Sent: 18-07-2005 00:15:44
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Estate Choices, Not Estate Planning – Part 1 - Tony Crilly
Recently I was again asked to prepare a lecture for the Securities Institute regarding an introduction to estate planning. As I have said many times, succession law is one of the most challenging and complex areas of law, given the individual circumstances of the person. It involves tax law, trust law, family law, defacto law, death, deceit, sibling rivalry and all the elements of a good drama! The saying goes that wherever there is a Will there is a relative, and how true this is.
It is the bane of a practitioner’s life to try and recover all assets, pay the debts of the estate and distribute the benefits in a timeframe that is suitable to the family.
Estate planning is really about estate choice. It is looking at all the options given the circumstances and making your own choices.
The statistics always surprise me. Approximately $200 billion will be transferred over the next 10 years but only about 55% of people have a valid Will at death. A staggeringly low 28% have worked out how much is actually needed to fund their objectives. It is vital for clients to understand an asset and liability audit is required to calculate the future estate liquidity. It is not just payment of existing debts they must consider, but maintenance of their family’s lifestyle into the future, including special needs such as medical or education expenses. If they have an investment strategy, a client should aim for the best outcome financially on their death.
The name of the game is to ensure that the money ends up in the right hands, namely the hands of the spouse, the children or perhaps the grandchildren. What is undesirable is for uncertainty to be created by the wording of a document or arrangement, arguments to arise and additional tax consequences to be caused by lack of foresight. Most of my clients are surprised to hear that if there is an argument about a bequest, generally the legal costs of that argument for both parties are paid from the estate.
Timing is critical. If a client anticipates the immediate cash needs and covers them by insurance or in other ways, things flow smoothly. However, if a small business owner does not make provision for living expenses, this creates high anxiety in the minds of those left behind. Generally speaking, if there are sufficient assets, a bank will provide the executor spouse with a working overdraft until insurance proceeds or other assets can be sold. Of course, probate is usually required and this takes time.
In regards to estate planning, I cannot over emphasise the importance of the relationship between the client, their accountant, their financial advisor and the lawyer drafting their documents.
Next week: Preparing your estate plan.Tony Crilly is a solicitor of the Supreme Court of Queensland practicing in commercial and succession law.
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