It’s all too easy to forget estate planning consequences when clients have complex assets or financial advice requirements. But financial planners that do routinely consider estate planning implications when providing advice leave their clients in a much stronger position in terms of the way their wealth is managed down the track.
Scott Hay-Bartlem is a partner in Brisbane law firm Cooper Grace Ward. A specialist in tax-effective estate planning, which was the topic he spoke to at this week’s FPA conference, he says the most important thing for planners to remember about estate planning is that there is no magic solution that be can consistently applied to all clients.
“Every estate planning solution has to be tailored to the client’s circumstances. There are many common tax and structuring decisions that have important estate planning consequences. In fact, many day-to-day activities planners do are fundamental estate planning decisions,” says Hay-Bartlem.
A simple example is a super fund’s transition from accumulation to pension phase, when an income stream will commence from the super fund.
“Whether the income stream is reversionary or not is a really important estate planning decision. Another issue that has estate planning consequences happens when the client is owed money from a family trust; that changes the estate planning outcome for the client,” he says.
Assets in family trusts do not form part of an estate, but amounts owed to a deceased client are part of an estate. There are also estate planning consequences of setting up a family trust and buying assets to place in it.
“Buying assets is a good reason for having a trust but, as well as thinking about any tax and liability issues, estate planning impacts must also be addressed. Contributing funds to the trust and how much the client is owed as a result also has an impact on estate planning,” says Hay-Bartlem.
Other common situations that have estate planning consequences include purchasing a house and whether the ownership structure should be tenants in common or joint tenants. Which spouse owns the interest in any equities in which the couple has an interest and how control of assets passes to the next generation, as well as power of attorney decisions should also be factored into estate planning.
The main message for planners is to always consider longer-term estate planning consequences when providing advice, alongside other considerations such as the tax and other implications of any wealth management decisions.
