A complex estate plan
The circumstances
Mark and Lucy are a blended family, they have one child together and each have a child from a previous relationship. They came to us looking to create an estate plan to ensure that when one of them passes away, the survivor is looked after and then when the survivor passes, the three children will benefit equally.
Lucy has a business which she operates through a discretionary trust, while Mark’s business is operated through a company. Mark’s business premises are owned through a self-managed superannuation fund, which only Mark and Lucy are members of.
Capital Five’s considerations
When assisting Mark and Lucy with their estate planning we took the following key considerations into account to create a comprehensive succession plan.
Business entity structure & succession
A key consideration for the company is who holds the positions of control. We needed to understand who the directors and shareholders were and who would take control in the event of death or incapacity. This included reviewing the company’s constitution which governs the management and control of the company.
Trust beneficiaries & control
For the trust, we needed to determine who is the trustee of the trust and who holds the position of appointor. Mark and Lucy had to consider who they would like to benefit from the trust and in what portion. This raised other questions including, did they want the trust to continue or be terminated and if it was to continue, who would remain in control?
Wealth succession
It was important to discuss how Mark and Lucy would like the survivor to benefit from the family wealth. Did they prefer access to income and capital, or limited access to income?
Executor appointments
Mark and Lucy needed to consider who would be appointed as executors of their wills and whether their wills should provide for testamentary trusts.
Superannuation
We set up binding death benefit nominations to ensure that superannuation death benefits pass in a tax-effective and appropriate manner to family members.
Risk of challenge
We acknowledged the risk of the estate being challenged if there was not an equal division amongst the children.
By addressing these considerations in their estate planning, Mark and Lucy were able to feel secure that their wealth will be sufficient for the survivor, in the case of one of them passing, and that their three children would benefit equally from their assets. Furthermore, we minimised the tax implications and created an effective estate plan that will allow their wishes to be carried out in a legally binding manner, whilst managing the risk for disputes among the three beneficiaries.