Succession and Estate Planning - Pitcher SEP 2018.pdf · Succession and Estate Planning David...

Succession and Estate Planning

David Foulds

– Director - Estate Planning and SuperannuationAndrew Gray

– Director – Estate Planning and Business Succession

CPN Road Show 2018

Today’s AgendaSuccession and Estate Planning

2

Introduction and WelcomeDisclaimer

1

Estate PlanningWhat is It?

2

Estate PlanningHot Topic - Superannuation

3

Estate PlanningKey Risks and Pitfalls

4

Succession PlanningBusiness Transition and the Family

5

Questions and AnswersRaise your thoughts

6

Horizon – by Pitcher PartnersFor additional resources

7

Thank youThank you for attending

8

Introduction and WelcomeSection One

4

Any information provided by us is only our opinion based on our understanding of the current law, administrative practice and our knowledge of particular circumstances and limited understanding of the relevant facts. Any such information will not necessarily be beyond challenge by the taxation authorities or others. Accordingly, we do not accept responsibility to anyone for any loss suffered in connection with the provision of information and make no warranties or representations about the information we provide. If you require greater certainty, we recommend the seeking of a formal engagement of our professional services which understandably will allow us to better consider the facts and the various issues.

Introduction and WelcomeDisclaimer -

Estate PlanningSection Two – What is It?

• Making a plan now to protect and pass on your wealth in a way and at a time that you want.

• 30 years ago, estates were much simpler

• Your Will is limited• Does not deal with wealth in Trusts or

Superannuation, or potentially assets overseas

Estate Planning – what is it?

6

• Estate Planning is becoming increasingly more about passing on control of assets, rather than ownership.

Estate Planning – what is it?

7

• Client addresses “What?” they want

• We address “How?” to achieve

Estate Planning – what is it?

8

Estate Planning – Hot TopicSection Three - Superannuation Post 1 July 2017

A key reason to review a client’s Estate Plan

Long Time Practice

• Keep money in super for as long as possible

• Pay out benefits to the estate of the last to die

All Changed Now

Superannuation in Estate Planning - post 1 July 2017

10

• $1.6 Million pension Transfer Balance Cap

• Caps level of tax free earnings in the Fund

• Death Benefit Pensions count towards the recipients Transfer Balance Cap

On death, forces benefits in excess of the Cap out of the superannuation environment

Superannuation in Estate Planning - post 1 July 2017

11

Tom ChristineAged 70 72

Reversionary Pensions

BDBN to spouse

Super Comprises:

Pension $1.6M $1.6M

Accumulation $3.4M $2.6M

Superannuation in Estate Planning - post 1 July 2017

12

• First dies

• Deceased’s pension passes to the survivor

• Survivor commutes their own pension

• Deceased’s accumulation paid out as a lump sum

• Death Benefits are always Death Benefits

• How / Why?

Superannuation in Estate Planning - post 1 July 2017

13

Tom dies - Tom ChristineReversionary Pension $1.6M +$1.6M

Commutes own Pension -$1.6M

to Accum

+$1.6M

Accumulation $3.4M $2.6M existing

=$4.2M

Death Benefit out of Fund

-$3.4M

to Christine per BDBN

Superannuation in Estate Planning - post 1 July 2017

14

Money pushed out of super earlier

To surviving spouse – tax free

Security vs Tax

Superannuation Proceeds Trust

(form of Testamentary Trust, created by the Will)

‒ Receives death benefit, - tax free

‒ Surviving spouse the only capital beneficiary,

‒ Range of potential income beneficiaries??

‒ Remaining capital to surviving spouse’s estate.

Superannuation in Estate Planning - post 1 July 2017

15

Binding Death Benefit Nominations

• Provides certainty to direct Trustee

APRA Funds

• Certain conditions apply – includes Lapsing in 3 years

Reversionary Nominations – probably SMSF’s

Estate Planning – certainty

16

Estate PlanningSection Four – Key Risks and Pitfalls

• Ownership of key assets

• Sophisticated Structures

• Control of entities

• Loan balances

• Binding Death Benefit Nominations

• Digital Assets

• Powers of Attorney

Estate Planning – key risks and pitfallsTopics to be discussed

18

• Wills pass Ownership of your assets,

• Shares in Companies or Trustee Companies etc

• If assets are owned by Trusts,

• You can only pass on Control of the Trust

Estate Planning – key risks and pitfalls

19

Consider succession of:

Trustee day to day control of trust assets

Appointor can remove and appoint the trusteeUltimate Controller

Guardian approves certain decisions of trustee or appointor Blocker

Are these successors to be individuals or perhaps a company?

