Estate planning flexibility

Estate planning flexibility is facilitated in the ‘modern’ Will. This article discusses some of the features of a modern Will that give that flexibility and provide peace of mind to the testator.

What’s in a Will?

As mentioned in our post ‘Estate Planning outlined’ two important documents to be found in an Estate Plan are the Last Will and Testament (Will) and the Enduring Power of Attorney (EPA): we also noted that “it is what they say about how your estate is to be administered– and the documentation and arrangements that support them – that is more important”.

Is a traditional Will good enough?

‘Old-style’ traditional Wills do little more than bequest estate assets to the nominated beneficiaries of the testator (Will-maker) – without considering the beneficiary’s age, personal circumstances, or any taxation implications of the transfer of the asset concerned, amongst other shortcomings of this style of Will. They are usually inflexible in their provisions.

The trouble with this approach in estates where there are substantial assets – or where there are beneficiaries with particular circumstances or needs – is that it

• leaves no flexibility or choice as to how they can receive the benefit from the assets they inherit;
• can result in unintended inequitable bequests (because of Capital Gains Tax and/ or income tax consequences); and
• can ‘invite’ challenges from disaffected claimants.

What makes a modern Will, modern?

A modern Will avoids some of the above shortcomings by inclusion of one or more testamentary trusts ¹ in the Will, increasing the flexibility by which the assets of the trust can be utilised for the intended beneficiaries – and in that process, the value of the bequest may be enhanced. A well drafted Will providing the appropriate flexibility allows beneficiaries to choose when they will utilise their gift from you – and in some cases, how it is to be treated from a taxation point of view.

The flexibility provided under a discretionary trust structure can be incorporated into the testamentary trust, allowing for beneficiaries to make the most of opportunities – and avoid unintended pitfalls.

The flexibility provided under a testamentary trust in the Will may facilitate:

• Minimising personal income tax
• Minimising Capital Gains Tax (CGT)
• Keeping an inheritance at arm’s length from the Family Court during a property dispute with a former spouse (albeit that its value may be taken to account by the Court in determining the allocation of assets in the light of financial resources)
• Protection of the inheritance from a trustee in bankruptcy
• Protection of the inheritance for beneficiaries with certain disabilities from inappropriate access to their asset; and in limited situations,
• Avoidance of unintended loss of Centrelink or Veterans Affairs entitlements.

Where can I get help with Estate Planning (including my Will)?

The Continuum Financial Planners Pty Ltd Estate Planning service offers clients:

• working with them to prepare the detailed information required for their appointed estate planning specialist lawyer; who can then
• consider the client’s individual detail in light of their estate planning experience so as to design a plan appropriate to the client’s present and known likely circumstances; and where needed
• provision of access to our referral connections of such professionals (to whom we are happy to refer you to match their expertise with circumstances such as your own).

To avail yourself of this service, contact our office (by phone, on 07-34213456; or our website Contact Us page) for an appointment with one of our experienced advisers.

¹ a subsequent article in this series, ‘Estate planning with a testamentary trust’ explains features and benefits of the testamentary trust in Estate Planning; and in the administration of the Estate.

More about Estate Planning…

This is the second in a series of 13 articles on the topic of Estate Planning: further articles in the series seek to bring clarity to some of the issues and implications to be dealt with in fulfilling the three key considerations of Estate Planning – getting the right amount of money, to the right beneficiaries and at the right time; and to prepare you and your family to understand the final plan when drafted. The remaining articles consider –

• Estate Planning outlined;
• Asset protection using Estate Planning;
• Superannuation death benefit nominations and Estate Planning;
• Estate planning and Business Succession planning;
• Capital Gains Tax impact on estate planning;
• Estate planning and family loans;
• Estate planning and company-owned assets;
• Estate planning for a SMSF trustee;
• Estate planning and superannuation assets;
• Estate planning with a testamentary trust;
• Estate planning for younger children; and
• Estate planning dependent on a valid Will.

(This series was first posted to our website over a period from late-2011 through early-2012; it has been refreshed, updated and re-posted in February 2015.)