Even with the spectacular advances by medical science over recent decades, we human beings are susceptible to the passage of time and the effects of events beyond our control.
Ultimately, we will all move on to the next world.
I think it fair to say that Australians are amongst the most pressured and hard working of human beings. Generally, great care is taken to seek out professional advice and gain knowledge to facilitate growth in our capital bases and to maximise the financial rewards for the exceptional efforts we put in during our working lives.
Consider, however, for a moment the effect of death on your estate. (Consider also, if you will, the effect on your estate of mental or physical incapacity before death).
We should all recognise the need for careful and deliberate estate planning to ensure that a significant portion of our hard earned assets is not needlessly dissipated because there has been a failure to plan ahead for the inevitable.
Whilst death (estate) duties were abolished some decades ago, Capital Gains Tax (CGT) has since 1985 effectively stepped into the breach.
The adverse effect of CGT cannot always be avoided indefinitely. Proper estate planning can, however, totally avoid the application of CGT in some circumstances and on other occasions significantly delay the adverse impact of CGT on the capital value of your estate, thus delivering to your loved ones an enhanced benefit.
Some further lesser known (but equally pertinent) matters that may impact on the ultimate value of your estate are:
- claims by unhappy (eligible) beneficiaries under the Family Testator Legislation who complain that they have been left out of your Will or that the provision made for them in it is inadequate;
- protection which may be afforded to beneficiaries from creditors who may be only too eager to lay their hands on your hard earned money/assets once transferred to a beneficiary;
- conservation of your estate for the real long term benefit of your beneficiaries by protecting them against their own folly (spendthrifts);
- significant taxation advantages which may legitimately be applied to the income earned from the proceeds of your estate (through the use of a testamentary trust) thereby saving potentially thousands of dollars.
The greatest crime of all is not leaving any Will. In such a circumstance, the provisions of the Administration Act 1903 apply. I have yet to come across a Will maker who has been satisfied with the distribution scheme prescribed by that Act. In addition, the absence of a properly constructed Will has more often than not given rise to expensive practical estate administration problems and disputes which could so easily have been avoided.
Coming to grips with one’s mortality is never a pleasant task. Perhaps the estate planning exercise (and making an Enduring Power of Attorney, Advance Health Directive and a Will should be considered only one aspect of your estate planning program) should rather be viewed as making an investment, the ultimate beneficiaries of which will be your successors (although some benefits – through thoughtful tax planning during this process – may also flow to the Will maker during his or her lifetime).
Proper estate planning may save thousands of dollars. Estate planning is different from financial planning, although the two disciplines are inextricably interwoven. We spend considerable time, energy and money in the financial planning mode, probably because of the significant promotion of that discipline and often simply ignore the estate planning side of our affairs. This is most unfortunate as whether or not we are able to make a dollar is uncertain but death and its consequences on our estates – including taxes – are certain.
Mortality is not confined to “everyone else but me”. Seek competent legal advice on your estate planning matters soon – you cannot come back to fix it up. Our lawyers in Perth are specialists in estate planning, wills and enduring powers of attorney, so call us today to discuss your plans.