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The Importance of Estate Planning

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By Andrea Olsson, Senior Associate

Estate Planning is increasingly important as the financial affairs of individuals are growing in complexity. Will makers are more likely to own assets across various entities such as companies and self managed superfunds. They or their beneficiaries are frequently living overseas for extended periods of time.

Will makers with blended family situations with a child or children from previous relationships sometimes avoid estate planning as they grapple with drafting a Will that achieves a fair outcome for the beneficiaries. Estate planning allows you to address your concerns with the benefits of a certain outcome rather than uncertainty that may have unexpected negative consequences.

An effective estate plan enables you to consider any possible claims against your estate and how these may be overcome or limited. It allows you to choose the right executor to administer your estate and allows you to appoint a guardian to look after any minor children.

Your comprehensive estate plan should take into account taxation on superannuation and/or life insurance in the event of your death. Superannuation is becoming an increasingly significant asset for many Australians and is a paramount consideration in every estate plan. It is important for will makers to effectively understand what rules apply to the payment in dealing with the superannuation death benefit. This includes considering if a binding death benefit nomination is the best outcome for your superannuation planning.

This is particularly important in the light of the February 2019 decision in Marsella v Wareham 2 [2019] VSC 65 in which a trustee’s decision to pay the superannuation death benefit to herself was set aside by the Supreme Court. In this case the trustee of the self managed superfund was also removed as trustee of the fund. The appellate division of the Supreme Court confirmed that in making any payments of death benefits for superannuation a trustee of the self managed superfund must act in good faith, upon a real and genuine consideration in accordance with proper purposes.

Detailed estate planning will allow you to effectively pass control of any family trust to enable those you wish to benefit from the trust to receive their fair share of trust assets. It enables you to consider whether a testamentary trust option will allow the beneficiaries of the estate to access significant tax concessions that would otherwise not be available. For those who have a beneficiary with a disability or an inability to manage their finances you should consider a protective trust to ensure the assets are effectively managed for the maximum benefit of that beneficiary.

If family members are involved in managing a business or trust, the lack of an effective estate plan and uncertainty among the future role of those managing any family business may result in divisions between family members. In some cases this has resulted in significant losses to the family business due to uncertain management. Moreover, lack of effective planning increases the opportunity for family disputes which are expensive to resolve. It also may trigger unnecessary capital gains tax and stamp duty liabilities which may otherwise have been avoided.

Enduring Powers of Attorney should also be considered as part of the estate planning process. Enduring Powers of Attorney provide an opportunity to plan for the possibility if you lose capacity due to disability or illness for financial decisions, personal lifestyle decisions and medical treatment decisions.

To discuss your estate planning, please contact Andrea Olsson on 03 8540 0232 or Paul Watkins on 03 8540 0230 of our office.