Estate planning - keeping the children happy
Estate planning can be quite a complex area, particularly in these times where we see an increasingly diverse range of family circumstances, such as blended families, surrogates, and where the assets are owned through other entities such as companies and trusts.
If you have children, the most common and simplistic approach taken in estate planning is to leave your estate equally among your children.
As blended families become more common, balancing your estate planning needs and wants makes the concept of “simple” estate planning more challenging.
When planning who you want to leave your assets to, it is also important to consider the circumstances of each 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 than 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 adult children on the basis that inadequate provision has been made for them.
In determining what is considered adequate provision for an adult 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 additionally worth considering the other life circumstances of your beneficiaries, such as any taxation consequences of an intended gift or whether assets should be held in a protected environment, perhaps to isolate from a child’s future relationship split.
You might also need to consider if some of your assets should be held in different structures, such as a testamentary trust, to protect against spendthrift beneficiaries or drug/alcohol dependant beneficiaries.
In that way the assets can be preserved for longer, and perhaps for greater benefit of your beneficiary rather than being blown away quickly.
Your planning objectives may also include acquiring future assets through a discretionary family trust, rather than in your own name.
The advantage of using a discretionary family trust is that the beneficiary does not have direct control over the assets.
A further advantage is that the assets of the discretionary family trust do not form part of your estate and therefore are protected from any 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 while you are still alive.
The move to a discretionary family trust 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.
Katie Worsnop is an Associate at de Groots wills and estate lawyers specialising in estate litigation, estate planning, and estate administration.