Estate planning is important for anyone who wishes to ensure their assets are distributed to the right people upon their death. Without a will or other testamentary safeguards in place, people often risk their estate being at the centre of an inheritance dispute when they pass away.
Business owners are no exception. In fact, a lifetime of gathering wealth through corporate interests means estate planning can be particularly crucial if you’re a company director or shareholder.
Kylie Lamprecht, partner at Brisbane-based accountancy and audit advisory firm Pitcher Partners, said organisations must consider estate and succession planning procedures to ensure the future of their business.
She said the process is more complicated than simply writing a will. Business owners have to take into account superannuation funds, trusts and the matter of who will take over the company should the owner die, get divorced or become incapacitated.
“Estate planning is a way to ensure your estate is passed to your chosen beneficiaries with certainty in the most financial efficient and tax effective way possible,” Ms Lamprecht explained in a media statement on the Chamber of Commerce and Industry Queensland website.
“Many transactions clients enter into will ultimately have an estate planning consequence including setting up business, purchasing property or setting up a structure to accumulate wealth.”
Benefiting from trusts
Ms Lamprecht said business owners can benefit from setting up testamentary trusts in a will. A trust holds a number of tax advantages, while also allowing an individual to protect assets for a beneficiary without giving them direct access to the estate.
“Normally if a beneficiary of a family trust is under 18 years of age, the trust income distributed to that person is taxed at penalty tax rates and the child has a limited tax free threshold,” she said.
“However, if the income derived by the trust was generated from inherited assets then the child will be taxed at normal adult rates.”
According to Ms Lamprecht, testators should contact an experienced wills lawyer when estate planning to ensure the process is professionally handled. She also advised revisiting estate plans every few years in order to cater for important changes, such as asset ownership shifts and changing beneficiaries.
NSW Trust & Guardian suggests updating a will any time someone experiences a big life event, such as a marriage, divorce, birth of a child or death in the family.
Even without a life-changing occurrence, the organisation claims people shouldn’t wait longer than five years to review their estate plans.