Wealth Transfer Succession Planning

Succession planning provides security for your family and gives you peace of mind.

Whether through accident, disease or death, the day will come when you can no longer personally provide for the financial, health and emotional well-being of those you love. These issues are too important to leave to chance. This is especially so if you care for dependents with special needs. Fortunately, you can plan for that time and put structures into place to help secure their future.

This process is called succession planning. A well-structured succession plan can give you great peace of mind that your loved ones will be provided for as you intended.

Preparing a will is an integral part of any succession plan, as it determines how your assets will be divided in the event of your death. But there are many other factors to consider.

Who can succession planning help?

As a carer or family member of someone with a physical or mental disability, there are unique considerations that you need to address when planning for their future. Your estate planning specialist offers tailored succession planning services designed to address a full range of circumstances, including:

  • intellectual illnesses or conditions such as Down’s Syndrome
  • disabilities that occur as a consequence of a severe stroke, Alzheimer’s disease or mental health
  • physical disabilities such as those caused by muscular dystrophy or cerebral palsy
  • spendthrifts who are incapable of managing their finances
  • drug, alcohol or gaming additions that impede rational financial decisions
  • severe head injuries as a result of an accident

Tailored succession planning advice can help ensure that after you have gone, your child will continue to be looked after the way you wish. Several strategies can help parents protect the interests of a child with cognitive problems. These include the potential use of:

  • Special Disability Trusts
  • Capital Protected Trusts
  • A combination of both
  • Superannuation Death Benefits for the benefit of your disabled or special needs child

Your estate planning specialist can also assist you in the choice and appointment of a suitable guardian or trustee to care for your disabled or special needs child when you are no longer able to fulfil the role.

The planning process

Succession planning is a three-part process involving:

  1. Identification of personal assets and those in your broader estate, such as assets owned jointly or owned by trusts or companies
  2. Identification of potential risks, including, for example, your early death or the possible divorce or bankruptcy of a beneficiary
  3. The design and implementation of a plan that incorporates all your assets and considers flexibility to accommodate future changes, risk minimisation, tax minimisation and succession issues.

Each step is a multidisciplinary exercise that usually requires the coordinated involvement of your financial planning, accounting, and legal advisers.

Components of a Succession Plan

Consider each of the following to determine if they are relevant to you now or in the future.

A well-balanced plan may include:

  • A  Will
  • An enduring Power of Attorney (to manage financial and legal matters)
  • Appointment of a Power of Guardianship (to manage health welfare matters)
  • Advanced Health Care Directive (to direct what medical treatment you do or don’t want)
  • The integration of company, trust and superannuation structures
  • The future realisation of your investment in a business
  • Flexibility to accommodate changed laws or changed circumstances that may exist at the time you die
  • A tax-efficient structure addressing the income tax, Capital Gains Tax, GST and stamp duty implications of transferring assets and managing assets upon death, retirement or any other event
  • The consideration of a range of critical events, apart from death.  These include:
    • mental incapacity – yours or a beneficiary’s
    • physical incapacity – yours or a beneficiary’s
    • bankruptcy or business failure – yours or a beneficiary’s
    • divorce – yours or a beneficiary’s
    • retirement, or
    • the potential for disputes between beneficiaries over the Will
  • Financial Agreements – when entering a new relationship to regulate ownership of assets
  • Testamentary trusts: these are created by your Will and come into existence after you pass away. They enable maximum flexibility so that a beneficiary may enjoy the full benefit of a gift from your estate whilst enjoying the asset protection and taxation benefits provided by a testamentary trust
  • The use and integration of insurance as an asset in your plan, whether as part of a business succession scheme to cover debt or income or to bolster the wealth of a future estate
  • Incorporation of a retirement plan as well as investment and wealth accumulation strategies.

General issues with a succession plan

  1. Executor and Trustee

Most couples appoint each other as the executor and trustee of each other’s estate, with their children acting jointly as backup executors and trustees. If children are too young to act or are not (for any reason) appropriate, then third parties must be chosen as the executors or backup executors. Solicitors, accountants, and family and friends (preferably those with business experience) are often chosen.

On your death, the executor applies to the Supreme Court to have your Will formally verified. Upon verification, the Court will issue a grant of probate. Your executor must then pay all your liabilities from your assets and distribute the remaining net assets by your Will.

The trustee’s role is to administer the estate set out under your Will once your net assets have been transferred to the estate by the executor. The trustee controls the day-to-day operation of the estate assets, including its investments. The executor will then administer the estate according to the terms of your will.

  1. Record Keeping

Keeping records of your assets is essential, particularly for capital gains tax purposes. After your death, these records will be required to calculate any capital gain or loss to a beneficiary that may arise from the disposal of those assets through the testamentary trust.

Asset records must be retained for five years after the disposal of those assets.

  1. Reviewing your Will once made

Do not add to or delete from a Will after execution without seeking advice. Simple changes must be made correctly, or your wishes may be invalidated.

Review your Will regularly. A review does not necessarily mean that a change is required but does ensure that changes in circumstances are not overlooked. We recommend that Wills be reviewed:

  • If you separate, divorce or re-marry/re-partner
  • If you have more children
  • If you establish or dispose of a trust, company or business
  • At least every three years
  • Whenever you dispose of or acquire significant assets
  • If you acquire significant debts or there is a likelihood you may become insolvent
  • Any major beneficiary dies or has a significant change in circumstances, including a family law dispute or
  • An executor dies or becomes ill
  1. Financial Agreements

If you enter into a new relationship, you should consider agreeing to the Family Law Act (Financial Agreement) to regulate the ownership of your respective assets to protect and preserve them for the benefit of your children.

*This content is derived from purchased third-party research we are entitled to use with our clients.

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