asset protection estate planning strategies
TRANSCRIPT
ASSET PROTECTION
&
ESTATE PLANNING STRATEGIES
Danny Adno
Special Counsel
Corporate & Commercial
B.A. L.L.B, Grad. Dip. Corporate, Securities & Finance Law
DIVORCED
DE FACTO RELATIONSHIP
MARRIED
GENERAL INFORMATION
This presentation contains general information and mayconstitute general advice only. It does not take intoaccount any person’s particular circumstances, strategicobjectives or individual needs. It should not be reliedupon as a substitute for legal or other specialist advice. Ithas been prepared solely for general informationpurposes.
Before making any decisions on the basis of thispresentation, you should consider the appropriateness ofthe content, having regard to your particularcircumstances and individual needs.
ABC PTY LTD
A B C
Purchaser
$$ $1/3
Shares
1/3
Shares1/3
Shares
$ $ $
What Assets Form Part of Estate?
FAMILY TRUSTSJOINT ASSETS
HUSBANDT1
WIFET2
CHILD 1
GRANDCHILD 1
CHILD 3CHILD 2
GRANDCHILD 2
SUPERANNUATIONSUPERANNUATION
ESTATE ASSETS NON-ESTATE ASSETS
HARSH REALITY
In 2014:
121,197 marriages registered
46,498 divorces granted – approx. 38.4%
Median duration of marriage was 12yrs
Median age at first marriage – Males: 29.9yrs, Females: 28.3yr
Median age at divorce – Males: 45.2yrs Females: 42.5yrs
47.4% of divorces involved families with minor children
Previously married - 20.3% groom & 18.8% brides
79.4% couples lived together prior to marriage
Blended Families
Today many people who are in blended families (with
their second or third spouse) are often at pains to ensure
that children of their first marriage are provided for, or
that their previous spouse can’t get their hands on any
more assets than what they have already receivedBlended family:
a family consisting of a couple, the
children they have had together, and
their children from previous
relationships.
PROTECTING INHERITANCE
Insulating risk – ensuring benefits distributed to intended beneficiaries
Benefit of children & grandchildren
Relationship breakdown or divorce
Spend thrifty child
Creditors if the beneficiary’s business or his or her spouse’s business goes under
Mental disability or addiction issues
Widowed Spouse – New Relationship
They fall in
love and
move in
together -
de facto
partners
Step 3
Distraught,
ex-wife takes
walk on Bondi
beach and
bumps into
charming
I insolvency
practitioner
Step 2
Husband
suddenly
passed away
and his entire
estate
distributed
directly to his
surviving
partner –
widowed wife
Step 1Step 4
Husband’s ex-
wife’s ex-de facto
partner may have
a claim to a
substantial portion
of ex partner’s
estate – rather
than earmarked
for children and
grandchildren
Step 5
Few months
later, whilst
going for a
walk, she trips
and falls off a
cliff
PRACTICAL APPLICATION
GOOD LOOKING INSOLVENCY
PRACTITIONER
Rather than being allocated for the benefit of your children and grandchildren, assets susceptible to a claim by a third party.
PRINCIPAL QUESTIONS
(a) What have I got?
It is critical to understand:
The will-maker’s circumstances
Relationship with other family members
Extent and nature of his or her assets
How are the assets held?
Shares in a company, trust (discretionary/unit trust), or a partner in a
partnership?
(b) From Whom Do I Want to Protect?
Assets distributed to intended beneficiaries
Lazy drafting – unintended consequences
Estranged spouse, children’s ex-spouses, distant relatives with dubious intentions
Blended families
Mental disability or addiction issues
Creditors
Typically in a blended family, one or both spouses have children from a previous
relationship. Often in these circumstances, parents want to ensure that children
from earlier relationships receive an adequate share of their deceased estate
ESTATE PLANNING – CREATING CERTAINTY
Testamentary Trust- discretionary trust in Will
Assets held by Trustee on trust for beneficiary
The trust is controlled by the trustee/trustees
Family dynamics
Dispute resolution mechanisms
Careful thought is required as to who should be the trustee(s),
including succession of the role of trustee(s)
Succession Issues
ADVANTAGES OF A TESTAMENTARY TRUST
Assets retained for benefit of nominated beneficiaries
80yr: 2 or 3 generations
Greater degree of control of intended use and actual beneficiaries
Relationship breakdown – separate asset base
Taxation Benefits
Reduction in tax payable - testamentary Trusts provide major taxation benefits to minor beneficiaries.
Under 18 yrs have the first $18,000 tax free. By comparison, the first $416 held in a family trust is tax free
with the remaining amount being taxed at top marginal rates
Income Splitting – income from assets in discretionary testament trust can be split amongst beneficiaries
with lower tax rates
Capital Gains realised on assets held in a testamentary trust can be streamed to one or more
beneficiaries in a tax effective manner
ADVANTAGES OF A TESTAMENTARY TRUST Insulating Assets from unintended claims
Deceased’s previous spouse remarries
Beneficiaries’ relationship breakdown – child’s spouse
Protecting Assets
Beneficiaries with intellectual or physical disability
Substance abuse or addiction issues
Creditor Protection
High Risk profession/ Business
Control
Government Benefits
DISADVANTAGES OF TESTAMENTARY TRUSTS
Control & Administration
Administration costs
Nature of assets – CGT exemption and land tax exemption on principal residence
CGT losses carried forward – set off against future capital gains
HOLISTIC ASSET
PROTECTION PLAN
Control of Companies and Trusts:
Business succession arrangements
Shareholders agreements
Buy Sell / Funding arrangements
Partnership arrangements
Superannuation
Valid Binding Death Nominations
Loss of Mental Capacity
Enduring Powers of Attorney - Financial
Enduring Deeds of Guardianship - Lifestyle
Planning is bringing the future into the present so that you can do something about it now
Our Services:
Australian Consumer Law
Business Succession Planning
Buying/Selling a business
Compliance and Regulatory
Contracts
Corporate and Commercial
Employment and Workplace
Estate Planning
Intellectual Property
IT and Technology Law
Litigation & Dispute Resolution
Transactions
Commercial | Strategic | Legal Advisers
Awards:
Award-winning strategic and
commercial legal services firm:
2016 – Best Start-Up Law Boutique
Australia (APAC Insider Legal
Awards)
2016 – Most Innovative Commercial
IP Firm (APAC Insider Legal Awards)
2016 – Finalist - Female Executive of
the Year, Australian Lawyers Weekly