Modern Estate Planning is much more than drafting a Will, it's about protecting assets when a person passes and reducing taxes and duties.
A basic Will may not achieve this. At a basic level, a Will enables a person to pass their assets to the person/s they desire, appoint the person/s they desire to manage this process and sets up options they believe necessary to help their loved ones.
Estate Planning at a basic level is more than just a Will. It includes a Power of Attorney and Enduring Guardianship, and most likely a Health Care Directive. In modern society, however, people's assets are more complex and this needs to be considered.
"Thirty years ago people generally had perhaps a house, a bank account and a pension when they passed away," Kevin O'Brien, from Landmark Legal said.
"Now people have superannuation, life insurance, companies, family trusts and more in their asset base.
"An important part of Estate Planning is to ensure your Will has coverage, or has taken into consideration, all assets a person may possess when they pass away.
"Do they have family trusts? Do they want super and life insurance to come to the Estate or remain outside? Do they have infant children trusts? Are they in second relationships with children from prior relationships? Do they want to use discretionary trusts to protect children from separation or bankruptcy? All these factors need to be considered.
"Any Will drafter who simply draws a Will leaving all to a spouse and then children equally (or similar) without considering or asking these further questions has failed in providing a proper service."
Mr O'Brien said it is also important to consider how those assets being passed can be protected and how taxes and duties can be saved for beneficiaries and suggests one way to achieve these goals is to use a Testamentary Trust Will.
Testamentary Trust Will
A Testamentary Tust Will is a Will (last Will and Testament) that creates a trust.
"There are variations of the types of trusts that can arise but they all provide asset protection whereby assets passed to a beneficiary (your partner or child) can be protected from future relationship breakdowns, bankruptcy issues or other risks," Mr O'Brien said.
According to Mr O'Brien, a common question from parents leaving funds to children is a concern family money they pass to the child could be 'lost' through divorce.
"The trust Will could prevent this," Mr O'Brien said.
A spouse passes away and all funds (super, life insurance, etc) pass to the spouse. They then enter a new relationship which breaks down years later. How much of that money could be lost in family law circumstances?
"The trust could protect all those monies for the spouse and their children," Mr O'Brien said.
An important difference between a testamentary trust and a family trust established during lifetime is tax treatment of children under 18.
"In the family trust created during lifetime children under 18 are limited to receiving income distribution of $416 per year each, after which they pay maximum tax rates," Mr O'Brien said.
"In the testamentary trusts, children under 18 get full adult tax threshholds, meaning they get the first $18,000 a year tax free. This can save families literally tens of thousands in tax each year. We work closely with many financial planners and accountants on these issues on a daily basis."
Landmark Legal is a family wealth practice, focusing on working with families to grow, protect and ultimately transition their asset base between family.
"We do this through key areas of assisting clients with business and property sale and purchase, commercial law for businesses, asset protection for investors and developers through advice on trusts, SMSF and other forms of structuring, drawing of Wills and Estate Planning documents and all aspects of managing Estate and contested Wills," Mr O'Brien said.
"We round this out with family law services with heavy focus on resolution without court appearances and reducing costs where possible."
Mr O'Brien worked 20 years in the trustee industry doing Wills, managing Estates and family provision Will claims before moving to private practice in 2010 in the SMSF and property sector. He started Landmark Legal in 2013 and set up office in Charlestown in 2014.
"I have accreditation in Estate Planning and focus on this area as a passion," he said. "Having been in the trustee and legal industry for over 25 years, the option of asset protection and tax benefits to the family when Will and Estate Planning documents are well drafted is paramount.
"I would say over 90% of solicitor drafted Wills I have reviewed fail in one area or another in providing these needs."
Landmark Legal is located in the Landmark Building, Charlestown. For more information, ring 02 4943 3905, email@example.com or visit www.landmarklegal.com.au.