As accountants we understand that an estate plan goes beyond preparing a will and a testamentary trust. The practice of making sure you choose the time when you transfer your estate together with the correct recipient (tax effectively) ranges from simple to deeply complex.
The following are some simple tips to making sure your estate plan goes actually works.
1. Itemise your stuff
Go through your house and write down everything that you own – jewellery, paintings, collectibles, war medals, photo albums and furniture. The list can take a while and it probably longer than you would think. However many disputes over an estate are not financial – a lot of disputes cover possessions that have deep sentimental value to the family but probably not anybody else.
Once the list is done identify the family member you would like to own the asset after your death.
2. Itemise your investments
Once you have all your personal assets written down: develop your estate plan further by itemising your non-physical and investment assets. This will cover items like bank accounts, stockbroker accounts, real estate holdings, superannuation funds, term deposits, bonds and motor vehicles.
Your investment assets are also most likely owned across a range of entities. So getting the ownership attached to an organisation chart so your beneficiaries can understand your estate plan is also important. As accountants we are often engaged to draft an estate plan that is mapped to your financial reports for your families broader investments.
3. Write down your debts
Once your estate plan is mapped to your financial reports and tax returns you should do the same for your investments. So bank debts, credit cards, leases, hire purchase obligations on cars and even TV subscriptions are all ongoing obligations that impact a well-developed estate plan.
For estate plans with a range of liabilities a chart mapping the obligations with loan review dates, security offered, banking covenants and loan conditions. The aim here is to help your executor understand what they need to do and how to understand your estate plan quickly and without negative trigger events that can cause unnecessary cost and confusion to your estate and your estate beneficiaries.
4. Make a list of contacts and memberships
Your estate has a range of people who will be impacted by your death. This will range from the gardener, chemist, newspaper delivery service and the telephone company.
Create a detailed list of social, financial and business connections so your executor can reach out and communicate with those people. This will help in so many ways from notifying everybody who matters about the date of your funeral to cancelling your subscriptions.
The list of contacts should also include business connections like Westcourt to your lawyers, investment advisors, real estate agents and stockbrokers. And for those operating a business ensuring the broader team runs and operates the business properly is also a critical step in making sure your estate works properly.
5. Make copies
Your estate plan is of no help if nobody knows it exists and where to find it. So make sure that your executor has a copy of your estate plan together with your trusted accounting advisor like Westcourt. Many clients also arrange for their legal advisor to hold a copy of the estate plan and will as a third backstop to help your estate transition smoothly.
6. Understand the tax impact of your estate
Getting tax advice and tax strategy within an estate plan is a critical step in making sure your beneficiaries are properly dealt with. The main residence for a family home can be transferred to a family member tax free and an investment property might have an inbuilt tax burden – unless the property was acquired prior to introducing capital gains tax. Likewise, the tax burden for superannuation proceeds to different family members can vary depending on their age, relationship to you and how financially dependent the beneficiary is on you.
7. Check your insurance
A lot of families will have a life insurance policy contained within their estate plan. So check with your insurance broker, risk advisor or financial planner about your insurance policies to make sure that the policies are appropriate for you and are suited for your family.
As a general guide when people are working and accumulating assets they have a higher need for life insurance. And as a family retires, has less debt and no dependents the need for insurance reduces (quite often to nil). However, engaging with a properly qualified insurance advisor to help you understand the cost and quality of your insurance underwriter is important part of your estate plan.
8. Check your superannuation
Your super fund is not part of your estate. So, your will does not cover the bequest of your superannuation fund entitlements. And if you are running a SMSF the operation and succession of your SMSF is a critical part of your deeper and broader part of your estate plan.
At Westcourt we handle many SMSF’s with tax strategy creation, maintenance and administration. And ensuring that binding death benefit nominations and pension creation documents are properly drafted and integrated into your estate plan helps ensure the plan happens as intended, when intended.
If you have a generalist large super fund managing your super fund you should reach out to the super fund and check their policy positions on the management of your super on death. Many funds have pre-set forms to complete for effective transfer so making sure that you adhere to the way they operate is important to getting your broader estate plan working as intended.
9. Talk to your executor
The role of executor is an onerous one – especially if they are not local or if the executors skillset is not a financial skillset. So helping your executor know the administrative and financial obligations they have in managing your estate on death is a good strategy to make sure that the management of your estate goes to plan.
For many clients the role of executor is challenging to a family member (who is often grieving) so engaging Westcourt to act as your estate executor is a natural choice given our deep financial knowledge and independence of advice.
10. Simplify your finances
Often the process of documenting your financial affairs will show up a multitude of complexity that is not needed. If you are running multiple bank accounts (even those with a nil balance) it might be time to shut down the ones you are not using. Alternatively, if you have several superannuation funds that are in existence you might want to consider (after speaking to an investment advisor) about the benefits of combing these funds.
Often a families investment profile while have a complex tax structure attached to it. So talking to your tax advisor about the purpose of your financial structure and a simplification strategy is a prudent part of your estate plan – you don’t want your legacy to be a financial headache.
11. Make an annual review date
Life changes in so many ways it is hard to track. And making sure that your estate plan tracks your life changes is an important part of the estate planning process.
Often the estate plan will be reviewed at the time when you sit down with your tax advisor to discuss the historical tax returns and the signing. This is ordinarily a “deep dive” into your financial structure and its tax profile so getting your accountant to update the financial map between your estate plan and your tax structure is a logical point in time.
12. Talk to your lawyer
While an estate plan is much more than a will – an estate plan without a will is fundamentally flawed. You should check in with your estate lawyer at least once in every 5 years to make sure that your will sits into your broader estate plan.
If you have a significant life event you should engage with your lawyer more regularly. So, if you get married, create a new tax structure, receive an inheritance or have another child you should be letting your estate lawyer know and ensure that your will is still current for the new financial position.
Of course, the need to engage with your lawyer is often identified when you engage with Westcourt as your business accountants. Because we are so closely linked to your financial
structure: we can identify those key events that will need legal advice within your estate plan.
13. Talk to your family
The lack of communication is the primary cause of conflict in a family on death. If you have an estate plan – talk to your broader family about how it will work, your hopes and what you are looking for.
Quite often a family member will be surprised on the death of a loved one. The estate is either bigger or smaller than expected and the distribution of the estate is perceived as unfair.
The time to stop confusion over your estate is when you are alive. This is where Westcourt is particularly strong. Our long-term approach to families and facilitating family discussions for an estate plan has stopped (or reduced) conflict over an estate.
At Westcourt we have one focus – making families in business become great. Our single focus on families and family succession have given us a focus on estate planning that stretches beyond many other generalist accounting practices. And given our deep international network, proven qualifications as accredited family business advisors and our with demonstrable tax expertise: we are the natural choice for many families in business to engage with on their estate plan – so why not give us a call.
