To Fail to Plan is to Plan to Fail
Wealth Management Solutions | Specialist Advice Solutions | Significant Wealth Owner Solutions

Tristan Bowman, Manager Anne-Marie Tassoni, Partner Paul Ashworth, Managing Partner

The proverbial ‘burying your head in the sand like an Ostrich’ is a very poor solution to properly addressing one’s affairs in the knowledge of the two certainties in life…death and taxes.
Posted 12 February 2018

The proverbial ‘burying your head in the sand like an Ostrich’ is a very poor solution to properly addressing one’s affairs in the knowledge of the two certainties in life…death and taxes. Such has been the extensive and substantial accumulation of private wealth in Australia over the last 30 years that ‘burying one’s head’ is likely to lead to a cascade of undesirable, unwanted and probably costly outcomes.

Our life circumstances change over time encompassing marriage, family, wealth, business property, investments and debt. Invariably, things become more complex through our life’s journey and ignoring or deferring proper, considered thought is always a poor option. You might believe your affairs are too simple to warrant any formal plan, or at the other end of the spectrum, your affairs and family arrangements are so complicated that it falls into the ‘too hard basket’; perhaps you are too young, too healthy, too busy to concern yourself with these matters today. However, what if the proverbial bus came along tomorrow…how would you like the ‘chips to fall’? You may also or alternatively want to benefit your heirs during your lifetime but don’t know how to effectively structure yourself and such gifts for an optimal outcome.

In intergenerational wealth transfer and planning, we observe five main shifts:

  1. Passing wealth on during your lifetime
    As compared to times past, wealth in Australia has grown exponentially over the last 25 years and so too have people’s complexity, circumstances, structures and overall affairs. For the first time in Australian economic history, the ‘baby boomers’ today have wealth surplus to their own needs. They can, and many are choosing to, sustainably pass on some of the wealth during their lifetimes (to their generation X & Y children) rather than just on death through the ‘age-old’ process of a Will and change of control arrangements. Intergenerational wealth transfer and estate planning is now a more dynamic process.

  2. Unabated relationship breakdowns with financial complexity
    Financial affairs and structures to conduct business, hold assets and accommodate debt have complexity (which tends to increase with people’s wealth and life circumstances). Breakdowns in personal relationships, where wealth has been passed down, requires proper forward planning from both the donor and the beneficiary.

  3. Complex families – remarriage, new relationships, extended families
    A corollary to relationship breakdown is subsequent new relationships and extension of an existing family. There is obviously sensitivity in the various inter-personal relationships combined with the complexity of financial arrangements. The prevalence of trusts in wealth and business structures and effecting intergenerational changes in control require adroit consideration and planning.

  4. Desire to grow and protect the legacy for future generations
    Wealth accumulated over an extended period is typically on the back of knowledge and hard-earned experience. Ensuring that wealth is protected but not hamstrung is usually an essential requirement. The controllers of wealth view solid foundations of governance and conduct as necessary to ensure sustainability of wealth long after they have gone.

  5. Business succession and continuity
    It is increasingly rare for private business succession to pass to family members. If this were to occur inadvertently due to a critical health event of the major shareholder, much angst, recrimination and unwanted outcomes are likely to result. For business owners it is recommended that a business succession strategy be formulated, and importantly that it integrates with business continuity arrangements and an estate plan.

The issues involved are many and varied. Cameron Harrison’s partners have been delivering specialist advice to business owners and families for over 50 years. Through our defined planning methodology, our clients gain access and receive a careful and properly integrated wealth framework. A critical component is ‘Intergenerational Wealth & Estate Planning’ which provides for the effective transfer of wealth from one generation to the next, whether that be during their lifetime or after they have passed.

Especially with today’s ever-increasing complexity of tax law and financial structures, a well-constructed estate plan is necessary to protect against significant risks without over-complication.

An estate plan helps to protect against three key risks:

Tax risks

  • Implicit ‘death taxes’

  • Sale or involuntary disposal of assets

  • Payout of superannuation balances giving rise to unnecessary tax, particularly in light of the new legislation introduced 1 July 2017

Asset protection risks

  • Matrimonial – a spouse remarries, or a child’s relationship breaks down causing wealth to be disseminated outside of the immediate family unit

  • Commercial – a claim is made against a business owner or self-employed person, such as a malpractice suit against a medical professional

  • Personal – dependencies among the family such as disabilities, financial irresponsibility or addictions

Economic risks

  • Investment risk – market fluctuations, the inappropriate allocation of assets with reference to the needs and objectives of the beneficiaries, longevity risks

  • Conduct risk – lack of governance, assets/businesses mismanaged or controlled by those with inadequate skill and experience

Cameron Harrison operates a tailored approach to the various plans that it undertakes for clients, above all mindful that our focus is to tease-out the issues and concerns. Whilst we act to facilitate the plan, of particular value to our clients is the extensive knowledge and experience we are able to impart throughout the process with the benefit of an intimate and in-depth understanding of their financial affairs and family circumstances.

Through our Plan for Peace of Mind Process, all relevant issues, needs, concerns, risks and opportunities are dispassionately identified, and actions put in place, prioritised and addressed in an orderly manner.

For more information on our approach to Estate Planning or any other enquiries please contact us on (03) 9655 5000.

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