8 overseas travel tips for a fabulous adventure

Posted on June 20, 2024 by Arrowroad

For most people their travels will be a safe and wonderful experience, and there are a few precautions you can take to ensure all you return with are happy memories. While you can’t control everything, a little bit of preparation can go a long way.

  • Let’s start with something most people don’t associate with an overseas holiday. Make sure your Will and Powers of Attorney are up to date and your executor and/or attorney know where to find important information. If there isn’t anyone that holds your Power of Attorney, consider appointing one before you leave. This can either be an Enduring or a Limited Power of Attorney.

  • Prepare a list of your accommodation details including addresses, phone numbers, and dates. Place a hard copy in each of your bags and give copies to your travelling partners, including any accompanying children. It may help to reunite you with lost bags or lost companions but is perhaps most useful when giving directions to taxi drivers. Showing them the written address avoids the inconvenience and expense that occurs when mispronunciation or a misunderstood accent delivers you to the wrong destination.

  • Most of us rely on our phones to look after our contacts, so who could you get hold of if you lost your phone? Take hard copies of your key contacts list, including family members, travel insurer, credit card, and travel card providers, banks, airline, and travel agent. Give a copy to your attorney or executor. It’s also a good idea to back up your phone to your home computer before you leave and ensure you can access these details via the cloud.

  • Split cash, credit cards, and travel money cards with your travelling companions. If travelling alone, consider taking two wallets (in separate bags or keep one in the hotel safe), so you have backup cash and cards if a wallet is lost or stolen. Make sure you report any stolen personal identification to the local authorities.

  • Security screening, which now can include full body screening, can be intimidating and seem intrusive, but it’s there to make our travels safer. Follow your airline’s instructions on what can be taken in hand luggage otherwise certain items will be confiscated. Ensure you allow plenty of time for screening before boarding.

  • Attracted by the beauty of Venice or Dubrovnik? So are several million other people. Crowds provide an ideal operating environment for pickpockets. So does public transport. In such situations stay alert to what’s going on around you. If you’re carrying a backpack, maybe wear it on your front. You don’t need to lock all the zips, perhaps tie them together with twist ties to slow down entry. This also can deter the unscrupulous from adding stuff without your knowledge. Wear shoulder bags diagonally across the body so they can’t simply be slipped off your shoulder. And choose bags with slash-resistant straps.

  • While credit cards are widely accepted, smaller restaurants may only take cash. If you’re relying on plastic to pay for a meal, check that cards are accepted before you sit down.

  • Do not use internet cafes or public Wifi to access your bank accounts. If you use these services to access social media, don’t save your login or password or any other personal information on the computer. These connections are never 100% secure.

With these tips in mind, you can be more confident. When you’re fully prepared it’s easier to sit back, let your adventure unfold, and allow yourself to be touched by the magic of exotic destinations.     

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser. 

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Ignore the third stage of retirement planning at your peril

Posted on June 19, 2024 by Arrowroad

The Golden Years… a time of leisure, travel, and more time with family and friends. This is likely what springs to mind when someone mentions retirement.  However, did you know that your retirement years are typically split into three main stages – the active years, the quiet years, and the frailty years?

While most will hope and/or plan to spend up big in the active years, it’s important to ensure you also plan on having adequate funds set aside for the frailty years. These are the later years of retirement where health and functional capacity may begin to decline, and additional care and support may be required.

While the Government contributes towards health and aged care costs, it is crucial that you also plan for these expenses. 

When putting together your retirement plan, particularly planning for the frailty years, there are some important considerations. 

Health Care

This can represent a large portion of the cost of living for older Australians1 and is an essential expense that needs to be factored into spending throughout the retirement stages. 

Quality of Care

While you might be familiar with the amount you need for a comfortable standard of living, you will also need to consider the amount you might need for a comfortable standard of care as well.

Factoring in the quality of lifestyle you would expect for the frailty years will be critical to determining your expense needs for these years.

These expenses might include in-home care (i.e., grocery delivery, meal preparation, home maintenance and cleaning), home and/or motor vehicle adaptations, residential aged care etc.

Aged Care

Aged Care services come in many different forms, from home care and transitional care to respite and permanent residential care. 

While most older Australians prefer to continue to live at home, the likelihood of needing to move into residential aged care increases throughout the later years of retirement.

