Most of us have at least vague notions of what we want to happen to our assets after we die and what we would like to pass on to our loved ones, but have you ever sat down to plan it properly?

Having a sketchy idea of what you would like to happen and the reality of what will actually happen can be worlds apart if the right planning and instruments are not put in place and properly documented.

Issues such as tax treatment, access to benefits and control over use of funds can pose real problems for those you leave behind. And when you overlay the sometimes fickle factors of relationships and family dynamics, things can get really messy. Here are some of the major issues that need to be considered.

Get a grip on the big picture
A good place to start is to catalogue exactly what assets you have, so that you know what will need to be shared around or otherwise disposed of after death. Things like bank accounts and your possessions around the home may be fairly obvious things to include in this, but then there are assets such as superannuation, life insurance benefits and business assets that may not be top of mind. Professional assistance may help you to gain an accurate ‘big picture’ of what is at stake – and it may be a lot more than you first think.

Can you rely on your beneficiaries to make the right choices?
You may have close relationships with beneficiaries of your estate and you may want to leave them well provided for, but that doesn’t mean that they can always be expected to use their inheritance wisely. Some beneficiaries may also simply be too young to deal with an inheritance.

If you want to exercise some level of control over how money is spent or how soon beneficiaries receive funds, then there are specific steps you can take to manage the situation. Testamentary trusts are one such device that can be set up in advance. These can come into effect in your will in order to set controls and limits on distribution and usage of funds. They can also help protect your legacy against divorce or bankruptcy related claims that may be made against your children. They can even help minimise tax and can set out guidelines for management of funds for future use by offspring who are too young to take control of money straight away.

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Professional assistance may help you to gain an accurate ‘big picture’ of what is at stake

What about your life insurance and super?
Many people understandably assume that a will is an all-encompassing document for the distribution of assets, but this is not always the case in relation to superannuation and life insurance benefits. Benefits from these types of financial assets are subject to specific nominations of beneficiaries.

In the case of life insurance, nominating a beneficiary can allow funds to be released more quickly, as opposed to having the funds paid into your estate first and distributed via your will.

Superannuation death benefit should also have specific beneficiaries nominated, otherwise benefits will technically need to be paid to the fund trustee first for them to distribute at their discretion. This nomination should be set up to be what is known as a “binding nomination” so that they can be directly paid to beneficiaries. Binding nominations need to be renewed every three years too, so it is important to have such issues reviewed by a professional to ensure that they are correctly set up and maintained.

Taxing matters
If your intention is to leave the same amount of benefit to each of your children, be careful that you don’t get caught out by the tax treatment that is applied to certain assets. Some of your assets may be capital gains tax free while others may not, so depending on what assets you leave to which child, it may end up that one receives a greater benefit that the other.

Taxation treatment can also vary on superannuation benefits paid as a lump sum to a beneficiary, compared to benefits paid as a pension. Again, some professional advice can make a world of difference if you are not sure what the tax situation is on your benefits.

Have you considered charitable giving?
A particular cause that you may feel passionate about may lead you to leave some of your estate as a gift to a particular charity. If you do intend to do this you need to take counsel on how it is set up in order to make it tax effective, to protect against the gift being contested by family members and to give your executor sufficient flexibility to re-direct the funds if, for example, the charity has ceased to be operating at the time of your death. Seeking sound legal and financial advice can ensure your wishes are carried out with greater accuracy.

Get an objective perspective
If these issues have raised concerns, or if you want to take some comprehensive steps toward organising your estate, talk to your solicitor and financial adviser before it is too late.

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