Succession PlanningThomas SkeffingtonRSM BIRD CAMERON

The 7 year check

• Pause to review your will every 7 years

• Communication is the key

• What happens if “I die tomorrow”?

• What happens if I die without a will?

Family trusts in succession plans

• What is a Trust?

• What is a Testamentary Trust?

• What tax advantages are there in a Testamentary Trust? – Discretion of income including allocation to children or grandchildren under 18 years of age

Testamentary Trust

Example

• Presently minors are taxed at over 66% on income above $416

• Division 6AA allows minors to be taxed at adult marginal rates of tax

Example – A man dies leaving his estate to his wife and 3 minor children. If he dies leaving an estate worth $2 million invested at 5%, the result would be:

Income Tax

Wife $ 25,000 $1,292

Child 1 $ 25,000 $16,225

Child 2 $ 25,000 $16,225

Child 3 $ 25,000 $16,225

$ 100,000 $49,967

Example

• By using a Testamentary Trust

Income Tax

Wife $ 25,000 $1,292

Child 1 $ 25,000 $1,292

Child 2 $ 25,000 $1,292

Child 3 $ 25,000 $1,292

$ 100,000 $5,168

Example

• If the Testamentary Trust had not existed and the husband left the entire amount to his wife, she would have an annual tax bill of $24,947

• The Testamentary Trust saved $19,779 pa

Questions