According to the OECD (2020), 18.4% of the Australian population aged 80+ were using long-term care provided by an institution (excluding hospitals)2. 

Residential aged care facilities can come with a range of costs, including:

  • Basic daily fees;
  • Means-tested care fees; and
  • Accommodation costs.

While the basic daily fees are a set amount paid for by all residents, the means-tested care fees and accommodations costs are subject to an assessment of your income and assets.  

Longevity Risk

Longevity Risk is the risk of outliving the average life expectancy, which may require greater levels of retirement assets than originally planned for. 

A good way to allow for this is to include a life expectancy buffer, by adding additional years (i.e. 5-10) to your life expectancy when calculating your retirement expense needs.

Strategies for Retirement Planning

There are several financial planning strategies available that can help retirees to get the most out of their retirement assets. These can include:

  • Contributing to superannuation, including downsizer contribution strategies.
  • Using account-based pensions and annuity products to structure retirement assets.
  • Strategies to optimise age pension entitlements, including prepaying funeral bonds.
  • Aged care planning, including the best way to fund care costs and how to best manage the family home.

If you’re not sure how to best approach your retirement plan, reach out to us today.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

  1. https://www.aihw.gov.au/reports/health-welfare-expenditure/health-expenditure ↩︎
  2. https://www.oecd.org/ ‘Long-Term Care Resources and Utilisation: Long-term care recipients 2020’, Organisation for Economic Co-operation and Development ↩︎
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Don’t bank your retirement on your business

Posted on June 19, 2024 by Arrowroad

Are you one of the many business owners who are ignoring superannuation in preference for re-investing spare funds in your business, hoping you can then sell at a premium when it comes time to retire?

At some magical time in the future, do you dream of selling your business for your asking price, turning the lights off, and walking away? Sounds perfect, doesn’t it?

As the uncertainty of recent years has demonstrated, in reality, this may be embarking on a very risky exit strategy. It might be that when you do decide to sell, you struggle to find a buyer. Or you find a buyer, but the buyer does not want to pay the price you may be hoping for.

This is even harder if you own a farming business. The idea of passing the farm on to your offspring can be deeply embedded within farming families, but if that happens, how do you then fund your retirement?

As with anything, if you fail to plan, you plan to fail.

Your first step must be to contact your accountant or business adviser to determine what they think of your business, its potential value as it stands, and what, if anything, you can do to improve its value to a new owner.

While you might think your business is in good shape, an outsider may not. For example, you may not be using state-of-the-art accounting and software systems or have a clearly documented operations manual. As a result, it may take several years to get your business to a place where an outside buyer would find it attractive. And then, of course, you should have several years not just of steady profits but steady growth to entice a prospective buyer.

A realistic, independent assessment of what a buyer may pay for your business should be undertaken. With all the hard work you put into running your business, it can be easy to overestimate its value, and this is where independent outside advice is essential.

If there is a risk that you might not get the price you think you need to fund a long and happy retirement, then maybe you should think outside the square:

  • Can you make a strategic acquisition that might make your business more attractive to a buyer?
  • Can you take on a junior partner or look within your existing business to determine if someone already working in it might like to take over from you in the future? Can you help them achieve that goal?

Finally, consider boosting your existing contributions to super. The more money you have in super, the less pressure there will be for you to obtain top dollar for your business when you sell.

Moreover, you can structure your superannuation contributions to legally minimise any tax liabilities. And, of course, you may be able to use superannuation to reduce any capital gains tax liabilities you might expect on the sale of your business.

Having a healthy nest egg within super will also put you in a much stronger position when negotiating the sale of your business and may give you some much-needed breathing space to negotiate extended payment terms should you need to.

Contact us to help you understand how we can help you reduce the risks of relying on selling your business as your only income in retirement. 

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

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Planning ahead for aged care

Posted on June 19, 2024 by Arrowroad

It is expected that the Australian population over the age of 70 will reach nearly four million in the next 20 years1, which means that aged care is an issue that will affect an increasing number of families. But it’s not just older Australians who need to understand how the aged care system works – anyone with aging parents may find themselves having to understand this complex system at very short notice.

Many people will make private arrangements for their retirement living. They may stay in their own home, perhaps with help from family or other carers. Some will move into a retirement village and retain their independence. For others, a time will come when they need a higher level of care.

