Transcript Leave things right for your family

Leave things right for your family
<Adviser’s Name>
<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd
Leave things right for your family
<Adviser’s Name>
<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd
Leave things right for your family
<Adviser’s Name>
<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd
Leave things right for your family
<Adviser’s Name>
My Name Financial
<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd
Leave things right for your family
<Adviser’s Name>
JV logo
<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd
Disclaimer
Important Notice
RI Advice Group Pty Ltd, ABN 23 001 774 125, holds Australian Financial Services Licence Number 238429 and
is licensed to provide financial product advice and deal in financial products such as: deposit and payment
products, derivatives, life products, managed investment schemes including investor directed portfolio services,
securities, superannuation, Retirement Savings Accounts.
The information presented in this seminar is of a general nature only and neither represents nor is intended to be
specific advice on any particular matter. RI Advice Group strongly suggests that no person should act specifically
on the basis of the information contained herein but should obtain appropriate professional advice based on their
own circumstances.
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Agenda
•
Family succession planning – the overall picture
•
The importance of a Will
•
Superannuation
•
Taxes
•
The next generation
•
The value of professional advice
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Family succession planning extends to…
•
Superannuation
•
Life insurance
•
Joint assets
•
Asset protection
•
Tax issues
•
Power of Attorney
•
Ensuring key information is recorded and accessible
•
Educating your dependants and more…
A standard Will may not be enough to protect assets and provide tax relief for
beneficiaries.
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What is family succession planning?
Making sure the:
• ‘Right funds’ - Having the appropriate net assets
are placed in the
• ‘Right hands’ - Where and to whom
at the
• ‘Right time’ - Appropriate timing
Taking care of your loved ones when you can’t
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Family succession planning overview
Family succession planning
More than a plan to distribute certain assets
Selection of guardians/ representatives/ other fiduciaries
Planning for illness or incapacity
Asset Protection
Life insurance proceeds
Taxation planning and deferral of
tax liabilities
Assets jointly
owned
A Will
Instructions to distribute assets according to your wishes.
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Preparing a Will is important
•
Control
•
Avoid family disputes
•
To choose beneficiaries
•
Appoint a guardian and name an executor
•
Review
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Is having a Will enough?
If you answer ‘yes’ to any of the following questions, you may have more complex issues to
consider:
•
Do you have superannuation or life insurance?
•
Do you have shared assets?
•
Do you owe money?
•
Are you receiving a Government pension?
•
Have you bought any assets since September 1985?
An effective family succession plan extends to asset
protection and the ongoing minimisation of income tax for
your beneficiaries
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What are considered estate assets?
•
All assets owned by the deceased at death
•
Excludes:
- Joint tenancy assets
- Life insurance proceeds
- Assets of companies/trusts
- Superannuation (unless LPR)
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What about small business estate planning?
•
What happens to the business on the death of one of the owners?
•
Is there a buy/sell agreement in place?
•
Is it properly drawn up?
•
Is there an associated insurance policy?
•
Other forms of funding such as assets of the business partner/s, terms of credit,
vendor finance?
These may enable the remaining owners to pay the deceased’s beneficiaries
without having to sell the business…Although… the business still needs to be
‘Sold’/ and/or Ownership transferred.
A desired outcome needs to be planned / discussed and placed into a formal
agreement to ensure that the wishes of all parties are outlined.
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Don’t let your assets fall into the wrong hands!