Estate Planning – key risks and pitfalls

20

• Check the rules in each Trust Deed

• Specific rules to vary Appointor

• Rules to vary Trust Deed

• Vesting Date?

Estate Planning – key risks and pitfalls

21

Dealing with Loan balances

• How will loan balances be unwound / repaid?

• If calls are made on the loan balances, do assets have to be sold?

• Settle loan on the Trust

• Other complications?

Estate Planning – key risks and pitfalls

22

Binding Death Benefit Nominations

SMSF

Must be Drafted correctly in accordance with the Fund Deed

Are the BDBN Current?

Do they Lapse?

Reversionary Nominations – 12 months to arrange affairs

Does the BDBN or Reversionary pension prevail?

Check the Deed

Estate Planning – key risks and pitfalls

23

Digital Assets

• Listing of your User Names and Passwords

• Safely Stored or Encrypted

• Computers, Tablets, Mobile Phones

• Email access

• Banking – Personal and Business

• Memberships and Subscriptions

Estate Planning – key risks and pitfalls

24

Your online footprint

• Social Media

• Online cloud Photo Albums and their storage

• Websites – Domains, Hosting

• Digital Libraries for Music, Books, Movies

How do you access, close or unsubscribe?

Consider a clause in the Will with explicit instructions

Estate Planning – key risks and pitfalls

25

Powers of Attorney

Personal Matters (previously Guardianship)

Financial Matters

or both

Medical Treatment – one person at a time

Enduring Powers of Attorney

• continues after you lose mental capacity

Estate Planning – key risks and pitfalls

26

Powers of Attorney

Take care as to who is granted the Attorney

• alternatives?

Not effective for decisions relating to:

Directorships, Appointors, Guardians, Trustees, etc

Estate Planning – key risks and pitfalls

27

Complex Issues addressed by:

Framework comprising:

• Understanding the client’s desired outcomes

• ‘audit or confirmation’ of the wealth, ownership and control

• Thorough, logical, documented Estate Plan

• Easily read with reasoning

Estate Planning – complex range of issues

28

Succession PlanningSection Five – Business Transition and the Family

30

Succession PlanningTransition of Wealth is Upon Us

Source: Succession ResetFamily Business Succession in the 21st Century, 2014

31

• Managing the needs of each individual

• Objectives of the Succession Plan?

• Retention of the Business in the Family?

• Sale of the Business and Manage the Wealth?

• Meet Family objectives

• Meet Commercial objectives

Succession PlanningMeeting Objectives

32

Family Constitutions / Family Charter

Preamble

• Family vision and values

• Family membership - definition

• Family commitment

• How the family members and company supports family vision and values

• How the family will act and make decisions

Source: OMBI

Succession PlanningFamily

33

Family Council

• Be the Owner

• Formal scheduled meetings

• Clarifies the boundary between family and business

• Helps create an overarching family plan

• Who are the members?• family head, during their lifetime

• member(s) from each family

• independent external advisor with a potential casting vote

• Facilitates education of family members

Succession PlanningFamily

Go ahead. Don’t hesitate.Q & A

34

Questions & Answers

Bringing the right team togetherProfiles

David Foulds

E david.foulds@pitcher.com.au

T 03 8610 5353

Director – Estate Planning and Superannuation

Andrew Gray

E andrew.gray@pitcher.com.au

T 03 8612 9520

Director – Estate Planning and Business Succession

35

Horizon by Pitcher Partners offers a range of complementary succession, wealth management and asset protection services to ensure that the wealth clients have worked so hard to create is passed safely to future generations. This enables clients to have the lifestyle they want whilst growing family wealth and maintaining family harmony.

Horizon – by Pitcher PartnersFor additional resources

36

Horizon – by Pitcher PartnersFor additional resources

37

Additional resources are available from:

http://www.pitcher.com.au/services/private-wealth/estate-planning

Feel free to download a PDF copy of this Presentation from:

www.pitcher.com.au/CPN-SEP-2018

Horizon – by Pitcher PartnersFor additional resources

38

Thank youFor your attention

39

Thank you!