How to reduce tax and keep wealth in the family

When you think about the wealth you’ve created, do you ever wonder what the next generation will do with it?  Will they grow, spend or waste it?

The topic of wealth transfer has been widespread throughout the media in recent times and a great article, by Michael Hutton in the Australian Financial Review, takes a close look at the use of testamentary trusts.

Often people set up a simple Will – when you pass away, your estate is divided and distributed as you have directed. Which is better than nothing, of course, but it doesn’t allow for options and flexibility, plus it may not be tax effective for your beneficiaries.

The best way to think about your estate plan is to ask the question: 

If I died tomorrow, what would I like to see happen to ensure the longevity of my wealth for generations to come?

Thinking that through, and then having those conversations, allows you to determine the options available for your circumstances.

For example, you might have an adult child who runs their own business or is involved in a professional career that exposes them financially.  The last thing you want is creditors having access to the wealth you’ve created and passed onto that child (or grandchild) if their business goes belly up, or if they are sued in their professional capacity.

Similarly, beneficiaries that may have a wayward spouse. How do you ensure your assets are protected and therefore available to second and third generations?

This is where a testamentary trust comes into play.

Having a testamentary trust as part of your estate plan allows you to put rules around how, when and to whom your assets are distributed, with the discretion lying with your chosen executor.

It’s a process that’s worth thinking about because apart from protecting your assets, it can also be a very effective tax planning strategy for your beneficiaries.

It’s one of those areas that you should consider seeking advice on so that you get the right assets being passed to the right people, at the right time. 

If you, or anyone you know, would like more information you can email and I would be happy to answer your questions.

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Stay connected.