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Asset Protection
Wills only deal with the property owned by a person individually and in their own right. However, many people own assets through different structures and entities. If this is the case then other documents may need to be checked to make sure the assets held in those structures/entities pass to the intended beneficiary.
Assets Outside A Person's Will
Assets which may or would not form part of a person's estate include:
- Assets owned as joint tenants (eg. often the family home).
- Life insurance proceeds (where someone else is the policy owner or nominated beneficiary).
- Assets owned within a family discretionary trust –
- Who is in control of the trust? This means not only the trustee, but also the “Appointor” (i.e. the person who has the power to remove and replace the trustee). The trust deed may need to be checked to work out who is in control and how that person passes on control.
- If a company is a trustee of the family trust, we may also need to check the shareholding and constitution of the company.
- Company assets - the shareholdings and constitution of the company would need to be reviewed to check the transmission of the shares on death and which shares have the voting rights in the company.
- Superannuation death benefits (that are paid directly to a dependant) – death benefits payable from super may simply be discretionary in the hands of the trustee, depending on whether any nomination is binding or non binding. If a person wants super death benefits to pass to a particular dependant, the deed may need to be checked to see whether a binding death benefit nomination can be completed.
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Sufficient Assets
Perhaps the most important component of an estate plan is to ensure there will be at least sufficient assets to meet the client's estate funding objectives.
This involves a careful analysis of the funding needs and available income and assets to meet those needs.
Where there is a clear estate funding shortfall, the client should be presented with the options for addressing the issue. These can include life insurance (as a short term measure), investment strategies (as a medium to long term measure) or a combination of these approaches.
Some clients (especially older clients) will have accumulated sufficient assets such that all their estate funding needs could be met and indeed exceeded.
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Transfer of Ownership and/or Control
This component of the definition encompasses a very broad range of issues.
The sorts of questions that may be raised can include:
- How will ownership and/or control of each asset be transferred?
- Is there a current, valid Will in place?
- Who are the beneficiaries for life insurance and superannuation benefits?
- Joint tenancies and other ownership structures
- Is the estate plan tax effective (eg. rather than transferring an asset to the spouse, should a testamentary trust be considered)?
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Timing
Timing can be critical to the estate planning process for a number of reasons.
These include establishing:
- The age that the younger beneficiaries should receive their inheritance (eg. at 18, 21 or 25 years of age);
- When the assets should be sold;
- Who should sell them (ie. the executor or the beneficiary);
- When debts must be repaid (eg. an unexpected call on a business loan could result in the business failing).
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Planning for Future Life
The law allows income to be concessionally treated for tax purposes in certain circumstances. For example, superannuation death benefits may be able to be placed in a special “superannuation trust”. This may then allow income to be paid to child beneficiaries at concessionally-taxed rates.
In certain circumstances, similar benefits apply to life insurance benefits, personal injury compensation and funds intended to look after children upon the breakdown of marriage.
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