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Ask An Expert: How To Get Intergenerational Wealth Transfer Right

Everything you need to know about safeguarding your assets and protecting your family’s future.

Estate planning is not just about writing a will. It’s about protecting your assets, minimising taxes, and ensuring a smooth transfer of wealth to future generations. Similarly, Family Law is more than divorce and financial settlements at the end of a relationship. Engaging a Family Lawyer prior to any conflict arising can provide opportunities to protect wealth should a relationship ultimately break down.   We cover the importance of estate planning, family law considerations and common pitfalls to avoid, and the benefits of working with experienced lawyers.

We asked Clare Hesbrook and Simone Green of Russell Kennedy Lawyers to answer our burning questions about estate planning, inheritance, family law and asset protection.

What are some of the most common pitfalls people face when it comes to transferring wealth to future generations?

Often the most common pitfall is doing nothing or having documentation in place that no longer reflects your wishes or circumstances. It can be difficult to make decisions around succession and financial agreements and many clients feel they need to have made these decisions before engaging a lawyer.

Proper estate planning, with an experienced lawyer is much more than document preparation, they can guide you through the various choices and options and tailor documentation to suit your circumstances. You do not need to have the answers from the outset, the most important thing is to start the discussion with the right lawyer.

From a family law perspective, for example, when providing an ‘early inheritance’, gift or loan to children to assist them to purchase property, fund education for grandchildren, provide an accommodation deposit for elderly parents, or for any other reason, failure to properly document both the sum and terms of the gift/loan and if and/or how it is repayable can cause difficulties upon the breakdown of the adult children’s relationship, or even in the event of the breakdown of the parent’s relationship. A financial agreement or ‘pre-nup’ for example, can protect family wealth gifted or loaned in such circumstances.

An estate plan, specifically designed for your family, gives you the ability to choose who holds decision making roles on your death or incapacity and allows you to structure and protect your family’s financial security. Another common pitfall is to deal with issues in isolation, for example, preparing a Will and Enduring Power of Attorney to deal with financial matters, but failing to prepare an Appointment of Enduring Guardian to deal with medical and lifestyle matters. Estate planning should be undertaken in a holistic way to deal with succession on death or incapacity and encompassing all wealth, whether personally held or through structures such as Trusts and Self-Managed Super Funds.

How can families with young children benefit from having a comprehensive estate plan in place, especially about guardianship and inheritance?

Many people think estate planning is something that can wait until later in life, but with a family, you have responsibilities that extend beyond your lifetime.

A comprehensive estate plan will enable you to provide protective structures to preserve your family’s wealth into the future and to choose suitable people to care for and support your children, financially and emotionally, if something happened to you before they reached maturity.

An estate plan, specifically designed for your family, gives you the ability to choose who holds decision making roles on your death or incapacity and allows you to structure and protect your family’s financial security.

In your experience, how can working with both a family lawyer and wills and estate planning lawyer minimise potential conflict within families during divorce or following the death of a loved one?

Having a Financial Agreement in place, to determine the distribution of assets upon the breakdown of a relationship, is an important consideration when entering into a serious relationship, particularly if you have children from previous relationships. A Financial Agreement empowers you to plan ahead without the negative emotions that accompany a relationship breakdown, providing clarity for all involved.

At the same time, making a considered estate plan is essential to ensure that there is transparency in the financial arrangements upon the death of either partner.

An experienced estate planning lawyer can undertake a risk assessment for your estate and advise you on suitable strategies and arrangements to reduce the risk of a challenge to your estate after death.

Even where there is little or no risk of a challenge, your estate planning lawyer can guide you through the options, relevant to your particular circumstances, to reduce expense and friction in the administration of the estate.

For example, the choice of Executors, Trustees and the succession of control of any existing family trusts, if not done correctly, can cause disputes, delays and expense. This can often be avoided if proper thought and attention is given to who ought to be appointed in such roles when preparing the estate plan.

Are there any specific tax implications to consider?  

A holistic estate plan provides many opportunities to mitigate tax exposure. For example, this could be through the use of Testamentary Trusts for beneficiaries with young families, tax effective superannuation death benefit nominations and assessment of exposure to international taxes where there are assets overseas or the client has overseas connections.

Estate Planning is so much more than the documentation at the final stage and tax saving strategies can be easily missed when a Will is drafted without full consideration of the individual’s circumstances.

What advice would you give our readers when it comes to asset protection and succession planning?

My main advice would be to seek advice, even if you have no idea what you want or need. An experienced lawyer who specialises in estate planning work, will guide you through the process and help you to focus on the issues relevant to you. A well-considered holistic approach also involves family law advice if you are entering into a new relationship or re-defining an existing financial relationship on the event of the receipt an inheritance or other life-changing event.

Remember it is more than just the documentation, the strategy piece is critical to ensure the documentation works properly for you and that all relevant issues have been comprehensively addressed.

Russell Kennedy Lawyers

Level 24
135 King Street
Sydney
New South Wales 2000

P +61 2 8987 0000

Website: https://www.russellkennedy.com.au/

Your Contacts

Clare Hesbrook

Principal, Wills and Estate Planning

chesbrook@rk.com.au

Simone Green

Principal, Accredited Specialist in Family Law

sgreen@rk.com.au

 

The information contained in this article is intended as general commentary and should not be regarded as legal or financial advice. Should you require specific advice on the topics or areas discussed please contact Clare Hesbrook and Simone Green at Russell Kennedy directly.

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