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The Professional Trustee Team

Just In Case You Don’t Live Forever, Here’s How to Avoid Common Estate Planning Issues

Thinking about and planning for our death is understandably a subject that most people prefer not to think about.

It comes as no surprise to us because we see it every day, that many people just simply do not plan for what happens to their assets and estate when they die.

With a bit of thought and a small financial and time investment, we all have the ability to save enormous amounts of pain and money from being inflicted on the people we love after we're gone.

Here are four estate planning issues to consider if protecting your future is important to you.

Don't leave your residual estates to your spouse personally

If your Will directs that your residual estate is bequeathed to your spouse you are, in effect, adding to their asset base. This places assets at risk and also prolongs gifting programmes.

A better approach is to bequeath the residual assets of your estate to a trust. Bequests under a trust are free of gift duty restrictions meaning that the assets lie within the trust without the need for them to be gifted.

The surviving spouse is then not burdened with the additional gifting programmes.

Not forgiving any ungifted loan balances

If you have a trust and you are conducting a gifting programme you need to make sure your Wills "tie in" with the trust. This means that Wills should forgive any ungifted loan balance owed to you by the trust. This brings gifting programmes to an end and prevents the surviving spouse from being burdened with extra gifting.

There is however an important proviso to this: Make sure you have two deeds of acknowledgement of debt – if you are to forgive any ungifted loan balance in your Will you need to make sure that you have separate deeds of acknowledgement of debt.

One of the pitfalls we often see is joint deeds of acknowledgement of debt. Where a trust recognises a debt to two spouses jointly, on the death of the first spouse the survivor inherits the full gifting programme.

This is obviously not ideal and can be avoided if you have two separate deeds of acknowledgement of debt and separately provide to forgive those under your Will.

Not thinking about the succession of your trusts

We often see trusts established with the power of appointorship passing to a person nominated under their current appointor's Wills or to the executors of their estate.

Then we find that no such nomination is made in the Wills or our clients are unaware of the fact that their executors of their estates will assume this important power in respect of the trust.

Therefore it is very important from an estate planning perspective to understand who holds the power of appointorship and how it is passed on. In our view the best practise is to have the trust deeds make it clear that a successor to holding the power of appointorship can be named in your Wills and name them there.

If you would like your situation reviewed, you can contact us and arrange an interview. It costs nothing to take the first step. We'll make recommendations that will be easy to understand. And when set up, these structures will ensure that any surviving spouse or family members will not be unduly hurt.

The Professional Trustee Team
The Professional Trustee Team
© Gilligan Rowe & Associates LP

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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
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Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.

We help new, small and medium property investors become long-term successful investors through our education programmes and property portfolio planning advice. With our deep knowledge and experience, we have assisted hundreds of clients build wealth through property investment.

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