09/03/2018 by Pascoe Partners Accountants
The children have finally left home to start families of their own?
The tough times are behind you, the mortgage is under control, and it’s time to start enjoying the little luxuries that you’ve worked so hard for.
So why should a will and estate planning be high on your priority list if you are over 50?
Middle-age is generally the period of life when people are at their most prosperous and financially sound.
Experience has taught us that without proper estate planning and advice, the bigger the estate the bigger the argument. There may also be some adverse tax consequences if you lack a properly crafted will and estate plan.
One of the big problems from a tax perspective is that the list of dependants for superannuation purposes is probably restricted to just your spouse. Payment of your death benefits to someone who is not a dependant could result in paying tax at up to 32% on the value of the benefit.
Payments to non-dependants must also be by way of a lump sum, which may mean the sale of assets held by the superannuation fund at inconvenient times.
Another option that should be considered is incorporating a testamentary trust into the will. These trusts can have the same powers and flexibility as discretionary trusts but come with generous tax concessions: children under 18 years get the advantage of adult rates of tax.
Allocations of income from a normal trust to children could attract tax rates up to 66%, whereas allocations from a testamentary trust attract no tax on the first $18,200.
We also recommend granting a Power of Attorney in favour of two adult children. Any more than two can sometimes make it unwieldy to get documents signed.
These should be Enduring Power of Attorney, which continue to apply even when the donor of the power has lost mental capacity.
Any holders of Power of Attorney can only act in the best interests of the donor and are generally prohibited from selling real estate to themselves.
The horror stories of these instruments being used to sell property out from under people are a thing of the past. There are different laws regarding registration of these documents in various states of Australia: check on these requirements if property is held in those jurisdictions.
There are also restrictions on who can act as a witness to the signing of a Power of Attorney. We suggest that, if the lawyers are preparing these documents, they be executed in the lawyers’ offices, where suitably qualified witnesses are present.
Whilst DIY “will kits” are available from newsagents nowadays, it is generally a case of getting what you pay for.
If you have worked hard to amass a reasonable size estate, it makes sense not to scrimp on getting advice about it.
Contact us here to get started with some professional advice on wills and estate planning.