Estate planning is the process of developing a strategy to deal with your assets after you pass away.
An estate plan is more than just having a will prepared and traditionally also includes an appointment of a power of attorney and enduring guardianship. Unlike your other assets your superannuation fund does not automatically form part of your estate, which means additional planning is also needed concerning your super fund.
Ordinarily when looking at undertaking estate planning many people focus on the preparation of their will, and place primary importance on providing for their families. We of course agree that this is very important but making sure this is completed in a tax effective manner is also critical in ensuring you provide for your chosen beneficiaries.
One tax effective strategy that can be incorporated into your estate plan is the creation of a testamentary trust when preparing your will.
A testamentary trust is a trust established under a valid will. A testamentary trust operates like a discretionary trust but can only come into existence after you pass away.
The utilisation of a testamentary trust in your estate plan can create asset protection, flexibility when distributing income, and income tax savings for its beneficiaries.
Outside of your home it is likely your superannuation fund will also form a large part of your wealth and needs to be considered when looking at your overall estate plan.
When it comes to your super however, you will need to also make sure it is distributed in accordance with your wishes as it is not automatically paid to your estate after you pass away. Where your super is paid will largely depend on whether binding death benefit nominations (BDBN) are in place.
We appreciate that undertaking the estate planning process is not the most exciting task to do but the consequence of not preparing will likely be detrimental to your family after you pass.
It is also important to not ‘set and forget’ once all the planning is complete. A process should be put in place to periodically review your estate plan to ensure it continues to be applicable to your personal circumstances, in line with your wishes and remains tax effective.
If you feel your estate plan may need some attention why not get in touch with one of our trusted advisors today.