What happens to your assets once you pass away is quite often overlooked, and understandably so. Planning for one’s death is not the most pleasant of past times. But to think of it another way, you have worked hard your entire life building and preserving what you have. How would you then feel knowing that a significant portion of it was lost because you failed to plan appropriately whilst you were alive?

Intergenerational wealth transfer not only deals with what happens once you are gone, but also deals with educating your beneficiaries –usually your children – as to how your affairs are structured and allowing them to learn more about aspects such as investing. Educating children as to your estate planning intentions can ensure there are no unexpected surprises when you go.

Being open and honest with your children prior to your death can avoid potential family disputes that quite often end up in court.

You may now be asking yourself –“So what will happen to my assets when I pass away?” Good question. Firstly, it is best to break up your assets into two categories, estate assets, and non-estate assets.

Estate Assets – All assets owned personally, e.g. shares and property. When you pass away these assets will flow through to your estate and be distributed according to your Will. A Will is a legal document that sets out how your assets are to be divided. You would be amazed at the number of people with significant assets do not have a Will. If you do not have a Will and you die, your assets will be divided up by the courts and may not represent your intentions.

A tip – If you have significant assets flowing through to your children, you may want to ask your solicitor if your Will provides for a testamentary trust establishment. This allows your Executor to contribute assets into a trust structure, most commonly for asset protection. This means in the event of a marriage breakup the estranged spouse is not entitled to a child’s inherited assets.

Non-estate Assets – Assets owned under separate structure. The most common asset here is superannuation. Super is not actually your asset, it is an asset of the trustee of your super fund, therefore, when you die, your super can be distributed at the trustee’s discretion.

Within superannuation, your balance is divided up into ‘taxable’ and ‘non-taxable’ benefits. Put simply, the more ‘non-taxable’ benefits you have at death the less tax your fund will pay prior to distribution. All employer (9%) SG contributions paid into your fund over the course of your working life are ‘taxable’ contributions, whereas all after tax money placed into super is counted as ‘non-taxable’. At death, all ‘taxable’ benefits paid to non-dependents will be taxed at 16.5%.

Many strategies are available to convert ‘taxable’ benefits to ‘non-taxable’ and in turn reduce tax after death and it is advised you seek professional advice to find out more.

Andrew Hewison is a certified Financial Planner with Hewison & Associates Wealth Management.

andrew@hewison.com.au 9682 1900