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Estate Planning and the Risk Adviser

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1 Estate Planning and the Risk Adviser
Michael Fitzpatrick Estate Planning and the Risk Adviser Speaker: Michael Fitzpatrick CFP Company: Clarendene Estate Planning Lawyers Date: November

2 Seminar Outline The Art of Estate Planning
Michael Fitzpatrick Seminar Outline The Art of Estate Planning Estate Planning – whose job is it? The 3 Big Myths The 4 Main Death Taxes The Role of the Risk/Financial adviser 6 Classic Estate Planning Strategies Case Studies

3 What is Estate Planning
Michael Fitzpatrick What is Estate Planning Structuring affairs during your lifetime to limit legal claims and obtain taxation efficiency Make provisions for incapacity Pass Wealth on death securely to intended beneficiaries.

4 Protecting from the Grave
Michael Fitzpatrick What is Estate Planning Ruling from the Grave or Protecting from the Grave

5 Estate Planning on Death
Michael Fitzpatrick Estate Planning on Death The transfer of wealth from a deceased to beneficiaries Tax effectively with Asset Protection for beneficiaries and Sensitively to the needs and welfare of the beneficiaries

6 Michael Fitzpatrick Estate Planning Whose job is it?

7 4 aspects of Estate Planning
Michael Fitzpatrick 4 aspects of Estate Planning 1st Aspect Making arrangements to limit the financial effect of legal claims that could be brought against them during their life This involves # appropriate insurance cover # proper choice of tax & asset protection structure

8 How to stop some scumbag and their “Gold Digging” Lawyers
Michael Fitzpatrick A$$ET PROTECTION! How to stop some scumbag and their “Gold Digging” Lawyers taking your Hard Earned A$$ets away from YOU! And ... legally reduce your tax at the same time. Today no one is safe without 'BULLETPROOF ASSET PROTECTION‘. AUSTRALIA ONLY - WARNING! How to Protect Your Assets from the Litigation Explosion that's gripping Australia: Asset Protection Specialists Discretionary Trusts Company Formation Tax Savings If you own a business, cars, real estate, shares, cash - anything of value - you must read the following message very carefully. Any day now it could ALL be taken away from you, whether you like it or not. You see, Australia is undergoing a litigation explosion! And if you have any assets of value, you could be a target.

9 "What will YOU Do When All Your Personal Assets are Seized
Michael Fitzpatrick Don't think it can happen to YOU? Well, consider this: Did you know that New South Wales & Queensland are the second and fifth most litigious states in the world on a per capita basis? (Following California in the USA.) And they are on the rise. A lawsuit from a totally unexpected source can wipe out everything you have worked so hard to accumulate. In one fell swoop, your lifetime of assets could become prey to some scumbag who wants to make YOUR assets HIS assets. If you don't have many assets or if your assets are well protected - he won't follow through. In fact, the situation has become so bad in Australia that you don't even have to do anything wrong for a subpoena to arrive on your doorstep with YOUR name on it, demanding that you appear in court! Notice, I didn't say if you did anything wrong. That's got nothing to do with it! It has everything to do with money and how much money a litigant can squeeze out of you! This is vital information for you to know because this is exactly what a lawyer will look for before he slaps a subpoena on you! And if you think insurance will cover you, then I have a slightly used Harbour Bridge For Sale! Look how hard it is for home owners to claim reimbursement for water damage … what do you think they say when you try to claim something really expensive? And a lot of things insurance simply doesn't cover - plus we all know how some insurance companies try to wriggle out of claims. "What will YOU Do When All Your Personal Assets are Seized to Satisfy Some Scumbag Ripping You Off and Suing You?"

10 4 aspects of Estate Planning
Michael Fitzpatrick 4 aspects of Estate Planning 2nd Aspect Make funding and legal provisions for incapacity This involves # appropriate insurance cover # Power of Attorney and # Medical Guardianship

11 4 aspects of Estate Planning
Michael Fitzpatrick 4 aspects of Estate Planning 3rd Aspect Ensuring that the estate is properly funded to provide adequate financial support to beneficiaries This involves # appropriate insurance cover # estate planning strategy

12 4 aspects of Estate Planning
Michael Fitzpatrick 4 aspects of Estate Planning 4th Aspect Ensuring that wealth will pass on death with certainty to intended beneficiaries sensitively to their needs and circumstances - asset protection and taxation efficiency. This involves # estate planning advice # modern Will with flexible trusts

13 The Role of the Risk Adviser
Michael Fitzpatrick The Role of the Risk Adviser In each of the aspects of Estate Planning there is a significant role for the risk/financial adviser.

