Okay so let’s get straight to the pointy end of this matter right from the get go; when you die, if you don’t have a valid Will, your estate and assets will most likely be allocated to whoever is deemed applicable, by a third-party person nominated as the administrator and appointed by a court of law. Most countries work on this principle and Australia is no exception.
Courts of Law are do of course act according to the law and not to the wishes of an individual unless otherwise instructed, and they generally favour domestic partners, spoused and blood relatives. Therefore, only by making a Will are you able to dictate exactly how your estate should be distributed.
Making a Will is both easy and hugely important because it prevents having the decisions made for you by the legal system, it reduces the tax burden on your estate and heirs, it avoids a whole lot of worry, stress and mess for your loved ones and most importantly, if affords the people you care about as beneficiaries a level of protection. So, with much planning for the future happening in recent weeks as a consequence of the Coronavirus pandemic, Australian wills and estates lawyers are receiving a sharp increase in demand to help financially savvy investors plan out their inheritance and action a Will.
Wills are legally binding documents which ensure that when a person dies, their estate, assets and wishes are distributed as requested and acted on accordingly. There are too many examples of the problems that arise when someone dies and hasn’t planned out their estate; assets ending up in the wrong hands, challenges to court decisions by unknown relatives, and legal pitfalls that all end up leaving a bad taste, but that’s not the point of this article. Instead it is hoped that it will provide you with the impetus to arrange your affairs, no matter what your age, so that your immediate family will benefit if something unexpected were to happen. The following are a few strategies that you might consider in addition to making a Will.
Firstly, if you are approaching a ripe age, then a good policy is to ensure you in-fact enjoy your wealth by spending it. You can of course spend it on and with the people you love to maximise your time with them, and the key upshot of this, as well as getting to enjoy the fruits of your labour, is that by doing so you will reduce your personal tax burden and in doing so benefit your family. The more your family get, the less the government receives.
You can of course also gift money, wealth and assets to your family and friends and in doing so make sure that the people you want to benefit, do so while you are still alive. Some countries have restrictions on the amount that can be gifted before taxes are applied and this needs to be checked. Australians can however gift up to $10,000 per year, limited to $30,000 in a five financial year period and this can be to family, friends, individuals or charities. Similarly, you can also loan amounts to family members and this not considered taxable income by the Government. In both cases it is advised that you keep records stating that the loan or monetary gift has been made.
And last but by no means least, probably the largest asset most people are likely to own during their lifetime is the family home. It is possible in many countries to create what is known as a life estate deed, which prior to a person’s death will transfer ownership of the house to a sibling, whilst retaining the rights of the parent or parents to remain living there too.
Hopefully we have presented a few options in this article for planning your financial future. As always though, before you action any of these it is advisable to seek guidance from a Wills and Estates professional to make sure you are acting correctly and according to the law.