Wills & Estates
Wills and Estates
Terry Waugh has a Masters in Wills and Estates from the College of Law.
He provides the following services:
– Legal Advice regarding Estate Planning (including asset protection strategies)
– Preparation of Wills
– Preparation of Testamentary Trust
– General and Enduring Power of Attorney (POA)
– Advance health directive (AHD)
Why are Wills important?
Wills are important as it will allow you to distribute your property according to your wishes. If you do not have a will then a formula will be used to distribute your estate. Also it provides additional flexibility as the Public Trustee does not administer the estate.
Why should a solicitor draft a Will?
If you die without a valid will then you may die partly intestate and partly testate, this is where part of the Will is valid and another part is invalid. This may create inconvenience and delay, and it could incur unnecessary expense. Reasons why the will might be invalid:
~ Will has not been signed and witnessed correctly
~ Fails to dispose of all assets
~ Mental capacity
~ Poorly drafted and rules of construction have not been followed
What is Estate Planning and is it important?
Estate Planning is where you decide what happens to your Assets and Liabilities with a focus on the following issues –
> Business succession
> Tax planning
> Asset protection
> Trust succession
> Beneficiaries who are under a disability
Estate planning allows you to utilize different strategies to maximize tax efficiency and asset protection.
Is a Will still useful even if it can be challenged?
A will is the only formal way you can tell the Court what your wishes are. A court must consider your will and any comments you have made in it during any legal challenge.
How Testamentary Trusts can Save Heaps of Tax
Testamentary Discretionary Trusts (TDT) set up in a person’s will can save the family a fortune in tax as well as give other benefits.
These benefits include the general benefits of a discretionary trust such as the ability to stream the income to the lower tax payers in the family. The trust itself doesn’t pay any tax if the income of the trust is distributed. The recipients of the income will pay tax at their marginal tax rates.
But with trusts set up under a will there are extra tax benefits because the income can be distributed to minor children who are then taxed as adults would be. This benefit is not available with trust set up during a person’s lifetime because children will pay penalty tax rates of up to 66%.
The tax saving can be demonstrated by a simple example comparing 2 situations of a family – with a TDT and without a TDT in the will.
Bob dies with a large number of investment properties. Rental income is $80,000 per year after expenses. Bob is married and has 4 kids.
Situation A: Bob dies with a will giving everything to his spouse –
The spouse will receive the rental income going forward and it will be taxed by adding it to the other income of the spouse.
If the spouse was on the top rate of tax, the tax payable each year would be $37,600.
A huge amount of tax!
Situation B: Bob dies with a will leaving everything in a testamentary trust with Spouse in control –
The trustee of the TDT will receive the rental income going forward. This could be the spouse or a company controlled by the spouse.
The trustee could then distribute the income of the trust to the 4 kids – $20,000 each.
Each kid will be taxed as an adult would and can get the tax free threshold and the low income tax offset so no tax would be payable at all.
This family could save $37,600 per year in tax!
Not to mention the tax savings on CGT when or if a property is ever sold. Additionally there are great asset protection benefits if the spouse would re-partner and/or if any of the beneficiaries became bankrupt or incapacitated.
Copyright 2020 - Terry Waugh, solicitor at www.structuringlawyers.com.au