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Estate Planning for Life Peace of mind for you and your loved ones 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. 1 Some Disturbing Facts More than 45% of adult Australians don’t have a will In the next 25 years $1,445 billion will be passed to the next generation Some Disturbing Facts Divorce rate are high and getting higher: 50% of 1st marriages, 66% of 2nd marriages, 75% of 3rd+ marriages Some Facts For every house lost to Fire 2½ houses are at risk due to Illness or Death 22½ houses are at risk due to Financial Problems1 Flood & Fire insurance typical costs $2,000 to $4,000 pa Illness & Death insurance typical costs $2,000 to $4,000 pa A good estate plan – typical cost $2,000 to $4,000 once 1 source ABS, RMIT, Crimsafe Estate Planning For Life – What Is It? “I can only relax and enjoy my trip if things are in order at home”........Angie W. 1. The Information That Matters 2. A Crisis Management Plan 3. The right legal documents to protect your family’s inheritance The Information That Matters A record of the information that your family and advisers need 1. People 2. Documents 8. Final Details THE 7. Responsibilities INFORMATION THAT MATTERS 3. Structures 6.Insurances 4. Assets 5. Debts The Information That Matters Crisis Management Plan If the worst happens don’t expect me to think clearly or know what to do. I will put one foot in front of the other until I recover. But in the meantime I need you to give me a simple guide, step by step, day by day..... .........Angie W Crisis Management Plan ? What do I need to know? (ITM ) ? Who do I need to call? ? What do I need to ask them? ? What is important? ? What can wait? Crisis Management Plan Protecting Your Family & Their Inheritance 1. Tax 2. Marital strife (divorce/separation) 3. Death and partner remarriage 4. Bankruptcy or other Legal threat 5. Mental, physical and legal incapacity 6. Behavioural or substance abuse issues 7. Young beneficiaries A Testamentary Trust Not like this... Estate $ Like this... Estate $ • Like a “will trust” for a young child, but it applies for adults and lasts up to 80 years • $ don’t pass directly to beneficiaries • $ pass to a trust controlled by a trustee (normally child) for your bloodline’s benefit Tax Advantages Effective 2013 Income Tax Scales (Including 2% Medicare) Example: Inheritance Invested 47% Estate of $1,200,000 with 2 beneficiaries 39% Inheritance amount: 34.5% 0% 21.5% $18,200 $600,000 each Term deposit interest rate: 6% (say) $37,000 $80,000 $180,000 Interest earned: $36,000 pa 34.5% income tax: $12,420 pa tax 2 Families: $24,840 pa tax A Better Solution: 2 Testamentary Trusts Same Income ($36,000 to each family) Income allocated to grandchildren (not adult children) $18,000 income to each grandchild $1,200,000 Estate $0 tax! Combined annual tax saving across 2 families up to $24,840 $ $ Divorce What Parents Want $ What They’re Afraid Of $ $ $ $0 $ Divorce: a better way Trustee $ Will Trust Bloodline Beneficiaries Death & Repartnering What Parents Want $ What They’re Afraid Of $ $ X + $ X $0 $ + $ Death & Repartnering: a better way X Trustee Family Appointor(s) decide who becomes trustee Will Trust $ X Bloodline Beneficiaries + Bankruptcy & Legal Threat Remember 1x : 2½x : 22½ x Top 5 reasons for personal bankruptcy: Job Loss Divorce/separation Debts and credit cards Poor health Adverse litigation Protecting The Family Home Inheritance $$ $ Loan Risk Family Home Unprotected! Protected by Loan to Trust Risk Risk Risk Risk Risk Registered Mortgage Repay bank Other Issues and Protective Trusts Age issues Drug and alcohol dependency; Mental health issues; Gambling and other addictive behaviours; Questionable social associations Estate Planning For Life The Information That Matters A Crisis Management Plan The right legal documents to protect your family’s inheritance Interested?