How a testamentary trust can be used for wills and estates

Posted on 16 June 2023
How a testamentary trust can be used for wills and estates

(Feedsy Exclusive)

The significance of choosing the appropriate structure to make the protection and maintenance of your assets possible cannot be overstated. This is necessary regardless of whether you have acquired your fortune on your own or through inheritance.

In this instance, you may want to consider estate and succession planning to protect your assets and ensure some tax benefits for the beneficiaries of your estate.

One of the most effective estate planning strategies today is the use of a testamentary trust in a will.

When your estate is distributed to your beneficiaries, a testamentary trust can help with minimising capital gains tax, stamp duty, and other taxes that may be due. It can also help protect your assets from creditors, unscrupulous individuals, and the like.

 

Testamentary trusts—the basics

A testamentary trust (aka will trust) is, in simple terms, a trust that’s created according to the terms set in a will. It typically takes the form of a discretionary trust.

However, unlike inter vivos (facilitated or done between living persons) discretionary trusts, which allow for the transfer of assets and gifts while the grantor is still alive, testamentary trusts are only activated after the grantor’s demise.

Each beneficiary under your will may have a testamentary trust that is most appropriate to their circumstances. There are different sorts of testamentary trusts that can be established, such as:

  • Beneficiary-controlled testamentary trust
  • Capital-reserved testamentary trust
  • Protective testamentary trust

Benefits of testamentary trusts

Compared to typical wills, a testamentary trust offers the grantor more discretion over estate planning and distribution to beneficiaries.

Among the key benefits of testamentary trusts are:

  • Flexibility: A testamentary trust functions in a similar way to a discretionary family trust. A trustee may choose which beneficiaries get trust income as long as they are nominated in the trust. With this freedom, the trustee can choose to distribute income, capital and dividends in the most tax-efficient way. Also, in the event that superannuation funds are paid to the estate, trustees will have plenty of discretion in how to handle them.
  • Asset protection from third parties: Testamentary trusts can shield assets from possible court cases, bankruptcies, and legal actions because the trustee has the title to the trust assets (not the beneficiaries directly). A testamentary trust can offer you extra asset protection if your surviving spouse or your adult child runs a business that carries a large financial risk. For adult children, it might offer family law protection as well.
  • Tax advantages: Testamentary trusts give trustees the option to divide and distribute the trust’s income for tax planning purposes. Also, distributions from a testamentary trust will be tax-free up to the standard full exemption amount. Beneficiaries who have children aged below 18 can significantly profit from this tax planning benefit because they can use pre-tax income to pay for their children’s expenses. Moreover, any capital gain made by the executor (the person chosen to carry out the will) is disregarded by law when a capital gains tax asset is transferred from the executor to a beneficiary.

So, is a testamentary trust for you?

When it comes to estate and succession planning, it’s always better to get the input of your financial advisor and a solicitor specialising in wills and trusts.

If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.

 

 

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ATO latest scam alerts

Posted on 15 June 2023
ATO latest scam alerts

(ATO)

Be wary of emails, phone calls and text messages claiming to be from the ATO.

If you think a phone call, SMS, voicemail, email or interaction on social media claiming to be from the ATO is not genuine, do not engage with it. You should either:

Stay up to date on the latest scam alerts by subscribing to our general email updates. You will also receive updates on all new general content on our website.

Latest scam alerts

January 2023 – ATO social media impersonation accounts scam

We’re seeing an increase in fake social media accounts impersonating the ATO, our employees and senior executive staff across Facebook, Twitter, TikTok, Instagram and other platforms.

These fake accounts ask users that interact with the ATO to send them a direct message so they can help with their enquiry. The people behind these fake accounts are trying to steal your personal information, including phone numbers, email addresses and bank account information.

Our only official accounts are on FacebookExternal LinkTwitterExternal Link and LinkedInExternal Link.

