Feb 08, 2024  | Tags: estate planning

Our insights

Estate planning remains a challenging subject for many people to broach.

But death is the last bridge we cross in life and to do so without having made plans and considerations for your loved ones is negligent.

For higher income earners with greater levels of accumulated wealth, the need and urgency to have a meticulously prepared estate is greatest.

It ensures your final wishes are honoured, minimises tax liabilities, circumvents the risk of legal challenges and wards off the prospect of vast sums of money being lost.

Estate planning isn’t just about a Will. It takes a holistic approach by assessing your total wealth including your business interests and superannuation.

It also makes provisions regarding your guardianship and specifies who has control of your care and finances in the event you become incapacitated.

Here are just some of the key considerations for high income earners who are serious about estate planning.

Will

This remains the most important document of your estate plan but it is just one piece of the puzzle.

Your Will distributes the assets of your estate after death and appoints an executor whose duty is to administer it according to your wishes.

It should be regularly reviewed and updated to account for any changes to your situation - forgetting to maintain this document is one of the common traps for busy high income earners.

Your Will does not cover assets you hold in your family trust nor will it necessarily cover assets you hold in super or companies.

Superannuation

A common mistake many people make is not realising that superannuation is not automatically included in their Will.

That is because it is held in trust by your super fund.

To include it in your estate, you must specifically nominate a beneficiary.

This is a very important component of your will because it often involves extremely large sums of money accumulated over many years.

Consider how you want to distribute your super funds, taking into account the most tax-efficient manner.

Business succession planning

Consider your business interests, including investments in companies and trusts.

The intention is to ensure that ownership and control of your businesses pass in accordance with your wishes.

If your business is owned by a company or trust and controlled by business partners, it cannot be dealt with in your Will.

You will need to include business succession planning in your estate.

Your portion of a joint asset cannot be bequeathed to another but instead passes to the surviving owner under the ‘law of survivorship’.

Assets owned by entities you control are passed to people you must nominate via a Deed of Trust or a Company’s Constitution.

It is therefore critical that all the legally binding preparations have been made ahead of time to ensure your beneficiaries are not confronted with some nasty surprises after you pass.

Trusts

A trust is a mechanism you can use to distribute parts of your estate.

It is most commonly established when the beneficiary is a young person not yet mature enough to inherit a significant sum of money.

The trust can then make that sum of money payable when the person reaches a certain age.

Trusts can also reduce tax liabilities and protect assets.

Enduring Power of Attorney

Making someone your power of attorney gives them the right to act on your behalf.

By appointing an ‘Enduring Power of Attorney’, you give someone the enduring right to make financial and legal decisions in your best interests in the event you become incapacitated.

This has become more important in recent times as people live longer but not always with the ability to make decisions for themselves.

Enduring Guardianship

Similar to an Enduring Power of Attorney, an Enduring Guardianship gives someone the power to make decisions about your health and lifestyle in the event you become incapacitated.

It does not extend to legal and financial decisions.

Advance Care Directive

This is also known as a ‘living Will’.

It comprises a set of instructions and wishes made ahead of time regarding your medical treatment and end-of-life care in the event you are unable to communicate them.

Guardianship of minor children

This applies to anyone who still has dependent children and names a guardian who can assist in the raising of those children if both parents have passed.

It is usually made via a clause in the will of both parents.

Key considerations for estate planning

Simply drawing up a will risks overlooking a number of important legal considerations.

Professionally prepared estate planning will carefully examine the following:

Validity 

Ensuring all documents comply with relevant state and federal legislation including the Succession Act which in South Australia was updated as recently as September, 2023.

Capacity 

To guard against legal challenges, a will must be made by a person of sound mind who understands the implications of their decisions.

Family law matters 

Families have grown more complex over time with divorce, separations and occasionally children with different partners. It is important to consider all of your obligations to minimise the risk of a contested will.

Contested Wills 

This occurs when a challenge is made to a Will by a family member in financial need who believes they are entitled to a greater share. Recent changes to South Australian law have expanded the abilities of stepchildren to make these claims.

Tax implications 

Carefully considering the tax consequences when bequeathing your assets to certain individuals is common sense. The last thing you want to do is leave a particular asset to a family member that creates an unwanted tax burden.

Get advice today

When it comes to your estate and looking after your loved ones, you don’t want to leave things to chance.

That’s why the importance of professional estate planning cannot be overstated – especially for high income earners and large estates.

That’s where Calder Wealth Management can help.

CWM are wealth experts who work closely with estate planning lawyers to ensure the legacies of our clients are protected.

We’ll help you prepare plans that will ensure your wishes are observed and your assets are distributed appropriately when you pass.

Complex business requirements and family law updates mean there is so much to consider.

And remember to regularly review your documents to ensure they remain aligned with your wishes and appropriate regarding any changes to your family structure.

Don’t take a chance with your estate.

Contact us today.

Written by Aaron Doig

The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Calder specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.