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Legal Tip 75: Alternatives to Gifting via wills

Discussion in 'Legal Issues' started by Terry_w, 1st Sep, 2015.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Wills can be challenged. Gifts in wills can have no effect. So one strategy to make sure your assets go to whomever you want them to go to is to make gifts while you are still alive. This way you can be sure the recipient will get the gift and you can also enjoy seeing them enjoy the gift.


    The gifts could be made outright, and/or linked to a particular age or particular event - such as passing the HSC, getting married etc.


    Grandparents could do this for grandchildren. Perhaps to make a backup plan different bank accounts can be opened earmarked for each grandchild with funds deposited. If the grandparent would to die the rest of the account could be given to the relevant grandchild via the will.


    Care should be taken so as not to give money or assets away that you may need later.


    Disadvantages of this strategy are

    • Funds could be lost through family law disputes

    • More tax effective for the beneficiaries to receive via a will, especially under a testamentary trust

    • Funds could be lost through bankruptcy

    • Gifts could still be potentially clawed back under NSW law if the giver dies within 3 years of the gitt

    • Social Security rules may still count the gift as an asset of the giftor for 5 years after the gifft is made.
     
    Tim & Chrissy likes this.
  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Sometimes a discretionary trust that ensures some assets are not estate assets can be a strategy BUT good estate planning is critical for control of the trust.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Discretionnary trust assets are not assets of the individual so don't form part of a person's estate. Trustee owned assets do not pass via the trustee's will, but the trust keeps going with a new trustee.

    However in NSW under a family provision claim, where the assets of the deceased are not enough to make adequate provision for an eliigblle person then an order could be made against the trust assets if the deceased was trustee or had a power of appointment over a trust assets.