Most of us would rather not think about the death of a loved one, although, like paying tax, it is inevitable. But what happens when you are a beneficiary in a deceased estate?

Someone will be appointed to gather the assets of the deceased person pay their debts and distribute the balance amongst their beneficiaries. If they had a will, the executor appointed in the will does the job according to the deceased’s wishes. If they died intestate (without a will), an administrator is appointed according to the formula set out in the relevant state’s Succession Act.

As there are no death duties in Australia, death itself does not incur any extra tax. However, if you inherit an asset and then sell it you may be liable for Capital Gains Tax (CGT). One of your aims as a beneficiary will be to minimise or avoid this tax.

The family home
Normally the family home is exempt from CGT. The same applies if you inherit a family home provided you sell it within two years. Outside of this period, you would be assessed on the increase in value since the date of death.

Valuing assets
If you inherit assets such as property, shares and other investments, you may be liable for CGT if you sell them. Just how much depends on when they were bought. You can save money and hassles by finding out purchase price of the assets or their value at the date of death.

Estate tax and your tax
In the year of death, two tax returns are required – one for the deceased person up to the date of death and one for the estate for the rest of the year. Both tax returns qualify for the full tax-free threshold. Less tax may be due if the estate sells an asset and gives you the cash rather than you getting the asset and selling it.
If you are a beneficiary of a substantial estate it will pay you to take an active interest in how the estate is administered. We can guide you through this minefield safely.

Footnote:
Do you have an up-to-date will? Remember dying intestate means state laws decide who gets your money and your beneficiaries may be inconvenienced by delays and disruption.

For more Financial Planning advice, contact us at Leenane Templeton on 02 4926 2300

Sources:
Australian Tax Office website www.ato.gov.au Deceased estate and capital gains tax

The post Managing an inheritance appeared first on Newcastle Financial Planners & Financial Advisors.

Basically, you can do whatever you like with your money while you’re alive. But what control do you have over your assets when you die? It’s an interesting thought that most people don’t like to dote on, however with more wealth being created through superannuation funds, it’s a thought that will require action at some stage – and the sooner the better.

It has been estimated that members of the baby boomer generation will pass about $600 billion to their children or grandchildren over the coming decades. This wealth will in some cases come in the form of family businesses moving to the next generation. In others, it might be more passive investments, such as shares, property and cash. 

Each of us might only have control over a small piece of this inheritance bonanza. Nonetheless, how much thought have you given to what it will mean to your beneficiaries and how they'll remember you? 

Preparing your legacy

The billionaire US investing guru, Warren Buffett, has some pretty clear views on the legacy he wishes to leave to his children. He has been quoted as saying that he wants to leave them enough money so that they will think they can do anything with their lives, but not so much that they can afford to do nothing.

The first step of course is to determine what assets you have that might form part of your financial legacy. Shares, property, superannuation and life insurance can be treated very differently under estate laws, so it's crucial to have this checked by your trusted advisers.

Next, you might want to think about the opportunities and values you want to leave to your beneficiaries. Do you want to "rule from the grave", or let them make their own decisions about how they tackle life's challenges?

Perhaps other bequests — to charities, for instance — will be your way of reflecting both personal gratitude and your preferred value system.

Who can help?

On the practical side, there are various professionals to help you to create your personal legacy. For example, enlisting a solicitor to draft your will and related documents is crucial. And we can advise you on superannuation and investment matters.

It might be a good idea to take time out to reflect on these important issues. Don’t wait until you’re sick or old to plan your legacy. Start now and plan to have the time of your life so you’ll have something memorable to leave behind!

Sources:
Musgrave, R. "Values based advice: How to create a living legacy", Australian Journal of Financial Planning (Volume 3, Number 1, 2008)
www.familymoneyvalues.com “What does family legacy mean to you?”

Call (02) 4926 2300 or email us. 
To discuss your financial future and that of your legacy, please do not hesitate to contact the team at Leenane Templeton. 

The post A legacy isn’t just about money appeared first on Newcastle Financial Planners & Financial Advisors.