There is no obligation to inform your relatives, particularly your spouse or children, of the contents of your will, nor are they entitled to know what is in the will unless you wish to reveal it to them.

However, when considering how you wish to divide and distribute your assets on death, I ask the question, “have you considered how that inheritance to your child or relative will affect their income tax, capital gains tax, financial position and income pension benefits they receive?”.

Remember your will is your last opportunity to make provision that is of great assistance to your family.

Let me give you examples:

  1. A child of yours as a beneficiary of an estate and whilst working generally pays tax on income at their marginal tax rate. Should they receive additional income from their inheritance, that income will result in their paying more tax and may result in them moving from one tax bracket into a higher one.

    There is a solution to this as your will can provide that instead of you leaving the asset to them personally, the income earning asset is left to them with the option of them holding it in a discretionary trust in a will. This enables them to do some tax planning in a manner that is of benefit to your children, their spouse and grandchildren. It also, incidentally, will save them a significant amount of tax.
  2. Although we do not have inheritance tax in Australia, Capital Gains Tax may apply to assets received from an estate. There are a number of principals in regard to capital gains which include the following:
    • Death of a person does not normally constitute a taxable disposal for Capital Gains purposes
    • It does not represent a new acquisition by either your executor or your beneficiary. This may, at that time, create a Capital Gains Tax event and a necessity for assessment. If your estate or a beneficiary sells the asset received, which is assessable for Capital Gains Tax, care needs to be taken
    • There are special rules in regard to beneficiaries who are foreign residents
  3. Is one of your beneficiaries in receipt of Centrelink benefits? This is a common and frequent problem for beneficiaries who receive an inheritance. The inheritance received can either result in an increase in the assessable income received by the pensioner or the sum of the assets that are assessable for the purposes of determining a pension entitlement. The result may be a reduction or even loss of pension entitlements.

    It is important to note that the loss of pension entitlements is not just the income, but also benefits for medical, pharmaceutical, transport and accommodation concessions.

The takeaway message is when considering who is to benefit in your will, take into account their situation. It is important to talk to an advisor who understands these impacts upon your chosen beneficiaries, particularly your family.

We at Turnbull Hill Lawyers understand how this can apply and can discuss it with you or liaise with your financial advisors and accountants in that regard.

We can assist you to ensure your family get the greatest benefit and flexibility from your efforts when they receive your inheritance. However, it is necessary that this be put into place in your will as it cannot be done after your death.

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