New year resolutions to protect your wealth
It’s not the most exciting thing to do in your holidays, but some New Year resolutions regarding your finances and estate management could save your wealth and wellbeing in the year ahead.
Tony Mitchell, commercial law expert at Stacks Law Firm, points out that your life and circumstances change over time and there are a number of estate planning strategies that should be checked as you start the year.
“Let’s take the example of a couple who are planning to retire in the next few years. Assume they have three grown up children, one of whom is still at university.”
Mr Mitchell said if they have a self-managed superannuation fund (SMSF) it’s important to update it every few years.
“Let’s say the fund has accumulated about $2 million and five years ago the couple signed Binding Death Benefit Nominations which declares to the fund trustee how the super fund money is to be distributed in the event of their death.
“They’ll need to update it as such nominations at the time were permitted to be made for only three years – it lapsed two years ago. If they died the trustee could distribute the money as he or she wished ignoring the out of date nomination.
“Under new legislation trust deeds for a SMSF provide for non-lapsing Binding Death Benefit Nominations.”
The second major item to review is the Family Discretionary Trust.
“Let’s assume the couple set up a trust 20 years ago which owns a house and unit, both of which are rented. If the deed establishing the trust hasn’t been regularly updated it may be deficient in several financial aspects due to changes in rulings by the Tax Office. Unless the trust is adjusted in accordance it could leave the couple with unintended tax liabilities.”
Wills also need to be checked and updated. If the couple signed their Wills 10 years ago leaving everything to their children, do they still want the eldest who has money problems to be executor? Would their three children – now adults – be better off receiving their inheritance through an optional testamentary trust rather than receiving it outright?
“Such a trust can reduce tax, protect a spendthrift beneficiary from themselves, care for children when they are young or still dependents, protect someone who has a disability, protect against creditors and greedy partners or avoid the loss of a government pension or other benefit. (For more information please see Testamentary trust or discretionary trust – which is best for you?)
“If you need help with all this it would be wise to contact someone with legal expertise in wealth protection.”