INTER-GENERATIONAL WEALTH TRANSFER

In simple terms, estate planning involves passing on assets to your family when you die. It often is a huge issue for all family members concerned. If done well and executed properly, it can make a real difference to the financial position of the recipients. If misjudged or poorly handled, it can cause enormous grief and resentments within the family.

First step – make a will

The first step of any estate planning is to make a will. This is a legal document that enables you to say who gets what after you die. Without one, your estate could go to people you wouldn’t want it to. Indeed, in the absence of a will, and any relatives, your estate may end up going into the public purse.

It’s estimated that nearly half of all Australians die without a will.(i) This is even more surprising when you realise a will can be a fairly simple document to draw up. And it generally doesn’t cost much. Having a solicitor draw one up for you will ensure it’s properly completed and worded. This is less likely to be successfully contested by anyone who believes they haven’t received their fair share of the pie.

Naturally, there’s not much point in having a will if no one knows where it is. Make sure one copy is in a safe place for yourself, and keep another copy with your executor and/or solicitor.

Wealth transfer during your life

Having a well-considered and properly drawn up will is a necessity for anyone serious about achieving good outcomes. However, you don’t have to wait until you die before distributing your wealth. You can pass on assets while you’re alive. However, depending on your circumstances there may be some pitfalls involved.

Firstly, you need to ensure that by giving your capital or assets away you’re not going to leave yourself short-changed. This is particularly important if you live longer and have greater aged care costs to deal with.  You really have to consider closely whether you can afford to pass on the assets you would like to while you’re alive.

Secondly, you need to consider the impact if you receive Centrelink benefits. Assets worth more than $10,000 in one year or more than $30,000 in five years are still counted as belonging to you. , for up to five years – and this can negatively affect your Centrelink aged pension and aged care entitlements.(iii)

There may also be costs involved in the transfer, such as capital gains tax and stamp duty. Make sure you speak to your accountant before making any decisions.

Get advice about the tax issues

With any estate planning there are other issues to consider in addition to the ones above. These include:

  • what tax implications are there for your beneficiaries (some assets may be passed down with a potential capital gains tax liability or a superannuation death benefit tax attached )
  • what do your beneficiaries really want (one child may want your shares, the other may want your old Jaguar)
  • which of your beneficiaries may be ‘at risk’ (for example, your daughter’s marriage could be looking shaky, which could see part of her inheritance from you end up in her ex partner’s hands).

These and other matters can be addressed through some key steps including:

  • open family communication,
  • the use of testamentary trusts if required,
  • a binding nomination on your super and
  • a good will.

Most estate planning will involve input from your solicitor. However in an area as important as this, a lot of useful advice can be provided by your financial adviser.

Milestone Financial provides advice to families about the transfer of assets including any Centrelink implications. For more information, call Milestone Financial on 02 6102 4333.

Andrew Boulds – Milestone Financial’s Certified Financial Planner wrote today’s article. Andrew has a wealth of experience in financial planning including investment, super, risk and retirement planning.

(i) https://www.moneysmart.gov.au/life-events-and-you/over-55s/wills-and-power-of-attorney
(iii) https://www.humanservices.gov.au/customer/enablers/assets/gifting

 

Contact us for further information or to make an appointment

02 6102 4333

enquiries@milestonefinancial.com.au

12A Thesiger Court Deakin, ACT 2600

Contact us

Address: 12A Thesiger Court, Deakin ACT 2600

Phone: 02 6102 4333

Email: enquiries@milestonefinancial.com.au

Milestone Financial Services Pty Ltd

(ABN 68 100 591 508) is an Authorised Representative and Credit Representative of AMP Financial Planning AFSL 232706