If you have been reading my blogs and watching my webinars there is no doubt, whatsoever that estate planning is the next big thing (right now). With an expected $2 Trillion set to pass between generations over the next 20 years and many clients with no or ineffective estate plans that means investment properties, shares, superannuation and the principal place of residence are at risk. Let’s face it with this sort of money, expect legal challenges galore and with an average cost of 10+% of the estate going in legal fees to fight a Family Provisions challenge, litigation lawyers’ incomes and fancy lifestyles will be underwritten for decades to come.
Challenging an estate under the Family Provisions laws can be undertaken by any “eligible person” which is the traditional spouse and children, but can you believe it, extends to former spouses, anyone who is partially dependant on the deceased, adopted children and grandchildren. The essence of the claim is that you believe you deserve more than was received under the deceased’s estate. It’s no wonder that so many estates end up with family provision claims that take years and with the Supreme Court the court of jurisdiction, it’s happy days for the lawyers!
And to think that estate planning lawyers that you are using, for lack of knowledge of the power of the SIS Act 93 in terms of estate planning, direct superannuation into the estate – opening a bigger pot for a challenge. So, lawyers litigate mistakes that lawyers have created.
Now I have a legal degree, but I am not a practising lawyer, just a specialist at Abbott & Mourly lawyers. But I know my stuff and what is important to your clients. Protection of their assets and wealth from falling into hands most foul after death. In simple terms can we trust our child or spouse not to get involved with a ne’er-do-well? And if former spouses, grandkids and others we have supported get to kick the Family Provisions can, it can be a huge worry.
So, what to do? Build a Moat.
A Moat is a fortified structure built around your client’s structures to prevent the adventurous combatants attacking the client’s financial castle without second thoughts. If you can get a great moat, filled with crocodiles and booby traps then it will shut down even the best Family Provision litigator. After all, look at how many dependants have tried to attack binding death benefit nominations, under federal laws, only to fail.
The first rule of thumb of Moats. What happens in a SMSF stays in the SMSF. Any superannuation benefits of a deceased should stay within the fund or be paid out of the fund as a lump sum, commutation or into a death benefits trust (from the SMSF not the Will). If we get this right using a SMSF Will and other tools, then we can build a Moat around the SMSF and ensure it does what is expected.
The same goes with any Discretionary Trust. We need to build a chain of appointors and a corporate trustee with reversionary shares as between appointors. Most trusts I see have no succeeding appointor and with shares of a corporate trustee being part of the deceased’s estate, expect the trust to fall straight into the lap of the Family Provisions lawyers. Remember these guys are super aggressive and hard core. They are working for no win no fee, so the Moat is essential. Putting a Moat around a Discretionary Trust is much the same as a SMSF if done right.
And here’s the deal. Accountants generally build Moats around a client’s affairs for asset protection purposes during their life but fail to go one step further, when they die and dare, I say it when they lose their mental capacity. But I know what to do and how to do it. In fact, I have automated the Moat on LightYear Docs and it is my gift to the accounting and financial planning professions. There is absolutely no reason for a well- seasoned and trained accountant or financial planner not to become the next generation of estate planning specialists, building Moats around a client’s castle including helping to build, with automation tools, Wills and Testamentary Trusts.
I would love to invite you to join me in this great new adventure and give our client’s what they want: Safety – Certainty and Security, delivered quickly and efficiently by their trusted adviser. If you would like to see it in action and what all the noise is about take an hour out of your busy schedule and watch this webinar I did with some Moat specialists – The Moat in Action Webinar
With $2 Trillion changing hands, what an opportunity. So, research look at your client base and ask yourself – how many Moats could be built there?