Planning well for the future, as with anything, requires the planner to follow some basic rules. Poor planning in estates can be disastrous so you might want to consider the following:
- Procrastination – Planning anything requires you to be involved and requires your input. Only you can do it.
- Wishful thinking – Hoping that your shares will suddenly quadruple in value, that you will buy that farm or, that your son or daughter will return from Europe with an interest in the family business is just “wishful thinking”. Take positive steps to take control of your estate plan.
- Penny Pinching – Obtaining the best advice often involves advisors from various professional backgrounds working together. Like anything, you get what you pay for. Paying for advice and then finding out it is wrong is painful. Estate planning is a mix of personal, family and structuring (tax, legal, etc.) issues. There is simply no substitute for well-structured professional advice. Obtaining advice is a two-way street. Advisors need to understand more than just the financial consequences for what they recommend. The advice you receive will affect not only the control of your family’s financial security but will also affect relationships far into the future. Advisors must be compassionate and understanding and have a commitment to the client, their family and their business. This is what we can offer you at King Cain.
- Beating the tax man – Simply trying to beat the ATO at their own game can have disastrous consequences. Having a fantastically complex estate plan including tax planning can result in structures which lead to family disputes and the benefit of the plan – tax saving – being spent on legal fees. Of course, this assumes the tax structuring works in the first place! You have worked hard for your wealth so why create a situation where that wealth is used by quarrelling beneficiaries simply for the sake of a tax benefit.
- Is it fair or equal? – Confusing notions of fairness and equality can be a route cause of failure in an estate plan. We all try to bring up our children in the expectation that parents do not have favourites. However, that is not always the case.The needs of a particular child throughout life both for their financial, medical, educational and emotional development is a process which the individual carries through their life and, it changes.Family Businesses often suffer most from this downfall in estate planning. Can it be fair to bequeath the efforts of one child who is active in the business to another who has no interest or activity in that business? Or, what if the situation where disinterests of parties in the family business are locked into illiquid assets, especially where children do not get on?There is simply no way that you can create permanent financial equality. The successes and failures of particular with their individual abilities, opportunities and luck are simply something to hard to plan for. Forcing feuding parties to share a common goal is a recipe for creating feuds.
- Everyone will always agree! – Thinking that everyone will agree on a particular decision as a majority can have disastrous consequences. There is always the chance that a minority, excluded previously or becoming disenfranchised decide to exercise veto. This is where you must consider appointing someone to take control, someone who can be a leader and be vested with the power to make decisions.
- Not telling people about your plan – Involving people in the planning process and telling them about your desires for the plan is the single most important aspect of estate planning. Leaving it to the living to sort out problems which have arisen as a result of perceived equality and fairness in the distribution of the estate can destroy your best intentions.Explaining your philosophy, beliefs and goals to those you expect to benefit from the plan is something that requires not just providing them with paperwork, but careful attention to involving a group of intended beneficiaries in that plan.You might think, “I can’t do that, it will be a disaster when I speak to them about it”. Well, the opposite is, what if you don’t tell them while you are alive and the problems it will create when you are not around to explain when you are gone.
- Testing the plan and teaching it to others – Like any plan, the only way to test it is by running the plan. If it is difficult to decide which one of the children or the beneficiaries in general will be most able to plan and execute as a leader, let them try it for a while.Similarly, if you are concerned about a beneficiary’s ability to handle money, let them have some and see what they do with it. The most important thing is to guide and assist people in the process. Remember, you are the person with the expertise, drive and firmly focused on goals and you are the only one who can teach others what those key elements are.
- Keep the plan up-to-date – Planning is an evolving process. You don’t win a grand final in a sporting match simply by having one plan and using it from the start of the season to the grand final day. There are tweaks, wrinkles and adjustments to be made to any plan. This is equally so in estate planning. Sometimes people think the need to constantly change plans is a reason for not having an estate plan.Using that as an excuse to put off planning is something that will leave you with no plan at all.
- Getting others to look at your plan – Reviewing the plan yourself and regularly is a starting point. Having independent of the parties who are professionals review that plan is a must. This can involve your Solicitor, Tax Advisor or other trusted professional. The review process is something that is ongoing and an effective strategy for best practice estate planning.
King Cain can assist you with estate planning or any legal matter. If you have a matter you wish to discuss feel free to telephone Paul Carver or Kel Graham, on 6333 4400 or call into our office at Level 1 Suite 4, 90 Keppel Street, (cnr Keppel and Bentinck Street)Bathurst NSW 2795 to arrange an appointment.