Meeting with account estate planning

An accountant in Bayside explains estate planning

Published On: September 26, 2019Categories: Accounting

At Bruce Edmunds & Associates, our mission ever since 1966 has been to provide individuals with the level of financial freedom needed to achieve their goals and get them where they want to be in life.

Our accountants in Bayside have been providing qualified financial, super and tax assistance to help our clients get to that point.

However, that isn’t all our personal accountants do – our team also offer a range of non-financial services such as estate planning.

That’s because estate planning has considerable overlap with tax, super and financial considerations – three areas our personal accountants specialise in – which can influence how your estate is divided and how well off your beneficiaries are.

Estate planning has 3 main objectives in mind…

Objective 1: transfer of wealth

When most of us think of estate planning, odds are our minds drift towards Wills, and the transfer of wealth and assets once we pass.

During your life, you will have (hopefully) built up an impressive collection of assets and wealth. The number 1 objective of estate planning is determining how these assets and wealth are distributed among your legal heirs and beneficiaries.

Important legal considerations

Transferring your wealth and assets isn’t as simple as just saying “I want my house to go to (relative)” – there are a range of legal considerations involved in the transfer of wealth.

For example, some people believe that they can explicitly exclude estranged relatives from receiving anything. Another common belief is that by explicitly willing a marginal amount (for example, only $10) the beneficiary cannot claim that they were forgotten.

What many don’t realise is that beneficiaries are entitled to make a “Testators Family Maintenance Claim” or TFC in certain circumstances.

Another thing that many neglect when planning their estates is debt and other liabilities. Certain debts may be passed on to your beneficiaries, unless your estate is set up in a way to pay off these debts before passing your remaining assets on.

The importance of updating your Will

The most obvious part of estate planning is your Will, and ensuring that it’s up to date. 

Without a Will, the state will determine how your assets are divided in accordance with current legislation. This can lead to important assets not being passed down your family at all, or going to the “wrong” family member (for example, a car not being passed to a revhead relative).

It’s important that you have a Will – it’s also important that your Will is updated to reflect changes in your relationships and circumstances.

For example, say you’ve purchased a new investment property since your Will was last updated. Alternatively, you may have remarried since your Will was last changed.

Both of these change your circumstances by changing your assets and introducing new beneficiaries respectively, both of which dramatically change how your estate is handled and could introduce conflict.

Luckily, updating your will is inexpensive and relatively simple – there’s no excuse not to do it!

personal accountant

Objective 2: asset protection

The second objective of estate planning is asset protection. Essentially, this is all about ensuring that your assets are protected – specifically, it’s about protecting them from frivolous claims and illegitimate beneficiaries.

We aren’t talking about stuffing cash in the mattress or using other legal trickery to hide your assets – rather, we’re talking about using legitimate and legal techniques to protect your assets from losses.

By doing so, you can ensure that your intended beneficiary is able to access everything you’ve left for them.

Our accountants in Bayside can set up a testamentary trust for you

Trusts are the most common way of protecting your assets – specifically, testamentary trusts.

These trusts are created by a Will, and protect your assets by:

  1. Protecting your assets from excessive spending and waste by beneficiaries
  2. Reducing tax paid by beneficiaries on inheritance income

By placing your assets into a trust, the inheritance is totally controlled and managed, making it appropriate for young beneficiaries, or beneficiaries who may not be financially responsible enough to manage their own affairs.

In addition to providing expert financial and tax advice, our accountants in Bayside can also help by preparing a Power of Attorney document.

This gives certain individuals the power to make decisions on your behalf. In many cases, a trustee cannot perform their duties as part of your testamentary trust unless also imbued with the Power of Attorney. As such, this plays an important role in many estate plans.

Objective 3: using estate planning to reduce tax burdens

As with all other financial decisions, tax considerations affect how your estate is planned. Not only can the amount of tax you pay influence your estate plan, but it can also impact the amount of tax your beneficiaries need to pay.

Careful estate planning is needed to minimise the potential of taxes to impact what your beneficiaries receive.

Naturally, our accountants in Bayside can help you with this!

How trusts reduce tax burdens

The last thing you want to leave your beneficiaries with is an increased tax burden. By arranging your estate into a trust, you can reduce how much tax beneficiaries will need to pay.

Unlike family trusts, testamentary trusts are taxed at marginal tax rates, meaning that beneficiaries could potentially receive up to $18,200 of tax-free income.

Additionally, capital gains on assets passed from the estate to a beneficiary via an estate will not be subject to capital gains tax unless the beneficiary sells the asset.

These are just two of the ways setting up a trust for your estate can reduce the tax burden on your relatives.

“What about my business?”

One of the assets you may own is your very own business, built up over the years on the back of your hard work.

While you may have an idea of where ownership is going to go after you pass, you may not have the details sorted out.

In addition to estate planning, our accountants in Bayside also provide succession planning services.

If estate planning is a big picture view of your assets, succession planning is all about the nitty gritty details, with a focus on sorting out the chain of command and determining who’s going to look after running your business after you’re gone.

Succession planning is an important complement to estate planning that our personal accountants can help with.

It isn’t dedicated solely to sorting things out after you pass, either – succession planning is invaluable if your goal is to retire early, and can prepare your business if you decide to go on an extended holiday.

Call Edmunds’ accountants in Bayside for advice

Estate planning is a complicated area that overlaps with many areas including trust law, super law and tax law, just to name a few.

To ensure that your estate plan works for those close to you, we recommend talking to a professional.

Luckily for you, Bruce Edmunds & Associates excel in all three of those areas.

Our accountants in Bayside understand how important your estate is. We also understand how complicated it can be.

That’s why our estate planning accountants endeavour to make the process as simple and elegant as possible. Together, we’ll make sure that you understand exactly what will happen to your wealth and assets, creating tailor-made guidance and advice.

Give Bruce Edmunds & Associates a call today on (03) 9589 5488 or click here to request an appointment about your estate.

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