14 Estate Planning – doing it half right – Case Study
Michael Fitzpatrick Estate Planning – doing it half right – Case Study You organised the following insurances for a young accountancy professional (married with a dependant spouse and 3 young children) – 1. $2 million term life cover- for family financial support 2. $1 million life cover to fund business succession

15 Estate Planning – doing it half right – Case Study
Michael Fitzpatrick Estate Planning – doing it half right – Case Study He has been killed in a car accident. Scenario 1 He has a standard Will and no business succession documents in place. Insurance policy is owned by his practice partner.

16 Estate Planning – doing it half right – Case Study
Michael Fitzpatrick Estate Planning – doing it half right – Case Study Scenario 2 He has a modern Will containing flexible discretionary Will trusts and Buy/sell agreements in place with his practice partner.

17 Estate Planning – Case Study Results comparison
Michael Fitzpatrick Estate Planning – Case Study Results comparison Scenario 1 No asset protection for beneficiaries – whole inheritance at risk to legal claims note S116 Bankruptcy Act Wife at risk – subsequent relationships Tax erodes earnings on inheritance for spouse’s life No tax concessions for kids Uncertainty for business partners – no S116 protection

18 Estate Planning – Case Study Results comparison
Michael Fitzpatrick Estate Planning – Case Study Results comparison Scenario 2 Complete effective asset protection for spouse and children and their descendants Wife can quarantine inheritance from relationship claims Tax savings for up to 80 years from death S102AG tax concessions for kids – huge benefit Certainty for business partners

19 Michael Fitzpatrick The 3 Big Myths Myth 1 Most lawyers know what they are doing when drafting a Will

20 Michael Fitzpatrick The Reality “Most Lawyers will be called upon to draft Wills yet few are likely to have had much training in the subject.” Ian Turnbull QC – formerly first Parliamentary Counsel for the Commonwealth

21 Michael Fitzpatrick The 3 Big Myths Myth 2 Generally lawyers know more about estate planning than accountants & financial planners.

22 Michael Fitzpatrick The Reality “Unless an estate is reasonably simple, expert taxation law or estate and financial planning advice should be considered” Hutley’s Australian Wills Precedents page 2

23 Michael Fitzpatrick The 3 Big Myths Myth 3 ‘See a lawyer’ constitutes acceptable estate, financial planning or risk advice.

24 Michael Fitzpatrick The Reality Seeing a lawyer who isn’t a specialist in Will drafting rarely produces an acceptable result.

25 4 Death Taxes – 21st Century
Michael Fitzpatrick 4 Death Taxes – 21st Century 1 Income Tax 2 Capital Gains Tax 3 Superannuation Death Benefit Tax 4 Land Tax

26 Michael Fitzpatrick Death and Income Tax 2 people earning $10,000 pa pay zero tax (with low income rebate) -1 person earning $20,000 pays $2,100 tax 2 people earning $40,000 pa pay combined $14,700 tax -1 person earning $80,000 pays $19,850 tax – 25% increase

27 Death - Capital Gains Tax Traps
Michael Fitzpatrick Death - Capital Gains Tax Traps Selling all the assets Losing the principal residence exemption Complications with Life estates Gifts to non residents, super funds & tax exempt bodies CGT on Life Insurance

28 Tax Rates on Super Death Benefits
Michael Fitzpatrick Tax Rates on Super Death Benefits Generally super proceeds paid to someone other than spouse or non tax dependant will attract ETP tax commencing from 16.5% depending on the tax components of super.

29 Michael Fitzpatrick The Lawyers Duty “A solicitor accepting instructions to draft a Will knows that the future welfare of an intended beneficiary is dependant on his or her proper execution of the task. By accepting instructions the solicitor assumes responsibility for the task of procuring the execution of a skillfully drawn Will knowing that the beneficiary is wholly dependant upon his carefully carrying out his function.” Lord Browne Wilkinson – House of Lords White-v-Jones {1995} 2 AC 207

30 Death & Taxes – the advisers duty
Michael Fitzpatrick Death & Taxes – the advisers duty Death taxes abound ie CGT and Super death benefit taxes More will come – ie wealth taxes Its the financial/risk advisers’ duty to help minimise the incidence of taxation on insurance and superannuation death benefits.

