Advisors who understand the basics of estate planning can provide invaluable support when a client or their family member loses capacity or passes away. Estate planning isn’t just about preparing for death—it’s about managing change throughout life, ensuring a seamless transfer of wealth, and minimizing estate tax burdens when the time comes.
This article will explore key considerations in wills and estate planning, from legal requirements to the complexities of trusts, to help you deliver expectional estate planning support to your customers during what can often be a stressful and emotional time.
Understanding estate planning
“Change is the only constant” Heraclitus
At its core, estate planning—or succession planning—is about preparing for change. Pre-death, it involves managing and maintaining assets in preparation for potential loss of capacity. Post-death, it’s about transferring wealth efficiently and fairly, addressing revenue issues, and managing claims or entitlements.
The importance of proactive estate planning
We’ve all heard the saying, “Where there’s a will, there’s a relative.” But when there’s no will, the law has its own formula, intestacy. This distribution rarely reflects what is truly fair or sensible for most families.
Accountants’ role in estate planning
Accountants are crucial in estate planning, offering guidance on tax implications and asset structuring to ensure the estate is preserved and transferred with minimal tax burden.
Key planning triggers
Estate planning isn’t a one-time event; it’s an ongoing process that needs constant adjustment. Advisors should be on the lookout for triggers that signal the need for estate planning updates. These include:
- Death or incapacity
- A major illness or decline in health
- A likely future estate claim
- Control of family trusts
- Holding life insurance or superannuation, especially self-managed super funds (SMSF)
- Any change in family dynamics, such as marriage, separation, or the birth of a child
The myth about wills: It doesn’t always have to be written
A common misconception is that a will must be a written and signed document. While this is generally true, there have been cases where informal wills such as a video have been considered. The intent behind the will must be clear, and issues can arise if there’s ambiguity in these alternative formats.
It’s crucial to advise clients that while a traditional written will is the safest and most straightforward option, there are other ways to express their wishes.
It’s always about the money (and the lawsuits)
“If someone can sue, they will sue.”
Money is often at the center of estate disputes. Ensuring that the individual creating the will has testamentary capacity— that they fully understand the decisions they are making—is a critical factor in reducing the risk of disputes.
When you hear, “It’s not about the money.” In reality, it often is about the money.
The more clients insist that their estate planning isn’t financially motivated, the more likely money will become a significant issue later on.
Non-estate assets: what the will doesn’t cover
Wills don’t account for every asset a person owns. Non-estate assets—such as joint property, assets in family trusts, or superannuation funds—fall outside the will’s jurisdiction.
Advisors should note that these assets are generally protected from claims, adding an extra layer of complexity to estate planning.
Only estate assets can be challenged, making it essential for clients to understand the distinctions between what a will can and cannot control.
Wills become public after probate
For clients who value privacy, it’s important to know that a will becomes a public document after probate, making it accessible to anyone.
Some lawyers recommend their clients make only succinct statements in the will and provide more detailed instructions in a separate document to their lawyer. This keeps sensitive information private while still providing clear guidance on the estate’s distribution.
Executors: A role of great responsibility
Executors are responsible for administering the estate, paying debts, distributing assets, and dealing with legal processes like probate. It’s important to understand that this role can be onerous and carry personal liability if not executed properly.
Executors are typically not paid for their services unless specified in the will, so clients should choose someone they trust to handle these responsibilities carefully.
Trusts: controlling assets beyond death
To avoid disputes, wills must clearly outline trust beneficiaries and instructions for handling the trust when the original controller is gone.
Naming new trustees and documenting trust details, such as vesting dates, is essential. While trusts offer asset protection and tax benefits, they can also lead to conflicts when the controller dies or loses capacity. Advisors must help clients plan for these challenges to ensure a smooth transition of control.
In some situations, a financial advisor, lawyer, or professional trustee may be appointed as executor if the estate is complex, or if the testator wants someone with financial expertise to manage the process impartially.
The importance of storing the trust deed
Without this document, it can be difficult to understand the trust’s terms or even confirm its existence. Clients should be advised to store their trust deeds in a safe and accessible place. While there’s no formal government or industry body that tracks trust documentation, firms can store their client’s Trusts safely within the Prime Compliance platform using our Prime Documents solutions.
Key takeaway: plan proactively for the future
Estate planning is a dynamic process that requires regular updates, careful consideration of legal requirements, and a deep understanding of the client’s personal and financial circumstances. As advisors, your role is to guide clients through this complex process, ensuring their wishes are honored, and their legacy is protected.
At Prime Company Compliance, our expert team works closely with accounting and legal firms. Contact us today to learn how we can support your compliance needs.
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