Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 28

Estate planning for families with carer responsibilities

In our legal practice, we see families with carer responsibilities and of reasonable wealth wanting to establish special arrangements on their death to ensure that support continues to those that they care for.

Gifting your estate absolutely is not ideal for dependants who are unable to look after their own financial affairs. Our clients are typically concerned with ensuring that their wealth is preserved to provide long term assistance and in a way that does not affect social security entitlements such that those they provide care for are in a worse position.

Some strategies that we find have assisted include:

Building in flexibility – While you can predict to some degree what your financial situation might be when you die, it is more difficult to predict the circumstances of your beneficiaries and also the tax and social security regimes in place. Therefore giving your executors a range of options provides flexibility in how financial support can be structured from your estate.

Advisory team – It is not necessary for your executors to have all the legal and financial skills to assess the options, but it is desirable that they have access to a team who know your affairs and can support the executors and trustees in their decision-making with good advice. This team of advisers for financial decisions can be included in your will. It is also desirable to include a role for technical assistance on the legal aspects for your executors and trustees in case any conflicts or problems arise.

Different types of trusts and income streams – The establishment of a Special Disability Trust is a good option for many clients, as is the establishment of a testamentary trust that gives the trustee access to income and capital for the benefit of the beneficiary. Trust structures can be used to provide funds for the maintenance, advancement and benefit of the beneficiary without giving income directly to them. This retains some control over how the income is used by the beneficiary and how it will be assessed for social security purposes.

A pension from a superannuation fund is also an option where the person you care for is a financial dependant. Additionally, your estate could also be used to purchase an annuity to provide an income stream. With so many options, it is important for your executors and trustees to obtain good advice before making any decisions on the appropriate structure.

Choice of trustee – Many clients feel more comfortable appointing a trustee who has a genuine, affectionate regard for the beneficiary such as a family member or friend. A good advisory team means that this person does not need any particular skills or qualifications but is someone that you could trust to make good decisions in the best interests of the beneficiary after considering advice from your advisers. It is also a good idea to appoint joint trustees who will be able to support each other if difficult decisions need to be made.

While public and private trustee companies are always an option and will be a good solution for some, we find that the fee structure and loss of control over investment decisions make them less attractive for many of our clients.

The law in this area is complex and families should seek specialist advice to develop a plan that will reflect their intentions and be of optimal benefit to those cared for, without creating unintended consequences.

Top 5 tips

  1. Give the executor the flexibility to determine the optimum structure for the dependant beneficiary.
  2. Build into your estate planning a team structure of financial and legal advisers to support the executors and trustees.
  3. Consider a trust structure established in your will that protects the capital of the trust but allows income to be used to support the beneficiary.
  4. Plan for a trustee or trustees who have a relationship with the beneficiary.
  5. Plan now. The structures do not have to be established in your lifetime but a plan should be formulated so that your wishes will have effect.

 

Claire Williamson is a Solicitor, Estate Planning at PricewaterhouseCoopers in Sydney.

RELATED ARTICLES

Six common estate planning errors

Disability advice: the niche that’s gone mainstream

banner

Most viewed in recent weeks

Are you caught in the ‘retirement trap’?

Our retirement savings system is supposed to encourage financial independence but there is a ‘Retirement Trap’ due to the reduction of age pension entitlements as assets and income rise.

The power of letting winners run

Handling extreme winners is a complex task. Conventional wisdom such as “you never go broke taking a profit” often leaves a lot of money on the table as strong growth stocks continue to run.

Tony Togher on why cash isn’t just cash

An active manager of cash and fixed interest funds can achieve higher returns than the cash rate through a selection of other securities while managing both liquidity and income for clients.

NAB hybrid: one says buy, one says sell, you decide

Differences of opinion make a market, and hybrid specialists disagree on the likelihood that NAB will call one of its hybrids early. It makes a major difference to the expected return on NABHA.

Watch your SMSF’s annual return this year

The best way to preserve your SMSF’s favoured status is to make sure the fund’s annual return reaches the ATO on time. There are new rules this year that every SMSF trustee should know.

Worshipping at the altar of alternative assets

Investors worried about an overvalued sharemarket and low interest rates on term deposits and bonds are focusing on alternatives. What are they and how are they used by leading asset allocators?

Latest Updates

Interviews

Kunal Kapoor on different paths to investor success

The Morningstar CEO on democratising investing, why saving in your youth is crucial, and why most investors care more about paying off their debts than comparing their results against benchmarks.

Investment strategies

Do sin stocks really give your portfolio the edge?

Should sin stocks, those companies who engage in activities that are considered unethical or immoral, be excluded from a portfolio, or would this compromise potential performance?

Economy

What is the likely effect of COVID-19 on the Australian economy?

Our close links to China mean the impact of the virus could tip the local economy into recession and certain sectors such as resources, education and travel will be harder hit than others.

Insurance

Poor pricing of life insurance products and the impact on Australians

The use of discounted pricing by insurers to attract new business is unsustainable and leaves existing policyholders on higher premiums for what is essentially the same product.

Retirement

Spotting signs of trouble in a retirement portfolio

Do you risk paying a lot of tax in accumulation phase? Or, if you're in retirement phase, do you face the risk of outliving your asset pool? Two key things to consider in the low-rate world of today.

Sponsors

Alliances