There is one thing in life that is certain - Death & Taxes
Lodging tax returns and unexpected tax consequences are the last thing anyone wants to deal with during the difficult and stressful time after losing a loved one. Below are some tips that may make this time easier, whether you are managing the estate of someone you have lost or making sure your own affairs are in order to support those you leave behind.
Are the key people in the know? Talk to your executor, lawyer, financial planner and accountant, even your beneficiaries if appropriate. Better still make sure each of these key parties are in contact as well. This way you can ensure your estate is comprehensively taken care of and make sure there are no nasty surprises down the line.
There is a lot more to estate planning than just having a basic Will in place. Take a look at what assets you hold and any liabilities. Think about who you leave behind. Will they be left with a debt they cannot manage on their own? Do you have dependant children who will need guardians and financial support? Did you know your super is dealt with separately from your estate, and have you supplied eligible beneficiaries to your fund? For instance, an insufficient Will can significantly prolong the distribution of your estate to your loved ones. Also, it can lead to the Will being contested, cause family disputes and break downs and then lead to your estate being distributed contrary to your wishes. Therefore, you should consider seeking legal advice if you are concerned about any of these factors. Also, seeking insurance advice to make sure that on your death your loved ones aren’t left in financial hardship is a great idea.
In conjunction with above it is important to involve your accountant. Different assets have different tax consequences on death. Your accountant will be able to work with your lawyer and other advisers to make sure your estate, insurances and other affairs are structured in a way to best minimise these tax consequences. Some key areas that you should discuss with your accountant include:
- Some beneficiaries may have lower tax consequences than others and there may be merit in considering this in how you allocate your super and other assets between beneficiaries.
- There are taxable and tax free components of superannuation accounts and further potential strategies available to manage this.
- Capital Gains Tax
- Capital assets such as property, shares etc. may have CGT consequences on disposal or transfer from your estate. There are various concessions available to minimise the tax consequences. It is important to keep and pass on relevant records.
- Foreign Residents
- If you have a beneficiary of your estate who is a foreign resident, certain assets may have significant tax consequences on transfer. You should speak to your accountant on how to manage this.
If you are the executor, on death you will need to manage with your accountant to lodge the following with the Tax Office:
- Date of Death Tax Return
- Estate Return until the estate is fully administered
- You or another nominated Trustee may also need to Lodge Tax Returns for a Testamentary Trust if any were established under the will
If you would like to discuss your anything covered in this article, please contact your PJT Advisor on 5413 9300.