Mortality and the management of our estate are not issues we like to think about on a regular basis, so they can often be overlooked or ignored.
But if you want your assets, including your farming operation, to be distributed according to your wishes, it is important to put in place an estate plan before it is too late.
More than just a Will
Although your Will is an important part of you estate planning, it’s not the only part.
Estate planning is about protecting assets, minimising tax and ensuring your wealth gets to the right people, at the right time, in the most tax effective way.
Your Will takes effect when you die and can cover everything from how you would like your assets to be distributed through to instructions for your funeral. In the context of a family farming operation, keeping your Will maintained and updated is extremely important and will ensure the risk of family disputes and breakdown of relationships are minimized.
It’s advisable that your Will is completed by a qualified advisor, as they’ll be able to provide strategies to ensure your assets are distributed in the most tax effective manner.
Appoint a power of attorney
Appointing someone as your power of attorney gives them legal authority to look after your affairs on your behalf. There are different types of power of attorney, ranging from someone who can look after your affairs for a specified period through to someone who can make decisions on your behalf should you be medically incapacitated.
Try to nominate people you know are trustworthy, financially astute and likely to be around when you need them. Don’t forget to tell the person who you nominate as an attorney of their appointment.
Insure your loved ones
Ensuring you have sufficient insurance to provide for your dependants is also a critical element of estate planning. This is particularly so for younger people who are still accumulating assets and have considerable debt.
Providing your family with a long-term replacement for the loss of your income can be essential, as well as providing immediate relief for costs such as medical bills and funeral expenses. It will also provide peace of mind for you knowing that if something happens, your family will be financially secure.
Consider a Testamentary Trust
The inclusion of a Testamentary Trust in your Will should be considered and provides protection of inherited assets and significant tax benefits.
Testamentary Trusts allow the income of the estate to be taxed more effectively through flexibility of distribution because the income can be distributed to those beneficiaries that pay the lowest rate of tax.
By using a Testamentary Trust, children are treated as an adult for tax purposes and are not taxed at the penalty tax rates that normally apply to unearned income of those under 18.
Minimising tax through superannuation
Dependant on your situation your superannuation benefits may or may not form part of your estate which will be administered by your Will.
Therefore your super needs to be carefully considered in your overall estate planning. Strategies should be used to ensure tax upon death is minimised. This planning can only be done prior to death and it is best to get qualified advice.
Effective estate planning should be undertaken with liaison between your lawyer, financial advisor and accountant, all working together to achieve the best results for you and your family.