Why estate & inheritance planning is so important
Imagine how you would feel if you lost all of your hard earned assets & wealth to a 3rd party or to your offspring’s estranged spouse? Not a pleasant thought is it?
It’s a scary thought but so many families leave their inheritance and estate planning to chance. This article introduces some increasingly popular asset protection, estate planning and tax reduction strategies to protect and manage a family’s assets.
Trusts originated in feudal England centuries ago when the King rewarded his Knights with land after they returned home from battle. To protect their estates from outsiders, the Knights bequeathed their estates to their trusted fellow Knights for them to control their estates for the benefit of their loved ones.
Not much has changed since in asset protection and estate planning.
A family trust is simply a legal obligation created by a person (“Settlor”) who gives the assets in control to another (“Trustee”) for the benefit of another (“Beneficiary”). A trust deed is formed to document the “rules” that the trust must operate within.
The more common reasons for establishing a family trust include:
- Offering asset protection for family members by transferring ownership of some assets to a trust (commonly the family home). Some business owners may be exposed to high levels of risk and may decide to protect their family home from future creditors
- Providing some level of estate planning by ensuring certain assets (for example: the family home, business or farm) are transferred intact to the next generation
- To make sure some assets are retained for other family members when one, or more of them needs rest home or hospital care
- To protect family members or a family business from possible relationship property or family protection (contesting a will) claims
- To manage the assets of someone who is unable to manage their own affairs, perhaps through age or infirmity
- To manage tax liability through income splitting
If you would like to establish a family trust, it’s important that you understand your trust and what trustees are responsible for before you establish it. You should talk to your accountant or solicitor to ensure that the terms of your trust fully meet your needs & fulfil the intended purpose and will not be exposed to tax authority scrutiny.
You should assess whether a family trust is a suitable vehicle to meet your objectives. You should also weigh up the advantages and disadvantages of your various options, including any ongoing management compliance costs of each. Your accountant or solicitor will be able to help you determine what is required to meet your needs.
Like many professional people, your accountant or solicitor charges for their time, experience and skill in looking after your affairs. Ask them at the outset how much it is likely to cost or tell them that you don’t want to spend more than a specific amount.
