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Shaping your legacy - five mistakes to avoid

 

30 April 2014

Would your assets end up in the right hands if you passed away suddenly?
Steer clear of these common mistakes when planning your estate.

 

 

 

 

High net wealth investors are exceptional for the breadth and sophistication of their wealth management strategies.

Yet a surprisingly high proportion lack concrete plans for sharing that wealth with future generations.

The outcome of this is that estate planning mistakes happen regularly, and it often leaves families having to deal with unexpected consequences.

Here we look at the top five estate planning mistakes, including some real-life examples of what happens when things go wrong, and tips for avoiding them.

adult son missed out on receiving any benefit from super, while her two younger children received a greater share of Mary’s overall wealth.

1. Not having a valid and up to date Will

Your Will needs to be reviewed and updated regularly to ensure it still accurately reflects your estate planning goals. As this example illustrates, this is particularly important when your family situation changes:

Bill had a family trust holding significant assets. After divorcing his wife Marlene, Bill inadvertently left her in the family trust deed as the controller (appointor) of the trust.

When Bill unexpectedly passed away, Marlene was left in control of the family trust. She wound up the trust and transferred the trust assets to herself.

adult son missed out on receiving any benefit from super, while her two younger children received a greater share of Mary’s overall wealth.

2. Not having a wealth transfer strategy

One of the reasons trust structures are popular for wealth transfer, particularly for high net worth individuals, is that they give you greater control over how and when your assets are used. For example:

Jack made a Will following the birth of his son, Mark, many years ago. Mark, throughout his adulthood, developed spendthrift habits. When Jack passed away, leaving his estate to Mark as his only son, Mark squandered the estate.

Had Jack established a trust fund in his Will for Mark, appointing a professional and independent trustee to manage and administer the trust fund, Jack’s estate could have been passed on gradually.

adult son missed out on receiving any benefit from super, while her two younger children received a greater share of Mary’s overall wealth.

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3. Over-looking a testamentary trust

When your beneficiaries are minors, a testamentary tax structure can provide significant tax advantages over a family trust. For example:

Rob and Raelene were a professional couple with four young children. Rob passed away suddenly and didn’t have a Will in place. All assets were held in his name only.

When Rob’s assets were distributed to his wife, she paid tax at the top marginal rate on the inheritance. Had Rob made a Will, he could have set up a discretionary testamentary trust, enabling income to be distributed to their four children at the adult rates of tax, creating significant tax savings for the family.

adult son missed out on receiving any benefit from super, while her two younger children received a greater share of Mary’s overall wealth.

Had Rob made a Will, he could have set up a discretionary testementary trust enabling income to be distributed to their four children at adult tax rates

4. Not talking to your family members about your decisions

There’s a tendency for people to avoid talking about sensitive topics like wealth transfer with their families, and particularly beneficiaries. The benefit of including your family in these conversations from an early stage can help make sure well-meaning wishes are carried through.

For example, if you would like one of your children to get involved in the ongoing management of your philanthropic donations, you need to ensure they are aware of your goals and intentions so they can carry on your legacy as intended.

adult son missed out on receiving any benefit from super, while her two younger children received a greater share of Mary’s overall wealth.

5. Only looking at some of the picture

If you don’t have one professional looking at the complete picture of your estate plan, it increases the chances your assets won’t be distributed evenly. For example:

Mary was a single parent who wished to benefit her three children equally if she passed away, and signed a simple Will accordingly.

When Mary died suddenly, her main asset was her super and she did not have a death benefit nomination in place. One of her children was a financially-independent adult working as an accountant, while the other two were school aged children living at home.

The trustee of the super fund decided to pay the death benefits to Mary’s two school-aged children (to be held on trust), rather than to her deceased estate. This meant that her adult son missed out on receiving any benefit from super, while her two younger children received a greater share of Mary’s overall wealth.

At ANZ, we can help

Estate planning can be complex, so it’s important you obtain advice from a competent professional, who practises in this area.

ANZ Private’s estate planning team comprises experienced lawyers who practice solely in estate planning law. Our service includes:

  • Analysing your existing personal and financial situation

  • Providing you with tailored estate planning advice

  • Preparing your Will, enduring medical and financial powers of attorney, assisting you with your superannuation death benefit nominations, and preparing documents associated with the succession of your family trust, and

  • Providing you with a complimentary safe custody facility to house your estate planning documents.

Estate planning with ANZ

You may have heard ANZ’s recent announcement about the sale of its subsidiary, ANZ Trustees Limited (ANZ Trustees), to Equity Trustees Limited (EQT).

Please note that this sale does not affect every part of the ANZ Trustees business. In particular, the estate planning service conducted by ANZ’s incorporated legal practice will be retained by ANZ.

If you are an ANZ Private client and you have an estate plan with us, your estate planning documents – including your Will, powers of attorney, title document(s) and deed(s) together with our internal file – will remain with ANZ and not be transferred to EQT.

We also continue to offer specialist advice in estate planning, working in conjunction with your solicitor or legal representative.

 

To discuss what this insight could mean for you, talk to your ANZ Private Banker directly, or contact us below.

Estate planning can be complex, so it's important ot obtain advice from a competent professional, who practises in this area

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