Government support

The government provides substantial assistance with the costs of aged care, and eligibility for government support is determined by Aged Care Assessment Teams (ACAT). Aside from assessing the need and level of care required, the ACAT may also be able to assist in finding an appropriate place. Most people prefer to make their own choice, and it is worthwhile visiting a number of facilities. Quite often available places are subject to existing vacancies so it may be necessary to apply to a few establishments.

Fee structure

In most cases, a contribution towards the costs of aged care is required. Contributions vary and depend upon income, assets, and pensioner status. Fees may include a combination of means-tested accommodation and care fees, a basic daily care fee, and fees for extra optional services. Fees are revised twice yearly in line with pension revisions. Care recipients have the option of paying their accommodation fee as an upfront refundable deposit or a rent-style periodic payment.

Not all needs are the same

Sometimes the need for aged care can arise at very short notice. For example, a stroke or a broken hip may be the trigger for an immediate move. The stress of entering aged care can be considerable and this isn’t helped by the overwhelming range of facilities on offer and the complexity of funding arrangements.

The emotional upheaval on all parties can be eased by early planning and open discussion within families. A good place to start is the federal government’s My Aged Care website www.myagedcare.gov.au. You can also phone the Aged Care Information Line on 1800 200 422.

The best way to make the transition to Aged Care easier for all is to discuss the possibility openly and early. Planning ahead and understanding the process is the best course of action.      

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

  1. www.health.gov.au, Australian Government Department of Health and Aging ↩︎
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How will Aged care impact your family?

Posted on June 19, 2024 by Arrowroad

Naturally, when investigating options for an elderly person, finding the right level of care is crucial, as is anticipating future care requirements and planning ahead.

Given a choice, many people would prefer to remain in their own homes. However, in home care is limited by the number of visiting carers and services available. The government has committed to ensuring that home care resources will be gradually increased over the coming years, including the provision of differing levels of home care. Costs associated with care are calculated on the single basic age pension and perhaps an extra income-tested fee determined by the care required.

The rationale is that those who can afford to pay for care should do so, while the government will subsidise those who don’t have the capacity to pay. Fees are now capped on an annual or lifetime basis and indexed annually.

When entering aged care accommodation, residents have the choice of paying a Refundable Accommodation Deposit (RAD) or making periodic Daily Accommodation Payments (DAPs).

To safeguard against the care facility becoming insolvent and unable to repay bonds, the government undertakes to make the repayment to either the resident or their estate. Bond amounts are recovered by the government via a regular fee levied against the care facility.

Other key aspects of the government’s aged care strategy include:

  • High and low care are treated similarly so that the level of care can be adjusted seamlessly as needed.
  • Care facilities can offer a wide range of extra-service packages. These are available to all residents at an additional cost, and residents can choose to opt-in or opt-out.
  • Rental income from the resident’s former home is included in the means test for those entering a residential facility.
  • The family home remains exempt from income and asset testing, if it is not generating an income, or if there is a protected person living in it, such as a spouse or financial dependent.

In an aging society, care for older Australians is a real concern for governments, communities, and families. It requires genuine and careful attention. Ongoing reviews and reforms will help, but your financial adviser / Aged Care specialist can assist you to create a tailored strategy that will help you plan for your own family’s future.     

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

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Keeping up with the Joneses could be costing you more than you think

Posted on June 19, 2024 by Arrowroad

There’s a quote that says, “Money can’t buy you happiness, but it can buy you a yacht big enough to pull up right alongside it”.

True if you’ve got that sort of money. For the rest of us, our spending is usually on clothing, gadgets, and cars – the kinds of things that make us happy.

Australian Bureau of Statistics (ABS) data suggests that consumer spending is influenced by job security and economic factors like interest rates and inflation. Favourable economic conditions certainly lead to consumer confidence and substantially affect how much discretionary income is available. However, isn’t it also about our emotions? How often do you hear statements like, Be the envy of your friends…Don’t miss out…Today only…?

We live in a consumer society where we’re expected to keep up with the Joneses. Every time we turn on the television or Google something, we’re bombarded by sales and offers. Then there’s social media; given the lucrative advertising deals Influencers achieve for themselves, plenty of us are making purchasing decisions around the accounts we follow.

It probably seems that the modern world is pestering us with advertising; how easy it is to lose control and find ourselves in debt!

