Good to Great: How to Scale With an Outsourced CFO

Transcript:

How Do I Reduce Tax in Estate Planning?

Tax is an essential consideration in any effective estate plan. By taking steps to minimise the taxes your beneficiaries will pay upon your death, you’ll be able to get the most out of your assets.

Let’s look at two strategies you can use to minimise tax in estate planning.

First, you can consider creating a trust. Trusts can be effective estate planning tools for many reasons. They can provide for children with disabilities, protect assets during bankruptcy or divorce, and ensure that assets pass to children if your surviving spouse remarries.

Trusts can also help you reduce your tax burden, especially when it comes to capital gains and income taxes. Creating a trust isn’t as hard as it sounds, but it’s a good idea to talk with your adviser about how it will fit into your estate planning. There are many ways to structure a trust and you’ll want to customise yours to meet your specific needs and obligations.

Actual death duties no longer exist in Australia, but that doesn’t mean that your beneficiaries won’t have to pay taxes on your estate. For example, if your heir takes your inheritance in his or her personal name, then income generated from the inheritance will be taxed at your heir’s personal tax rate. On the other hand, if a testamentary trust assumes the inheritance, there can be significant tax savings.

The second way to reduce tax in estate planning is by seeking legal advice regarding your estate. After all, the costs and benefits of particular estate plans can vary widely from one person to the next. For example, let’s say you have a family business. Your tax implications will be different than taxes for a non-business owner. Capital losses and family debts can also affect taxes substantially.

By finding the right legal and financial structures, you’ll be able to reduce your taxes and create an effective estate plan. As you talk with your adviser, you should also revisit your insurance, charitable gifts, and superannuation. All of these things can have an effect on your taxes, so take a holistic approach to your estate and retirement planning.