What you need to know about estate planning
It might seem like a morbid topic, but pondering your estate planning well before you’re at retirement age is crucial for a number of reasons. There are two certainties in life: death and taxes.
Estate planning is an umbrella term that encompasses lots of different areas that need your consideration. We’ve listed them and explained the importance of each.
You need a will
A will is a document that determines how your assets will be distributed upon your death. It can also name guardians for any minor children you may have, and assign power of attorney to someone who will manage your financial and/or medical affairs if you become incapacitated. A living trust can be included in a will, with instructions on when the trust should begin after your death, who should serve as trustee (the person responsible for managing the assets), and what conditions need to be met before distributing them to beneficiaries.
Leaving family members in the lurch (we all have a horrible story over will disputes) isn’t something any of us want to do. If you own a business and/or property, a will is a non negotiable. If you’ve got dependents, it’s particularly important. Enlist the help of a lawyer and get it done properly.
Powers of attorney
A power of attorney is a legal document that authorises a trusted individual to act on your behalf. You can grant them the authority to make financial decisions, manage property and other assets, collect any income or benefit you may receive and even make health care decisions for you should something happen to you.
You can grant powers over different aspects of your life if need be. Some documents are specific as to what powers they give—for example, managing real estate only—while others don’t have such limits.
Think about what kind of situation might arise in which someone would need power over your affairs. You might want someone to oversee the sale of real estate or manage trust funds that provide for an elderly relative’s care long after both parents have passed away; knowing how these things work can help ensure that everything goes smoothly when the time comes.
Guardianship: the legal relationship between a parent or guardian and their child.
Custody: the right to make all decisions regarding the care, control and upbringing of a minor child who is not legally emancipated (is under 18 years old). This includes decisions about schooling, medical care and religious upbringing if the parents have joint custody.
If you have children, you want the peace of mind that if something were to happen to you they’re well taken care of. Guardianship is included in your will.
Superannuation death benefits
Superannuation death benefits are a tax-effective way to pass on money to your dependents.
If you have children and/or grandchildren, they should be the beneficiaries of your superannuation fund after you die. However, if there’s no one left in the family who can inherit your super fund, or if there are no other funds for them to collect from, then that money must be paid back into the government general revenue account as unclaimed superannuation accounts. If no one claims the fund within three years of their owner’s death, then they may become subject to taxation by the Australian Taxation Office (ATO).
However, under certain circumstances it’s possible for a spouse or de facto partner of an estate owner to receive these superannuation benefits without paying any taxes on them at all.
Business succession planning
Have you thought about what you want to happen to your business once you’re ready to either retire or move on from it? You might want to sell or pass it on to someone else.
Planning for this is especially important if the success of your company depends on your skills or knowledge as its founder and leader, and it needs to start happening well before that day comes.
Business succession planning involves creating a plan for transferring ownership of the company from one generation to the next. It also includes deciding who will take over day-to-day operations in case something happens to you or another key member of management. Other steps may include deciding who should receive shares in return for their contributions, such as employees who have worked there for ten years or more – contractors, suppliers, customers, etc. – as well as making sure that everyone involved understands what’s expected from them during this process (and after).
The benefits of good business succession planning include:
- Having a clear path forward even if something bad happens suddenly
- Avoiding confusion among staff members about who is responsible for what parts of running things day-to-day when everyone knows exactly where they stand financially with certain tasks
How to start thinking about estate planning…
Estate planning is the process of creating a plan for what will happen to your assets once you’re gone. You may already have a general idea of who will get your property and money after you pass away, but it’s important to make sure that these wishes are clearly stated in writing and that they reflect how you want things to be handled.
You can start the conversation by tapping us on the shoulder. We can then point you in the director of other professionals who will need to give you a hand. The key takeaway is this: every business owner needs to consider estate planning whilst they’re young. This is not a close-to-retirement-problem. You know where to find us!