Unlike Yacht-guy from the quote, our finances may be more limited, but there are ways to ensure we stay in control of our finances.

Budget

Make a budget and be mindful of it. Think of your budget as helping you make better spending choices to live your best life, rather than a chore. It’s a time-proven technique for more mindful spending, where you may forgo small frivolous spending today, to enable more meaningful purchases and investing tomorrow.

The government’s SmartMoney website provides a free calculator to enable you to create your own workable budget.

Debit, not credit

Use a debit card instead of a credit card. Debit cards can be linked to a bank account or loaded with cash. Either way, you’re using your own money not the bank’s, meaning you can’t spend what you don’t have. There’s also no interest!

Additionally, it’s wise to avoid those Buy-Now-Pay-Later schemes. They’re so easy to arrange, and you can rack up quite a debt without realising it!

Payment plans

Most utilities and insurance companies allow you to set up regular payment plans so you pay a set amount each period. You’ll always know what you’re up for and it’s paid automatically. Your gas or electricity provider can help get you started.

Avoid social media

Ever noticed how after Googling, say, camping equipment, suddenly you’re seeing advertising for tents and camp stoves? Algorithms embedded in the internet record your searches to help advertisers target you through social media.

We get it – it’s tough to avoid social media, but if you’re susceptible to targeted online advertising, you may need to limit your exposure to it – at least for a while.

Pause

Avoid the temptation to impulse buy.

Advertising is designed to appeal to our need to fit in, keep up with our friends, to show off. Things you want to buy, but don’t necessarily need, may simply be status symbols. Before you whip out the plastic, ask yourself if a handbag with an Italian label is really worth months on a repayment plan?

If you think you’re going to struggle with any of our suggestions, visit MoneySmart.gov.au and download their online guide, Managing your money. It’s filled with ideas and advice for getting on track and staying on track.

As for that quote about happiness and huge yachts, those words were courtesy of 80’s rockstar David Lee Roth. Stick to your budget and savings and investment plan, and you might just be able to afford that yacht, sooner than you think!

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

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Helping you keep out of trouble with your credit card debt.

Posted on June 19, 2024 by Arrowroad

Credit cards certainly can make life easier – they are simple to use, accepted almost everywhere, and help you to buy what you want, when you want, particularly online. So much so that living close to, (or often beyond), the credit limit has become the norm for many people and spending can quickly get out of hand. Particularly as interest rates are on the rise, it’s important to stop and consider whether your purchases are wants or needs and adjust your spending accordingly.

To make sure your credit card works in your best interests, use these tips to help stay on top of your debt.

  1. Routine is key

We all know how easy it is to let things get away from us. Just like that power bill sitting lost amidst the promotional emails in your inbox or “accidentally” bingeing an entire Netflix season while the laundry piles up, we tend to postpone boring, albeit important, tasks. Create a routine, and you’ll complete these mundane jobs simply out of habit.

It can be as easy as setting a monthly reminder in your calendar to check that your credit card payments are up to date. Paying your credit card balance off in full each month too will help you avoid pesky interest fees. It will also help you avoid any late fees!

  • Make use of technology

If organisation skills are not your forte, why not take advantage of the many apps and services designed to help? ‘Mint’ is one of the many useful apps available that will organise your spending into categories, helping you ensure there is always cash to go towards your credit card repayments. Many banks also provide this through their online portal or apps.

Making use of automatic payments in your banking app can also be helpful. Payments will be made on time and best of all, once set up, you don’t have to lift a finger!

  • Cash advances cost more

When money is tight, people are forced to use their cards for cash advances (withdrawing cash) instead of just purchasing goods and services. In doing so, you pay a high price for the privilege.

Interest is charged immediately on a cash advance and at a higher rate than on purchases. Even if you have an interest-free card, you will immediately start paying interest as soon as you withdraw cash using your card. If you must use your card for a cash advance, repay it as quickly as possible.

  • Emergency funds will save the day!

You’ve probably heard about the importance of emergency funds, and with good reason! If we’ve learnt anything over the course of the COVID-19 pandemic it’s just how quickly things can change financially So, whether it’s an increase in the cost of living or a rise in interest rates, it is vital to have a bit of spare cash handy.

A good place to start is with an emergency fund calculator1. It will consider your income, savings, and living expenses, and provide an estimate of how much spare cash you should be saving for a rainy day.