The best way to verify that it’s really the ATO is to:

  • check how many people follow the account. Our verified Facebook and LinkedIn accounts have over 200,000 followers, and our Twitter account has over 65,000 followers
  • check activity on the accounts. Our social media channels have been operating for around 10 years – if it’s a newly created account, or only has a few posts, it’s not us
  • look for the grey tick next to our username (@ato_gov_au) on Twitter and the blue tick next to our name (Australian Taxation Office) on Facebook
  • make sure any email addresses provided to you end with ‘.gov.au’.

If you’re approached by an impersonation account, do not engage with them. Take a screenshot of the account, email the information to ReportScams@ato.gov.au and block the account through the social media platform’s reporting function.

July 2022 – tax refund SMS scams

We’re concerned about a high volume of SMS scams pretending to be from the ATO.

These scams tell you that you’re owed an income tax repayment and ask you to click a hyperlink and complete a form.

Clicking the link takes you to a fake ATO webpage that asks for your personal identifying information, including your credit card details.

If you receive an SMS like this, don’t click on any links. Report the scam to us.

The image below shows one example of what this scam can look like.

The real ATO will never send you an SMS with a link to log in to our online services. We’ll also never ask for your credit card details.

If you’re ever unsure whether it’s really the ATO, don’t reply. Phone us on 1800 008 540 to check.

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What we know so far about the federal budget

Posted on 8 May 2023
What we know so far about the federal budget

Paul Osborne
(Australian Associated Press)
 

WHAT WE KNOW ABOUT THE 2023 FEDERAL BUDGET SO FAR

Treasurer Jim Chalmers will deliver his second federal budget on May 9, focusing on cost of living relief while ensuring spending does not add to inflation.

BUDGET POSITION

* Deficits likely over the next four years. Treasury says persistent deficits of around two per cent of GDP are projected. The deficit for 2022/23 was $11.2 billion at the end of March, against the October budget prediction of $33.4 billion.

* Government debt is sitting on just under $900 billion.

* Treasury expects to see a small increase in real wages in 2023/24, reflecting the combination of rising wages and falling inflation.

* Growth to slow to 1.25 per cent in 2023/24 as cost-of-living pressures and rising interest rates increasingly weigh on consumption.

* Net overseas migration numbers are being boosted by international students and working holiday makers.

* Several payments are growing faster than the economy including interest on government debt, and growing spending on the NDIS, health, aged care, and defence.

* Expecting to see initial work on improving the cost effectiveness and productivity of government services and government-funded services, to help the budget bottom line.

SPENDING

* Defence funding reshuffle following the Defence Strategic Review and AUKUS submarines deal.

* $3 billion in energy bill relief, including deals with each of the states and territories. This will be helped by the gas market intervention which Treasury expects to ease price rises to 18 per cent and four per cent over two years (rather than 20 per cent in both years).

* Possible boost in support for single parents and the older unemployed.

* Large investment in clean energy.

* Support for small businesses.

* Aged care budget to rise from $24.8 billion to $29.6 billion, with the figure hitting $35.8 billion by 2025/26.

* Child Care Subsidy to cost $55.31 billion over four years.

* $535.3 million towards the nine National Collecting Institutions – such as the National Library and National Gallery of Australia – over four years.

* $163.4 million for the Australian Institute of Marine Science.

* Medicines changes – from September 1, general patients will be able save up to $180 a year if their medicine is able to be prescribed for 60 days, concession card holders will save up to $43.80 a year per medicine.

* $2.2 billion for Medicare reforms, including incentives for after-hours doctors.

* $737 million for programs to deal with harm caused by tobacco and vaping products.

* Extra $262.3 million for national parks, including Uluru.

* $3.7 billion extra for the five-year National Skills Agreement, taking total spending to $12.8 billion.

* $2 billion for more social and affordable housing via the National Housing Finance and Investment Corporation.

* $400 million for defence force retention bonuses.

* Funding for the new National Anti-Corruption Commission and a standalone privacy commissioner.

* Review of $120 billion infrastructure project list.

TAX

* $3.3 billion increase in tobacco taxes over three years, to pay for health programs.