Beneficiary’s creditors

Spouse

Tax office

Children

Former spouse

Grandchildren

Child’s ex-spouse

Trusts
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Two key issues
Who
Right hands
Tax?
Minimisation
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Structures to consider
•
Discretionary family trusts – assets not owned by client
•
Child support trusts
•
Testamentary trusts
•
Superannuation
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Superannuation
•
Restrictions
•
Binding nominations
•
Legislation
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Tax effective distribution of assets?
Superannuation
Super lump sum death benefits
paid directly
Dependant
Non-dependant
Estate
ALL Tax Free
Tax free element = 0%
Taxed element =17%
Untaxed element 32%
Estate pays tax according to
distribution of assets
Dependant
ALL Tax Free
Non-dependant
Tax free element = 0%
Taxed element = 17%
Untaxed element = 32%
Illustrates payment from accumulation phase of superannuation
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How are estate assets distributed?
Super
LPR
Other
assets
Estate
assets
Dependants
Will
Intestacy
Family
provision
rules
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Benefits of Life Insurance
•
Cover CGT liability
•
Maintain family’s lifestyle
•
Pay off debts
•
Pay cash legacies
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Planning your estate
Financial
Adviser
Solicitor
You
Accountant
... requires the advice of other professionals
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Don’t delay the inevitable
• Family succession planning and working out intergenerational finances is not just for
the very wealthy
• It’s important for all adults, especially if dependent children, debts, blended families or
family businesses are involved
• What issues do the next generation face?
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The next generation
• You might have your current finances in order but what if something were to happen
to a loved one?
• Would the people and possessions that matter to you be well cared for?
• Where would all your hard-earned assets end up?
• And what about your loved ones?
– how are you children and grandchildren likely to manage the money gained through
an inheritance?
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Your beneficiaries – what’s their life stage?
Child
Marriage
Mortgage
Children
Lifestyle change
Retirement
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What are their issues?
The average Australian family has a number of financial issues:
• Housing affordability is at an all-time low, debt is at all time high
• Average 40 yo couple with children need x10
annual earnings cover simply to repay debt & maintain
current living standard *
• The cost of parenting is high and needs to be reflected
in insurance cover**
• 18% of gross income goes to service mortgages ***
• On average only 37% of adult Australians have any
form of lifespace insurance ****
• Pension access and entitlements are undergoing review
•
Sources
•
* Rice Warner Under Insurance report Dec 2013
•
** Insurance needs for parents - Rice Warner Nov 2013
•
*** ABS Housing Occupancy and costs report 2013
•
**** TAL 2013
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Case study
• Alex aged 36 years and his wife Helen aged 32 had three children under the age of 5
years when Alex was diagnosed with a brain tumour
• He was self-employed and was the sole source of income for the young family who
had a mortgage of $250,000
• Unfortunately the couple’s happy-go-lucky attitude meant they never considered
terminal illness would happen to them so they had no insurance
• Alex had $30,000 in superannuation but no death or disability insurance through
super.
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Case study
• Alex received his $30,000 payout due to terminal illness but nine months later when
he passed away, the family had no money to live on
• Helen received financial help from both sets of parents while she lived on a single
parent pension for a while and cared for her young children
• Helen then had to decide whether to sell their home and move in with her parents or
continue to live in the home and depend on assistance from both sets of parents
• She chose to stay in the home and rely on parents for financial support
• Helen returned to work part-time while the grandparents babysat
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Case study
• If Alex and Helen had addressed their personal situation with a financial adviser they
could have provided finance and peace of mind for themselves and their young family
• They would have also relieved their parents of this burden on their own finances,
lifestyle and retirement
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How can you help your loved ones?
• Your hopes of a secure financial future for your family depend on how well you and
your loved ones plan now
• The best thing you can do to ensure beneficiaries of your estate spend their
inheritance wisely is to suggest they too seek financial advice to help them realise
their dreams
• For decades, RI Advice Group has been showing clients how to make sure their
assets are distributed in the way they want, to whom they want, in the most tax
effective manner
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Value of professional advice
Your loved ones don’t have to be wealthy or thinking of retirement to
get financial advice
It’s about you and your family making the most of what you have and
securing financial peace of mind both now and in the future
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Thank you for attending
Case study 1
Case study
Capital Gains Tax
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Case study - CGT
John owns
His objective...?
 home unit as principal
residence
 an investment home unit
Zoe’s inheritance
investment unit
... to pass on a home unit of
equal value to each child
John
Zoe
Chris
Chris’s inheritance
principal residence
$
$
Sale Price
180,000
Sale Price
180,000
Less CGT
30,000
Less CGT
Nil
Net Proceeds 150,000
Net Proceeds 180,000
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Case study - CGT Executor Sale v Beneficiary Sale
•
Estate holds:
- share portfolio net capital gain $40,000 (after 50% discount)
- $3,000 in other income
•
Beneficiary on top marginal rate wants the cash
Executor sells
Beneficiary sells
Tax on $40,000 gain*:
$3,000 x 0%
=
$0
Tax on $40,000 x 49% = $19,600
=
$0
Result = $12,700 additional tax*
$18,800x 19%
=
$3,272
$ 6,000 x 32.50%
=
$1,950
Tax payable
=
$5,522
(other income)
$15,200 x 0%
(capital gain)
* Ignores Medicare Levy
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Case study 2
Case study
Superannuation
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Case study - Superannuation
What are the tax implications of nominating Chris or Zoe as beneficiary
of the policy?
John
Age 15 and
dependant
Age 25 and nondependant
Chris
Up to 30%* lump sum tax
(depending upon elements )
Zoe
All Tax Free
*Plus Medicare Levy
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Case study 3
Case study
Income Splitting
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Case study - Income splitting
Peter’s Estate
$
Family can receive tax free
Rebecca invests
Rebecca $20,542
$416
$416
$416
TOTAL TAX FREE INCOME …….... $21,790
Includes effect of low income tax offset (for Rebecca)
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Case study - Income splitting
Peter’s Estate
$
Will incorporates
testamentary trust
which invests funds
Family can receive tax free
Rebecca $20,542
$20,542
$20,542 $20,542
TOTAL TAX FREE INCOME $82,168 (about $60,378 MORE!)
Includes effect of low income tax offset
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Case study 4
Case study
Family Law Property Dispute
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Case study - Family law property dispute
Janet
Edward
(deceased)
Margaret
David
Janet is concerned David’s
inheritance will be included
in any divorce settlement
Susan
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Case study 5
Case study
Creditor Protection
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Case study - Creditor protection
 Both aged 72 and concerned for daughter & grandchildren
Jean
Phillip
 Business in trouble
 Mounting debts
Tom
Amy
Sam  Daughter liable
 Potential bankruptcy
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Case study - Creditor protection
$
$
Tom
Jean Phillip
$
Trustee
Trust
$
Amy
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Case study 6
Case study
Social Security
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Case study - Social Security
John
Betty
Assets...
 Their home
 Other assets $800,000
including $60,000 in jewellery
Receive age pension of
approx $518 per fortnight in
pension (combined)
Sue
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Case study - Social Security
Without Family Succession
Planning
John receives
 No pension
 No Pension Concession
Card
With Family Succession
Planning
John receives
 $48.20 pension/fortnight
Pension
 Concession Card
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