Realistically, many of us couldn’t get by without our credit cards, but we must use them in a way that only provides a benefit to our lifestyle. The secret to credit card success — be mindful of your purchases and pay the full balance off every month; otherwise, the only winners are the banks.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

  1. https://www.moneyunder30.com/emergency-fund-calculator ↩︎
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Breaking free from living pay-to-pay

Posted on June 19, 2024 by Arrowroad

Now and then, Jodi borrowed $100 from her parents. She’s good for it, and always paid it back, but her situation was not uncommon.

6.9 million Australians live pay-to-pay1

An ongoing study by Deloitte2 shows results that are continually alarming: a bulk of respondents indicated that they did not feel financially secure, half of Millennials and half of Gen Zs lived paycheque-to-paycheque. All said cost of living was their number one concern – ahead of climate change and unemployment.

Easy to assume these are people earning lower wages, but that’s not always the case.

For Jodi, despite earning a good salary as an I.T. specialist, pay day didn’t always align with the due dates on her bills. This resulted in the occasional week when she needed a little extra to tide her over.

Jodi didn’t have a lavish lifestyle, but she enjoyed a monthly facial treatment and having her nails done. She also had two streaming subscriptions and a gym membership on monthly payment plans.

Physiotherapist Aaron had a cashflow issue. He loved technology and couldn’t resist any new gadget, even if he didn’t need it. Additionally, he had an active social life involving weekends away, dining out, theatre and concerts. Consequently, Aaron’s credit card was maxed-out and he had lost track of his buy-now-pay-later (BNPL) plans. After making his minimum monthly repayments, Aaron was forced to live on credit until the next payday.

When his clapped-out car died it needed replacing. It was a wakeup call when the finance company rejected Aaron’s loan application. Aaron felt trapped with no way to break the pay-to-pay cycle. The worry kept him up at night and began affecting his work.

According to mental health support organisation, Beyond Blue, financial worries impact our physical and mental wellbeing, potentially leading to further financial stress3.

Jodi’s parents introduced her to their financial adviser who identified areas for savings and helped Jodi develop a realistic budget. Jodi’s parents felt that connecting Jodi with their financial adviser, to help Jodi develop better financial habits and improve her own financial position, was a really worthwhile investment.She suggested Jodi cancel one streaming subscription, saving $15 per month ($180 pa), and reduce her monthly facial to bimonthly, saving $140 every two months ($840 pa).

The money was deposited in a savings account that Jodi could access in case of emergency, and within the first year, she’d saved over $1,000. Further, Jodi hadn’t needed to borrow from her parents. By focusing on improving her cashflow, Jodi was able to start accumulating regular savings. Now Jodi plans to invest in herself, by using some of her savings on studies that will qualify her for a work promotion.

Aaron’s situation was slightly different. As debt was his main concern his financial counsellor suggested he sell his unused gadgets online. This alone, raked in enough for Aaron to pay off his PNBL plans. His adviser then developed a debt-reduction strategy: if Aaron sacrificed three nights out per week and the occasional weekend away, he’d be debt free within three years – one year if he never left the house!

But any plan must be workable. The pair agreed that meeting half-way would be best, so Aaron’s adviser recommended a weekly spending budget that would see Aaron debt-free in 18 months – provided he curbed his passion for gadgets.

The simplicity of internet shopping, despite good intentions, means it’s easy to rack up debt without realising it. The key to being able to build up your savings and to start investing is to get your cashflow under control. If you’re trapped in the pay-to-pay cycle, reach out to a financial counsellor for assistance.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

  1. https://www.finder.com.au/news/half-of-australians-living-paycheque-to-paycheque ↩︎
  2. https://www.deloitte.com/global/en/issues/work/genz-millennial-survey.html ↩︎
  3. https://www.beyondblue.org.au/mental-health/financial-wellbeing ↩︎
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To be or not to be the Executor

Posted on June 19, 2024 by Arrowroad

If you’re the eldest sibling in the family or deemed to be the ‘most responsible’; if you’re seen to be a good friend by someone; or a fine upstanding citizen by others, chances are you will be asked to be an executor of someone’s Will.

After you’ve enjoyed the warm feeling of being wanted, just pause for a moment and take stock of what it really means to assume this most important role.