* Expected changes to bring in more petroleum resources rent tax revenue.

* Multinational tax avoidance crackdown continues.

* Commodity price estimates to be upgraded, having been set at a very conservative $55 a tonne for iron ore.

* Income and company tax receipts to be higher than expected.

Posted in:News  

Importance of Discussing Inheritance Planning With Your Family

Posted on 5 May 2023
Importance of Discussing Inheritance Planning With Your Family

(Feedsy Exclusive)

While most people write wills, very few families discuss inheritance. Parents avoid discussing inheritance planning with their children due to the subject’s sensitivity.

However, avoiding the conversation does more harm than good. For example, poor wealth management by heirs can lead to business collapse.

Here are some reasons why you should discuss inheritance planning with your family.

To Prevent Conflict

The risk of conflict is higher when you fail to communicate how you want your heirs to run your estates. While the will specifies who should get what, you may need to explain how you want them to run the business.

Your heirs may also experience unforeseen disputes if they are not aware of your share of the business and who should take the voting power.

To Protect Juvenile Heirs

Inheritance discussions with family help you devise plans to protect the minors entitled to your estate.

For example, you can guarantee your kids’ education through education insurance or a life insurance policy.

Your discussions can also help everyone understand when they can receive their inheritance and how they will receive it.

To Express Your Expectations

Since inheritance planning goes beyond property division, your family will know how you expect them to run your estate once you are gone.

Your heirs can also prepare for the new responsibility in advance instead of experiencing sudden changes.

To Encourage More Discussions

While it may seem difficult, talking about inheritance with your family is a gesture that the topic is open for discussion. So, your heirs can ask the questions they have about the subject.

These conversations also create a sense of ownership among your heirs, increasing their morale when under your leadership.

To Avoid High Taxation

Estate planning discussions can help you devise ways to minimise the tax burden for your heirs. The approach you choose depends on your situation.

Since your kids and spouse are the beneficiaries of your property, you can involve them in inheritance planning to simplify the process. You also get an opportunity to express your expectations, ensuring that your legacy continues after you are gone.

If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.

This information does not take into account the objectives, financial situation or needs of any person. Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation or needs.

Posted in:News  

Payment change set to boost superannuation by thousands

Posted on 4 May 2023
Payment change set to boost superannuation by thousands

Dominic Giannini and Poppy Johnston
(Australian Associated Press)

The Australian Taxation Office estimates $3.4 billion in super was unpaid in 2019/20.

The ATO’s resources will be boosted to crack down on compliance and it will have a new target for recovery payments.

Super Consumers Australia said the decision would better enable people to manage their money and ensure they are paid what they are owed.

“Our recent survey found the majority of people don’t realise they can report non-payment to the ATO and that it is the regulator’s responsibility to investigate,” the organisation’s director Xavier O’Halloran said.

“We encourage people to report unpaid super to the ATO if they can’t resolve the issue directly with their employer.”

The Association of Superannuation Funds of Australia said it was important employers were held to account.

“Left unaddressed, the issue of unpaid superannuation guarantee contributions comes at a significant cost to people’s retirement,” deputy CEO Glen McCrea said.

“For example, a 35-year-old on $65,000 per year who misses out on SG for two years would be around $24,000 worse off in today’s dollars at the time of retirement.”

Chair of the Council of Small Business Organisations Australia, Matthew Addison, said payday super would lift processing costs for all parties, including super funds.

He told AAP that would ultimately push up administration fees for employees and eat into super balances.

Mr Addison said employers would bear the cost of additional payroll software, as well as more frequent transactions, through the mandatory clearing system used to send money to super funds.

The council is urging the government to consult with small businesses on a workable system that won’t lift processing costs or unfairly punish compliant employers for the poor behaviour of a few companies that deliberately avoid paying super.

The council would also prefer businesses with fewer than 15 employees to choose monthly super payments and opt for more frequent payments if desired.

However, Mr Addison welcomed the long lead-up time, which he said would give businesses a chance to adapt to more frequent payments.

 

Posted in:News  

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