The value of advice for sucession planning
While the hit TV series Succession depicts more of a Murdoch-style dynasty than the average successful Australian family, it does highlight the drama and tension that can arise if estate planning isn’t done well or early.
Inheritances are coming later in life
It’s good news that we’re living longer, healthier lives than ever before, but it is delaying the transfer of wealth to younger generations. More than 80% of money passed down from parents now goes those aged over 50 and the most common age of inheritance is between 55-59.
This means, for the first time in our history, inheritances often don’t arrive in time to help with raising grandchildren or the intense costs of mid-life. By the time wealth is passed down, your kids’ financial circumstances and family dynamics may be quite complex.
Prepare for changing family dynamics
Your children may have already raised their own families and will increasingly be part of blended families, with children of their own, as well as stepchildren and second spouses.
Others will be flying solo, contributing to the fastest growing household type, single-person households. Your children may be business owners or nearing the end of their careers and entering their own retirement planning.
In this complex environment, it’s important to make sure your wealth is passed down as intended, in a way that reduces family stress and ultimately, makes your children and grandchildren wealthier.
Plan early and include the whole family
It’s natural that parents often talk succession with the eldest child or the child they have the closest bond with. Though, we have seen situations where this can inadvertently cause tension among siblings. So, we often recommend clients bring the family together for a meeting when they’re ready to talk about their wishes and legacy.
You could even consider involving your FMD adviser who can provide a valuable role as a guide in this meeting. It’s an opportunity for a range financial and legal matters to be considered, supported by an unbiased guide, to get the best outcome for all and optimise the transfer of wealth. Having your adviser on hand to facilitate the discussion and answer questions, gets everyone on the same page and provides peace of mind for the whole family.
Avoid unintended consequences
Sometimes people plan to pass wealth down to loved ones with the best of intentions but aren’t necessarily prepared for unintended consequences. While we don’t have an inheritance tax in Australia, there can still be tax and other financial consequences associated with how and when assets are inherited. Structures like Testamentary Trusts can provide protections that ensure your wealth is distributed as intended.
Trusts can also be an effective strategy if you’re concerned about protecting your estate from future family law claims from a range of parties, like an estranged spouse or Defacto partner.
Because inheritances are now typically coming later in life, we see more clients wanting to bring forward gifts to loved ones to provide financial support sooner.
There are effective ways to do this, but financial gifts should be well planned and documented to protect from future claims against the estate. This is particularly important for parents who want to ensure children are ultimately treated equally, or alternatively, for those who have remarried and want to ensure distinct treatment of biological children and stepchildren.
Tackle issues beyond wealth transfer and Wills
In addition to planning wealth transfer, a family meeting with your FMD adviser is also an opportunity to raise sensitive issues about your wishes relating to Aged Care, Advanced Care Directives and Powers of Attorney, in a structured and guided way.
We often support families of our clients in times of crisis, and while we are always here to help, we’d much rather provide good advice before you or your children find themselves in a highly stressful and emotional situation. In general, it’s ideal for your FMD adviser to get to know your adult children and develop a rapport, so we can better assist them if needed.
Get legal and financial advice through a trusted network
Our advisory team have spent years developing close relationships with other professionals who can help you put everything in place and be there to support you if your needs or family dynamics change.
We have Aged Care experts on the team, who can join your adviser in a family meeting, and we can introduce you to estate planning lawyers we trust to draw up all the paperwork on your behalf.
In short, you can turn to your FMD adviser to take everything related to estate planning off your mind, when the time is right and support you to communicate effectively with your loved ones.
If you or someone you know could benefit from a family meeting to discuss succession and estate planning, please contact your FMD adviser.
General advice disclaimer: This article has been prepared by FMD Financial and is intended to be a general overview of the subject matter. The information in this article is not intended to be comprehensive and should not be relied upon as such. In preparing this article we have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained on this article to particular circumstances. FMD Financial, its officers and employees will not be liable for any loss or damage sustained by any person acting in reliance on the information contained on this article. FMD Group Pty Ltd ABN 99 103 115 591 trading as FMD Financial is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977. The FMD advisers are Authorised Representatives of FMD Advisory Services Pty Ltd AFSL 232977. Rev Invest Pty Ltd is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977.