Testamentary & Super Proceeds Trusts for Professionals & Executives
Estate planning is about ensuring (when you’re no longer here) your assets are distributed to those you care about most and in a manner that will leave them better off or able to continue their lifestyle in the manner you want for them. To achieve a ‘seamless’ estate plan, executives, professionals and business owners need to consider legal, tax and financial planning matters as well as Testamentary and Super Proceeds Trusts.
Addressing what happens when you die can be a difficult but necessary discussion. Complexity and lack of time often contributes to executive professionals failing to get their estate plan and personal affairs in order.
Shoring up your estate is among the most important steps that can be taken to protect your family and maximise what can be considerable wealth and assets accumulated over the course of your career. This can include establishing Testamentary and Super Proceeds Trusts in your will.
A Testamentary Trust activates when you pass away. Often set up by parents who wish that upon their death, their children are placed in the best possible financial position, while ensuring their hard-earned money and assets are not squandered or whittled away by other external factors.
Most Testamentary Trusts are “discretionary”. This affords the Trustee (the person elected to care for and manage the trust) flexibility to deal with the assets and make decisions about to whom funds will be distributed including children, as and when required.
This is particularly necessary for beneficiaries who may not be able to look after their own affairs, such as infant children, those with intellectual disabilities, spouses who may be unable to manage their own financial affairs or beneficiaries affected by drug dependency, gambling or other circumstances that may make them prone to misusing inherited funds or assets.
Testamentary Trusts also protect money and assets should a beneficiary be exposed to entrepreneurial or high-risk business matters that are likely to attract legal action or if they are involved in bankruptcy, divorce or family court proceedings, particularly involving property.
Similarly, a Super Proceeds Trust is established in a will.
Your superannuation will likely be a significant portion of your estate, which can be vulnerable to unnecessary tax liability or claims by third parties including ex-spouses if appropriate steps are not considered and implemented.
This is usually achieved by way of a binding death benefit nomination allocated to your “legal personal representative” that directs your superannuation through your estate and into the Super Proceeds Trust.
In alignment with legal, tax and financial advice this type of structure allows flexibility for Trustees when decision making.
Super Proceeds Trusts are particularly beneficial when there are multiple dependants, as superannuation proceeds can be divided between each of them at the Trustees discretion.
Overall, the key benefit of Testamentary and Super Proceeds Trusts is the flexibility available to Trustees when distributing money and assets to beneficiaries.
As mentioned at the outset, vulnerability to unnecessary tax is a considerable disadvantage when trusts are not in place. However, other important matters to consider include claims made by wayward family members or children and other beneficiaries who do not have the maturity to manage large sums of money or make informed inheritance decisions.
However, there is also a case for surviving spouses, who due to the nature of the trust, may not have the freedom to choose how cash and assets are distributed on behalf of dependants of the estate.
Will and estate planning is complex by nature, and it becomes even more complex for high earners who accumulate significant wealth and assets. For executive and professionals whose careers can involve living and working overseas, there can be further complexities relating to foreign laws and tax obligations affecting overseas assets.
Importantly, your will and estate plan need to align and integrate strategies and solutions across legal, tax (often international tax), accounting and financial planning matters. For executive and professional personnel working in pressure environments we understand this can present issues due to your inherent lack of time for attending to personal administration.
However, complexity should not deter you from taking action. It should also highlight the need for informed and collaborative multi-disciplinary advice, often not available from many general law firms.
Next steps…
Your next step is simply to resolve to take action and implement a will and estate plan or review them if they are already in place but more than a few years old. It is also important to update your will and estate plan if you have been through a significant life event such as marriage, divorce or having children.
To do this please contact Robert Lamb, on +61 (0) 7 3007 2000 or email contact@executivestrategies.com.au
Executive Strategies is a solutions hub that provides integrated financial, legal, property and accounting & business advisory services for executives, professionals and business owners.
The information in this article is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate, we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.