You need to be aware that when the person dies, you will be required to spend a significant amount of time executing your responsibilities – and these can be onerous.

The actual functions will vary from one situation to another and, to some extent, depend on the surviving family members. However, the legally defined duties of the executor include1:

  • Arranging the funeral;
  • Determining the assets and liabilities of the estate;
  • Applying to the court for probate, if required;
  • Determining what assets may need to be sold to pay outstanding debts – this may be defined in the Will or by established legal definitions;
  • Arranging the sale of all assets which are not to be directly transferred to the beneficiaries – including the home, investments, business interests, and personal chattels;
  • Lodging tax returns for the estate and the deceased;
  • Paying the debts;
  • Publishing a notice that you intend to distribute the remaining assets to the beneficiaries;
  • Distributing the remaining assets to the beneficiaries according to the terms of the Will.

For all this, you may find yourself in the middle of family disputes and even subject to legal action from a dissatisfied beneficiary or creditor. If placed in this position, the executor needs to be able to manage his or her responsibilities as impartially as possible.

The executor can be held personally liable if a beneficiary suffers financial loss as a result of the executor’s actions or inaction, and in some instances, be legally liable for any losses incurred.

If, after considering all of this, you don’t think you can honour the person’s request and fulfil the role appropriately, it might be best to decline the offer.

If you’re feeling bad about not accepting, you could suggest that your friend or relative engages a professional executor in the form of a trustee company (or public trustee) or firm of solicitors. This will also guarantee the executor outlives the person making the Will.  

Be mindful that laws do vary between Australian states and territories. Consider enlisting the assistance of an estate planning solicitor for specialist advice.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

  1. https://www.qld.gov.au/law/births-deaths-marriages-and-divorces/deaths-wills-and-probate/estates/being-an-executor-of-an-estate ↩︎
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Should you consider a testamentary trust?

Posted on June 19, 2024 by Arrowroad

Do you worry about what will happen to your family when you’re no longer here?

If so, a ‘testamentary trust’ may be the answer. A testamentary trust is a trust in a Will. It is established as an outcome of a Will and only comes into force in the event of your death. A will may contain multiple testamentary trusts, and they may cover all or a portion of your estate. You can create one to cover the whole family or a separate one for each beneficiary.

The trustee of a testamentary trust may be one or more of the beneficiaries, a legal professional, a trustee company, or other person. The trustee is appointed to direct the trust until a set time when the trust expires, for example when beneficiaries reach a certain age or marital status. The trustee exercises discretion over the trust, and in some jurisdictions, it’s common to leave a letter of wishes for the trustee to consider.

The major benefits of a testamentary trust are taxation advantages and protection of the assets where children are involved, or where you may be concerned about the beneficiaries’ management of their inheritance. A testamentary trust means you know your children and grandchildren can have access to a regular income, along with capital (if appropriate). It tends to be most appropriate where potential life-insurance settlement amounts are likely to be far greater than the existing estate, and where the beneficiaries are young or otherwise unable to manage their own inheritance.

Taxation

Generally, children under 18 are subject to penalty rates of tax on unearned income. However, where their income is received from a deceased estate normal tax rates apply, including the low-income rebate, if applicable.

Using a testamentary trust means that all income from the estate, including capital gains and franked dividends, may be distributed amongst the beneficiaries in the most tax-effective manner.

Protection of Assets

A testamentary trust, if structured correctly, may also prevent beneficiaries from having unlimited access to the capital from your estate. This may be of particular benefit where:

  • you have a beneficiary who is disabled and unable to manage their own affairs;
  • you believe a beneficiary may be financially irresponsible or you wish to protect their inheritance in the event of marriage breakdown;
  • you think your spouse or ex-spouse may not manage the estate in the best interests of your children;
  • you wish to ensure your children receive a defined part of your estate in the event of a surviving spouse remarrying.

There are several advantages and disadvantages to consider before choosing to include a testamentary trust/s in your Will. The terms of the trust are set out in your Will and it is therefore important to have professional legal advice in the preparation of your Will and to discuss your needs fully with your solicitor.

Sources:

What is a Testamentary Trust? State Trustees  https://www.statetrustees.com.au/trustee-services/types-of-trusts-we-manage/testamentary-trust/

What is a Testamentary Trust? https://legalwill.com.au/what-is-testamentary-trust/

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

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