Estate Planning – Keeping the Children Happy

Estate planning can be quite a complex area particularly in modern life where you have an increasingly diverse range of family circumstances, such as “blended families” and where you have assets owned through other entities.

 

If you have children, the most common and simplistic approach taken in estate planning is, to leave your estate equally among your children. However, as blended families become more common, balancing your estate planning needs and wants makes the concept of “simple” estate planning more challenging.

When considering your beneficiaries, it is important to consider the various situations of the beneficiaries you intend to benefit. It is not always the case that an equal distribution is an equitable distribution. There may be some family members who are in far more need that other family members and in some situations it may be more appropriate to provide more for these beneficiaries than for others.

 

Wills are often challenged by children on the basis that inadequate provision has been made for them. In determining what is considered adequate provision for a child, the court will have regard to the particular circumstances of each case. Where a will maker wishes to minimise the risk of a family provision application, he or she will often take measures to reduce the size of their estate on their death, thereby limiting the assets that can be subject to a family provision order.

 

It is important when undertaking estate planning that you consider, the various situations of your beneficiaries, any taxation consequences of an intended gift and whether assets should be held in a protected environment. You may also consider as part of your estate planning, the need to transfer some of your assets into different structures to protect those assets against spendthrift beneficiaries or drug / alcohol dependant beneficiaries. This may include acquiring future assets through a discretionary family trust, rather than in your own name.

 

The advantage of utilising the discretionary family trust is that the beneficiary does not have control over that asset and accordingly, the asset is protected from wastage. A further advantage is that the assets of the discretionary family trust do not form part of your estate and therefore are protected from challenge by a disgruntled beneficiary. However, as can be seen from the Rinehart family saga, children (who are beneficiaries of the family trust) may also dispute decisions made by the trustee whilst you are still alive.

 

The succession to discretionary family trusts needs to be carefully considered, properly documented and sensitively communicated. Ultimately, it is important to ensure that there is a balance between your needs and wants when undertaking estate planning.