protection is important. If your estate plan is too restrictive and does not allow your beneficiaries with enough flexibility to live their lives in the way they wish to, the estate plan may be broken and challenged.

  • Taxation

The estate planning process involves a review of the potential tax issues associated with transferring assets to the next generation. With planning the impact of the tax issues can be reduced and greater wealth being able to be transferred to beneficiaries.

  • Asset Protection

In reviewing your estate planning objectives you are able to assess how assets should be owned for the purposes of succession but also asset protection. The review process generally uncovers exposed assets which can be protected to make sure they will pass securely to the next generation and be protected from creditors and third parties.

  • Modern Families

Increasing divorce rates,more blended and intergenerational families mean that well thought out estate planning is required to keep the family dynamic as harmonious as possible.

  • Estate Disputes

There have been several high profile court cases involving estate disputes. With proper estate planning these disputes can be avoided. The financial and emotional cost involved in settling an estate planning dispute are far greater than the cost to prepare and update an estate plan on a regular basis.

  • Business Succession Planning

The 2014 Family Business Survey by PWC shows that 1.4 million family business owners are planning to retire over the next 10 years however only 8% of family businesses have robust succession plans in place. 38% of family businesses are planning to sell or float their business and 24% plan to pass it on to the next generation. (source: 2014 Family Business Survey by PWC ).

My Estate Planning Process

    1. Estate Planning Objectives

The most critical aspect of my role as facilitator is helping my clients to work out their objectives or ‘Why’. Failing to get to the bottom of why you need to prepare your estate plan can lead to delays in implementation.

    1. Family

Estate planning starts with exploring your family values and understanding what is specifically important to your family dynamic.

Your own family dynamics make the estate planning process unique to you. By having an understanding of how each member of the family relates to each other, an estate plan can start to be prepared.

    1. Ownership versus control

To be able to distribute your assets to the appropriate people you need to understand how you own your assets. Not all of your assets will form part of your estate when you die and be distributed in accordance with your Will. Your assets maybe owned jointly with your spouse or they may form part of a trust you control or be part of a superannuation fund of which you are a beneficiary. Preparing your own balance sheet where ownership and control is documented is a crucial step in achieving your estate planning objectives.

    1. Life stages

Estate planning is equally as important to everyone regardless of your life stage. As you get older and accumulate more assets you may start to consider gifting of assets to either your beneficiaries or charitable causes.

    1. Review

Estate planning should be regarded as a journey not a destination and be reviewed on a regular basis because it forms the foundation of every decision you subsequently make.

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    1. Collaboration

Estate planning can range from important straight forward tasks such as reviewing and updating of superannuation death benefit nominations, to highly complex tax restructuring work. The best results require collaboration between your trusted professionals advisers. These include lawyers, accountants and financial advisers with one to take on the role as facilitator. No one adviser has all the skills necessary to provide estate planning services without consultation with your other trusted advisers.

Working in collaboration produces the best results. Opportunities emerge with the combined input of experts in their fields. It is a rare opportunity to tap into the best available expertise to provide the best outcome for you.

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Building Blocks of Estate Planning

To make your estate plan is legally binding and to provide clarity for you and your family it requires documentation. Depending on you and the level of complexity in your life, these are some of the documents that may need to be prepared to achieve your estate planning objectives.

      • Wills
      • Living Will
      • Ethical Will
      • Beneficiary designations
      • Will trusts
      • Shareholders agreement
      • Buy sell agreement
      • Binding Financial Agreements
      • Mutual Wills
      • Instruction Letter
      • Family Agreements
      • Trust Deeds
      • Binding Death Benefit Nominations
      • Advanced Health Directives
      • Life insurance policies

Key Estate Planning Appointments

Finally a decision as to whom is best suited to implement your estate planning wishes is made. By starting your estate plan and incorporating it into everything you do, you will be able to make the right choice.

      • Executor
      • Power of attorney
      • Guardian
      • Trustees
      • Enduring Guardians

Estate Planning Outcomes

My personal estate -planning journey has evolved to provide holistic financial planning services built on the foundation of estate planning. I continue to find it fascinating how families work and what legacy they would like to leave the next generation. My estate planning knowledge is now far more comprehensive than the single unit I completed by correspondence all those years ago.

The positive outcomes for my clients who have embraced estate planning include:

      • Preservation of family wealth
      • Tax minimization
      • Avoidance of estate disputes
      • Legacy
      • Clarity and reduction of family conflict
      • Preparing beneficiaries for their inheritance
      • Communication of the family story and
      • Preparing for business succession

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