Most will provisions are a simple division of your assets between family members, the division being a percentage of the value of the residual estate rather than specific monetary amounts.

However not all of your assets will pass into your estate and this can be a sound estate planning strategy. Think about the fact that the assets of your estate are frozen until the Supreme Court has granted probate to your executor, you may wish to ensure there are assets that do not form part of your estate so that your family can continue to access funds to meet daily living costs.

Which reminds me, think about that credit card you hold in your own name but your spouse also is a signatory. Your spouse cannot continue to use the credit card after your death and this can cause some very real issues in the period between death and being granted probate (which could take several months), it is a good idea to have two cards, one in in each name.

Then not all strategies work, I have seen will planning where the person writing his Will thought it would be a sound strategy to hold all of his assets in a self-managed superannuation fund, he did this to ensure he limited the amount falling into his estate and therefore the amount that could be pursued under a claim on his estate. Not all assets can avoid being bundled with estate assets in the case of a claim and superannuation assets are one of those. Superannuation assets can be considered to be a ‘notional’ estate asset if the claim has any validity.

Using a trust strategy

A strategy that is worth considering is the gifting of assets using a testamentary trust (this is a trust established in your will) I will give you two examples:

  1. The will writer has considered the tax outcomes of leaving a large bequest to his son. His son is earning a large income and is being taxed at the highest marginal tax rate, if the son adds the income from his bequest to his existing income he will lose around 50% of the value of the distributed income in tax liabilities. If the Will writer makes provision for the capital to pass to his son in a trust and the son is given discretion to distribute the income to any of his family members this strategy will minimise the tax exposure from the income.
  2. A will writer considered how best to protect his son’s inheritance, the son has had a broken relationship and he lost a large portion of his wealth in a subsequent property settlement. The will writer wished to avoid the beneficiary’s inheritance being reduced by any future relationship breakdown and left the sum to be inherited via a trust in his will, the discretion given to his son will allow him to distribute capital and income to family members (being his spouse and/or children), this strategy will help ensure that the inherited capital held in a testamentary trust will not be included in a property settlement. Of course the son can choose to give part of his inherited wealth to his spouse or partner but is not impelled to do so.

So you can see there is much to think about when you are drafting your will

Eleanor Dartnall TEP

Authorised Representative Number 285743 · Lonsdale Financial Group Limited · Australian Financial Services License Number 246934

For more articles or information about Estate Planning go towww.dartnalladvisers.com.au

General Advice Disclaimer: Information in this article is of general nature only and is not intended as personal advice. It does not take into account your particular estate planning objectives or financial situation and needs. Take the time to plan your Wills carefully and seek legal advice from an experienced estate planning lawyer.