There are two things certain in life – death and taxes. In this article, we talk about both. We interviewed Angelo Sirianni, who is a Partner at Colledges, about why it’s essential to have that sensitive conversation with your family. We know it’s not an easy subject and we’re here to help you work through it. But first, let’s talk about why it’s important to have this conversation sooner rather than later.
Q: Let’s start with the obvious question. Why is it important to talk about death and money?
A:People want to leave a legacy, but the legacy needs to be left so that the surviving generation are not weighed down with a litany of problems as a result. Talking about death and taxes now will save your beneficiaries a considerable amount of time and money and potentially heartache. Your passing will be enough for them to deal with, you don’t want to leave additional stress in the family.
Another important point I would like to make is that Wills are not just for the wealthy, they are for everyone.
Q: What can happen when people aren’t prepared?
A: These are two recent examples that we’ve been involved in (please note the names have been changed).
Scenario 1: Julie – a PAYG employee
Julie wasn’t prepared for her death. When she died unexpectedly, her children had to engage a lawyer because their mother didn’t have a Will. If you die without a valid Will, the law decides who gets your assets. This is called intestacy or ‘dying intestate’ and it applies to everyone regardless of the wishes of your surviving loved ones.
This situation causes unnecessary stress and delays for those left behind, a considerable amount of work, and potentially unpleasant tax implications.
The other problem which causes further delays, is due to the increasing incidence of identity theft. Obtaining the tax file number for a deceased person can take up to 12 months and only then can you begin the process of distributing their assets.
Julie’s family wished she had a Will in place. Selling and distributing her assets became time consuming and costly, and Julie would not have wanted this for her family.
Scenario 2: John – a wealthy property owner
John had a Will but it was not prepared correctly and the clauses were ambiguous. When John passed away, the registrar was asked to interpret the clauses and because they were unclear, the family had to engage lawyers and go to court to clarify John’s wishes.
What should have taken six months took two years to resolve, and was very stressful for everyone involved. John’s wife couldn’t get access to the cash in the meantime, and she was unable to pay her bills. Her own cash reserves ran out and she had to take out a loan to cover expenses. The entire process took value out of the assets that were left behind. This is not what John would have wanted for his family.
The important lesson here is to make sure you engage a lawyer who is experienced in creating Wills. By also engaging the Colledges team at the start of the process, your Will can be optimised for tax considerations.
Related article: Do you have your Will ready? Here’s what you need to know
Q: What topics should be covered when you have a conversation about death with your loved ones?
A: Death and taxes are not an easy conversation to have. People don’t want to discuss money and death with their parents out of respect, or they may be uncomfortable talking about inheritance money with the family. But this conversation is essential for the peace of mind of everyone involved.
If is too difficult to gather your siblings and parents to have this conversation, then you may want to call their accountant – this is a good place to begin.
There are many aspects to consider when preparing a Will which will minimise unnecessary tax expenses. These include:
- Restructuring assets for tax considerations.
- Superannuation structure and beneficiaries.
- Property and assets ownership.
- Selling and cashing out of assets.
- Giving gifts and personal items prior to death.
- Family members included in the Will.
- What should be included in the Will.
- If you have a business, you will need a succession plan. Prepare for that because you don’t know what will happen.
- Setting up a trust can be beneficial, because it puts the assets into a structure outside of the Will and reduces the complexity of distributing assets.
Q: What happens with superannuation after passing?
A: The members of the superfund should regularly check the binding death nominations to ensure they are up to date. This advises the trustee of the superfund who you wish your balance to be allocated to. This is usually a financial dependant, that is your spouse or children. If there are none available, then you should nominate your legal personal representative, this would be the executor of the deceased estate. This applies to all types of funds – industry, retail or self-managed superannuation funds.
That said, pre-planning is essential to ensure that any issues are minimised, and the intended beneficiaries are not left to deal with complex costly legal issues and taxation that would diminish the value of your superannuation balance.
The pre-planning should include the fund’s financial planners. However, you can also start by speaking to us at Colledges to discuss the taxation implications and appropriate strategies.
Q: What other professional services do you need involved when preparing a Will?
A: There are a number of professionals with whom you can consult:
- Your accountant – so that the impact of tax is minimised when the assets are distributed.
- A financial planner – to prepare for funerals ahead of time, for ageing relatives who may need residential care.
- A property lawyer – if you want to restructure your property and titles.
- A funeral director – to plan ahead and have the funeral you would like.
How does the team at Colledges help?
If you would like some advice on how to start the conversation about a Will or preparing one, please give the team at Colledges a call. We’ll help you to prepare a Will that ensures your assets are distributed exactly the way you would like, without ambiguity or open to misinterpretation. We will:
- Provide a menu list of things to do when you prepare for your passing.
- Read over a prepared Will to check for possible misinterpretations.
- Ensure that the Will covers what you want.
- Act as an advocate and explain technical terms and legal recommendations.
- Work together with lawyers so that they have a balance sheet of all assets and entities owned by you.
- Recommend what should be included in a Will.
Please give us a call on 03 9851 6500 or email us at hello@colledges.com.au for experienced advice and guidance on how to create a Will that leaves a peaceful legacy for your loved ones.
