If you have a Will in place outlining the distribution of your wealth upon your passing, this tip is for you.

You could be leaving tax complications for those you love.

While you may have a Will in place, without an appropriate Estate Plan you may be inadvertently leaving tax burdens for your beneficiaries. An Estate Plan includes items often not included in a Will such as superannuation funds, jointly held assets, assets held in trusts and, in some cases, business assets.

Not only do you need to consider how your assets outside your Will are managed, it’s important to consider how to structure your estate to take into account the tax implications when your wishes are enacted. For example, there may be tax effective ways for assets to be passed to dependent children, grandchildren or children with special needs.

If you are a business owner, it’s also important to protect your beneficiaries from claims upon your estate from debtors.

The use of a Testamentary Trust can be an effective way to protect your wealth and minimise tax liabilities for your beneficiaries. A Testamentary Trust comes into place, upon your passing, rather than all your assets being distributed, some or all of them remain in trust for the beneficiaries outlined in your Will.

A Testamentary Trust is different to a Family Trust as it offers considerable tax advantages for beneficiaries under 18 years of age. Income distributed to children named in a Testamentary Trust is taxed at adult marginal tax rates and they will also receive the full tax-free threshold ($18,200). In a Family Trust, beneficiaries under 18 years of age do not receive the benefit of the tax-free threshold and are subject to penalty tax rates for income of more than $417 per annum. [1]

A Testamentary Trust can be especially beneficial for:

Families with small children or grandchildren;
Situations where extra income is required to support the surviving family members of the deceased;
For those who want peace of mind that their assets will be protected for their beneficiaries. For example, a child’s inheritance being inaccessible by their spouse in the event that their partnership breaks down or protection against claims associated with bad business deals, and
Families wishing to reduce tax liabilities for dependents.

There can be other tax benefits associated with the use of Testamentary Trusts so it’s important to discuss your options with a tax professional. Through collaboration with other aligned professionals such as your solicitor and accountant, we can create an Estate Plan which considers your wishes in accordance with your overall financial objectives.

Estate Planning can be complex, but it is vital to protect the wealth you have worked so hard to accumulate. An Estate Plan can help to clarify your wishes to avoid conflict or litigation after your passing and, importantly, avoid disadvantaging the ones you love. We can work in collaboration with other key stakeholders such as your solicitor and accountant to develop an Estate Plan which incorporates your overall financial objectives.

If you would like advice on Estate Planning, I encourage you to contact us on 07 3720 1299 or email admin@wealthfundamentals.com.au.

[1] https://www.ato.gov.au/Individuals/Investing/In-detail/Children-and-under-18s/Your-income-if-you-are-under-18-years-old/?page=3#Higher_tax_rates

Lane Moses Pty Ltd ABN 56 092 186 117 trading as Wealth Fundamentals and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.

The information (including taxation) contained within this document does not consider your personal circumstances and is of a general nature only - unless otherwise stated. Wealth Fundamentals strongly suggests that you should not act on it without first obtaining professional advice specific to your circumstances.

This information is based on our understanding of legislation at the time of writing. Such legislation may be subject to change.

This publication cannot be reproduced in any form without the express written consent of the author.