Planning your Estate
It may seem like a rather grim topic, but it’s a conversation better had now than when it’s too late! The harsh truth of the situation is that when our time is up, we don’t know what will happen to what we leave behind. We can do our best to make our wishes known but unless we take specific measures, we cannot rely on the law to protect and care for our loved ones the way we think they should be.
Estate planning is the process of organising the distribution of your estate, or assets, when you leave this world. For many this may seem as simple as drafting a Will, however there are many other devices that should be considered to help safeguard your assets and ensure that they are distributed according to your wishes.
A Will is a very important aspect of estate planning, as it will dictate how your estate will be distributed to beneficiaries. However, a Will can be interpreted and challenged, which could result in an outcome quite different from what you had intended. It also does not cover all assets, so additional measures should be taken to ensure that ‘non-state’ assets are also dealt with – this is where it could be worth looking at other legal devices, such as trusts, to protect your interests.
At the moment there is a lot of buzz about discretionary trusts, and for good reason. It may be hard to imagine that the world could keep spinning without you, but children will grow up and have kids of their own, spouses may re-marry, people will start new ventures and others will lose jobs.
A discretionary trust is a more flexible trust that can be adapted to changing situations and ensure that the right amount of benefits are given to the right people at the time they need it most. This is accomplished through a nominated trustee who takes ownership of the assets and is responsible for their distribution over time to potential beneficiaries. Ideally, they will use your wishes in combination with their own discretion to achieve this.
A discretionary trust has several other benefits:
– A trust deed is generally considered separate to a Will and as such is less susceptible to challenge and does not need to be made public.
– A trust can help protect spendthrift beneficiaries from blowing all of their inheritance at once.
– A trust can be used to pay debts that you owe upon passing, however if a potential beneficiary is in debt, a trust will protect your assets from creditors.
– Minimises tax liability of your estate for beneficiaries.
– A trust can exist as a working investment, accruing interest over time, which is taxed at a considerably lower rate.
Considering the amount of power they will have over your estate, the choice of Trustee is very important. However, there are safeguards in the form of third parties to protect against an abuse of power. Another flaw in this process is that beneficiaries could become disgruntled if their expectations are not met.
Of course this is just one of many legal devices at your disposal when estate planning and it would be worth discussing with your legal advisor which would best suit your needs. By no means should woman with drive’s views be taken as professional legal advice.
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