31 The Risk Advisers Role STEP 1 Conduct thorough fact find
Michael Fitzpatrick The Risk Advisers Role STEP 1 Conduct thorough fact find and verify everything regarding ownership of assets

32 The Risk Advisers Role STEP 2
Michael Fitzpatrick The Risk Advisers Role STEP 2 Review all other estate planning documents ie family and unit trust deeds, SMSF deeds business succession agreements super death benefit nominations insurance nominations

33 The Risk Advisers Role STEP 3
Michael Fitzpatrick The Risk Advisers Role STEP 3 identify the relevant estate planning issues design appropriate estate planning strategies prepare Estate Plan

34 The Risk Advisers Role STEP 4
Michael Fitzpatrick The Risk Advisers Role STEP 4 Orchestrate and overseer preparation of the relevant legal documents using a lawyer who specialises in estate planning

35 The Legal Documents STEP 4
Michael Fitzpatrick The Legal Documents STEP 4 Orchestrate and overseer preparation of the relevant legal documents using a lawyer who specialises in estate planning

36 The Documents Usually required Will incorporating discretionary trusts
Michael Fitzpatrick The Documents Usually required Will incorporating discretionary trusts Power of Attorney Appointment of Enduring Guardian Super death benefit nomination

37 The Documents Sometimes required Business “Will”
Michael Fitzpatrick The Documents Sometimes required Business “Will” Family Trust and SMSF Deed amendments Memoranda of wishes Insurance nominations

38 Optional Discretionary
Michael Fitzpatrick Modern Will Trust Optional Discretionary Testamentary Trust WILL Executor Trustee Flexibility of distributions Tax savings, especially for minor beneficiaries Asset protection for trust assets Crisis provisions Ability to pass down the generations Simple to run Beneficiaries include: Primary beneficiary Spouse/Immediate family Related entities Charities Eg. Primary beneficiary

39 The Risk Advisers Role STEP 5 Ensure all documents signed
Michael Fitzpatrick The Risk Advisers Role STEP 5 Ensure all documents signed Tidy up all loose ends. Get copies/originals of all relevant documents. Ensure safe storage of documents

40 The Risk Advisers Role STEP 6 Conduct thorough client Estate Planning
Michael Fitzpatrick The Risk Advisers Role STEP 6 Conduct thorough client Estate Planning Reviews annually. STEP 7 Maintain and update expertise.

41 6 Classic Estate Planning Strategies
Michael Fitzpatrick 6 Classic Estate Planning Strategies Family with small children and big debts Life Insurance + Discretionary Will Trust = right result

42 6 Classic Estate Planning Strategies
Michael Fitzpatrick 6 Classic Estate Planning Strategies Severe incapacity for the breadwinner Income/Trauma Insurance + Power of Attorney + Medical Guardianship = right result

43 6 Classic Estate Planning Strategies
Michael Fitzpatrick 6 Classic Estate Planning Strategies Blended family Life Insurance proceeds for children of first marriage + Discretionary Will Trust for balance of estate to 2nd wife = right result

44 6 Classic Estate Planning Strategies
Michael Fitzpatrick 6 Classic Estate Planning Strategies Protecting the kids from losing their inheritance Discretionary Will Trust for each child with crisis provisions triggered by bankruptcy or divorce.

45 6 Classic Estate Planning Strategies
Michael Fitzpatrick 6 Classic Estate Planning Strategies Passing control of the Family Trust Will which contains Power of Appointment and equalisation provisions.

46 Classic Estate Planning Strategies
Michael Fitzpatrick Classic Estate Planning Strategies Looking after the incapacitated or vulnerable child Will which contains “Protective Trusts” allowing access to income stream but no access to capital.

47 Failed Strategies The Super Disaster – Katz –v- Grossman
Michael Fitzpatrick Failed Strategies The Super Disaster – Katz –v- Grossman Assuming the best – the eldest son runs out of luck Punishing the daughter to save her inheritance Loneliness disinherits the kids Something “dad said” fuels family feuds after his death

48 Michael Fitzpatrick 2 things to take home In Estate Planning its not the Will but the Strategy that produces the right result. You need to engage a Lawyer with specialist skills to implement the strategy.

49 Michael Fitzpatrick 2 things to take home The traditional one page Will (in all but the most simple of cases) is ill equipped to deal with 21st Century issues. Expect trouble if you use it!

50 Michael Fitzpatrick QUESTIONS?

51 THANK YOU My contact details Clarendene Estate Planning Lawyers
Michael Fitzpatrick THANK YOU My contact details Clarendene Estate Planning Lawyers Phone:


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