Succession Planning

The year is fast slipping away and we have said goodbye to another summer. But with much of the year still left to enjoy, now is a good time for reflection as the reality is that many Australian families will be touched by tragedy or hardship this year. The national road toll over the 2012 Christmas and New Year period was 501. Bushfires raged throughout the country in the second week of January and floods brought devastation to many families in February.

It is not nice to think about, but it is reality. So how do we make sure that in this, a brand new year, we are prepared for whatever the universe throws at us?
A good place to start is looking to get your succession plan in place so that you can rest easy knowing your hard earned assets will be distributed the way you would like them to be, should they need to be.
While recently talking to a good friend whose career carries a greater than average risk, she owns property and is looking to get engaged this year and yet she does not have a Will and has no idea how to go about getting one. The sense and sensibility side of my brain went in to overdrive. I refrained from yelling – “you don’t have a WILL” at her and instead focussed on pointing out some reasons she may wish to consider getting herself one, pronto.

However, a Will is only one part of a good succession plan. A complete succession plan should look at the distribution of your wealth in a tax-effective manner, aiming to prevent any further hardship on your loved ones and, importantly, trying to avoid unnecessary family disagreements at such a stressful and emotional time.

Succession planning includes considerations about your Will, Power of Attorney, tax obligations and testamentary trust. Let’s look briefly at each element.

A Will sets out the distribution of your assets at death. While a Will can seem easy to prepare, there are other elements of a Will to consider. Talking to your loved ones about the distribution of your assets, or having a written document explaining your choices can help your loved ones to understand your decision which may prevent arguments and can help to reduce the chance your Will is contested in court.

You must decide on an executor who will be responsible for ensuring your wishes are carried out and the Will must be witnessed by two people who are not beneficiaries.

Another consideration is how you want your assets re-allocated should the beneficiaries of the Will predecease you.

A Power of Attorney is someone you entrust to make decisions on your behalf should you not be able to do so yourself, for example, if you are ill or injured.

A testamentary trust is created by a Will and can provide greater control over the distribution of assets to beneficiaries. It can also have capital gains tax benefits and address the issue of what happens to your assets if a surviving partner and beneficiary in your Will remarries or becomes bankrupt.

Superannuation and life insurance are generally assets that fall outside of a Will and a binding nomination made in these policies may be overridden by nominees mentioned in a Will. With so many things to consider, a financial adviser can work with you to assist with the process in relation to these assets and with a smooth and speedy claims process, reducing unnecessary stress on your loved ones.

Are you a business owner? Part of your succession plan should be considering what you will do in the event a business partner departs or becomes too ill to continue working in the business. This will help to safeguard all parties and their families should it be required. Your financial adviser will be able to help you with the decisions that should be made now and can discuss different options available to all parties.

We all know we need a Will and we all know it should be reviewed and updated as our lives change, but how many of us actually get around to doing it? It is important, so put it at the top of your 2013 to do list so that no matter what happens this year, it is one less thing you need to worry about.

If you would like to find out more about developing a succession plan and if it is right for you, speak to a financial adviser who can give you more information specifically related to your situation.

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