Aug 13, 2019 / News

Financial Planning

Estate Planning: Where is the Value?

Estate Planning is a morbid and sometimes confronting topic, which is why it is an often-neglected area of advice.  However, once this process has been completed the participants see the value created and they are relieved that there is a plan to deal with various (sometimes complex) aspects of their circumstances.  Estate Planning undoubtedly creates value, but where?

An Estate Plan is the process of preparing for the transfer of a person’s wealth, whether directly and indirectly held, after their death.  A Will is obviously an integral part of this process, but it is far from the only part.  There are numerous other documents that may need to be considered, altered or created (eg Enduring Powers of Attorney, Advanced Health Directives, Trust Deeds and Amendments, Binding Death Benefit Nominations, Company Constitutions, Shareholders Agreements etc).  

The primary objective of any Estate Plan is ensuring that the person’s assets (or control of the assets) are distributed in accordance with their wishes.  A vitally important secondary objective is minimising the chance of external parties being able to adversely impact their wishes; examples would include the ex-spouse of a beneficiary where a relationship breaks down, the Australian Taxation Office or lawyers litigating for an aggrieved party.

It is the desire of most parents to leave a financial benefit for their children.  However, if this benefit is not provided (and protected) in the correct way, it is highly likely that a child’s ex-partner will be able to access some (or all) of the inheritance as part of the financial property settlement.  Effective planning in this area can save the family group a fortune – that’s value!

No-one likes the idea of paying the Government any more tax than is legally necessary, so why would anybody want to make the Australian Taxation Office a de-facto beneficiary of their estate?  This is exactly what can happen when there are assets inside entities that may have a hidden tax consequence.  Assets inside superannuation are often vulnerable to these pseudo death taxes and must be regularly monitored to consider and minimise the risks.  Assets owned personally, or inside other entities, also need to be reviewed to consider their tax implications.  Gifting assets via a Will to favourite churches or charities can lead to unforeseen tax liabilities for the estate; however, such gifts can be managed tax effectively with a little bit of planning.  Effective planning in this area can prevent problems and thereby save the family group a significant amount of money – that’s value!

Every potential beneficiary has the right to approach the Court and make a Family Provision Application for a greater “slice of the pie” than they have been given.  However, with an appropriately worded Will and control of other entities secured correctly, the risk of Court-ordered interference can be reduced significantly.  For example, if one child has received substantial support from a parent during the parent’s lifetime, they may be intent on equalising the overall position amongst their other children (thus taking into account past benefits), resulting in unequal treatment under the Will.  It is vitally important to record this earlier assistance in order to help prevent the supported child from claiming additional benefits upon the Parent’s death. Once again, effective planning in this area can save the family group real cash and untold amounts of mental anguish (as Court battles may drag on for years and years) – that’s value!

Other matters that should be considered include life insurances (and, importantly, how they are owned), family risks, business risks, consideration of business partners, the taxation implications of all these items etc.

These are only some of the ways a good estate planner can provide value to the family group.  When the Estate Plan is in place not only has a high level of financial value been provided, but there is also the significant intangible value that is the “peace of mind” provided when these issues have been competently addressed.  Estate Planning cannot be justifiably ignored in any rational context as both the financial and emotional consequences for doing so could be catastrophic.  For more information and assistance, please contact your Nexia Edwards Marshall or Edwards Marshall Financial Solutions advisor.

About us

EMFS was formed in 2001 originally to service the financial planning needs of the clients of Nexia Edwards Marshall, Chartered Accountants. In addition, we now service clients referred by other accounting firms, lawyers and clients who are not serviced by Nexia Edwards Marshall. We manage funds totalling about $250m on behalf of clients.

Contents of this publication are general of nature and are not intended to be used for decision making purposes. Edwards Marshall Financial Solutions Pty Ltd ABN 45 096 434 842 is an Authorised Representative of Edwards Marshall Advisory Pty Ltd ABN 18 600 878 555. AFS Licence No. 479 792.