Wealth transfer is a family matter

Wealth transfer is a family matter

It’s often said that it is better to give with a warm heart, but divesting assets while you are alive may not be the best way to pass on your accumulated wealth to your nearest and dearest.

Certainly giving when you are alive means you have more control over who gets what and you get to see them enjoy their inheritance. It also means your wishes are less likely to be contested after you are gone. But for many reasons this is not always practical or possible.

None of us knows how long we will live so there is little point giving everything away only to have insufficient funds to pay for, say, aged care in your later years.

The best way to ensure that you and your family are properly cared for is to have a comprehensive estate plan. Talking about death and money is never easy, but having a conversation with your family about your wishes can help prevent disputes and disappointment after you have gone.

Where there’s a Will

The most important thing is to make sure you have an up-to-date Will that truly reflects your current situation and your wishes. And make sure your family knows where your Will is kept. It’s good to get financial advice as there may be many hurdles and unforeseen consequences.

Most estate planning issues centre on bequeathing assets evenly among family members and understanding the different tax implications for each asset. For instance, if one child gets the family home and the other the holiday home then the holiday home beneficiary may be liable for capital gains tax. CGT can also be an issue when it comes to passing on shares.i

Asset protection is another area that requires careful planning. You may be worried about an adult child’s inheritance being lost in a divorce settlement or through financial mismanagement, or you may have a disabled child who will need ongoing financial support. One way to protect your assets in such situations is to set up a family trust.

Conversely, you may decide that your adult children are already well established and don’t need a large inheritance. With so many young people finding it hard to break into the housing market and repay student debt, you might consider bypassing your children and bequeathing your estate to your grandchildren.

A super strategy

Your Will is only part of the equation though. Many people don’t realise that super is a non-estate asset unless you specifically direct it to your estate by nominating your legal personal representative as the beneficiary.ii

Super is one asset where giving with a warm heart can be a smart strategy in some circumstances, such as the diagnosis of a terminal illness, particularly if your beneficiaries are your adult children.

This is because children aged 18 or more are treated as non-dependent under tax law unless they are financially dependent on you.iii So it is likely your adult children will be hit with a hefty tax bill on receipt of your super.

But if you’re aged 60 or more, you can withdraw money from your super, even a day before you die, and you will not pay any tax as all withdrawals from that age are tax free. Then you can pass the money on tax-free to your non-tax dependent children.

Succession planning

If you have your own business or a farm, then you also need to consider succession planning. Do all or any of your children want to stay in the business? How will you compensate those who don’t? Successful succession planning needs to start early so the next generation can plan their future with some certainty.

To make sure your wishes are carried out as intended, talk with your family and give us a call to discuss your estate planning needs.

i http://www.makdap.com.au/publications/cgt-consequences-will

ii http://www.schweizer.com.au/articles/Who_Gets_Your_Superannuation_When_You_Die_(SK00125438).pdf

iii ATO, https://www.ato.gov.au/individuals/super/super-and-tax/tax-on-benefits/#Taxondeathbenefits https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/tax-and-super

Adapt Wealth Management Pty Ltd is a corporate authorised representative of Paragem Pty Ltd, AFSL Number 297276. This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.

About Reuben Zelwer


Reuben Zelwer established Adapt Wealth Management in 2011 to help time poor clients achieve financial freedom. For over 15 years, Reuben has helped professionals, executives, business owner and those approaching retirement make the most of their circumstances by making good financial decisions. Reuben’s professional practice is complemented by substantial voluntary work, which has included setting up financial literacy and savings programs in the local community.