EPFL – leaving things right for your family is an Authorised Representative of RI Advice Group Pty Ltd

Disclaimer RI Advice Group Pty Ltd, ABN , holds Australian Financial Services Licence Number and is licensed to provide financial product advice and deal in financial products such as: deposit and payment products, derivatives, life products, managed investment schemes including investor directed portfolio services, securities, superannuation, Retirement Savings Accounts. The information presented in this seminar is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. RI Advice Group strongly suggests that no person should act specifically on the basis of the information contained herein but should obtain appropriate professional advice based on their own circumstances. 1 Important Notice

2 Family succession planning – the overall picture The importance of a Will Superannuation Taxes The next generation The value of professional advice Agenda

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4 Family succession planning extends to… Superannuation Life insurance Joint assets Asset protection Tax issues Power of Attorney Recording key information so it is accessible Educating your dependants and more… A standard Will may not be enough to protect assets and provide tax relief for beneficiaries.

5 Having the most appropriate net assets, placed in the hands of those you want to receive it, considering the where, who, when! What is family succession planning?

6 Family succession planning More than a plan to distribute certain assets A Will Instructions to distribute assets according to your wishes. Asset Protection Assets jointly owned Avoidance, minimisation and deferral of tax liabilities Minimisation of tax Planning for illness or incapacity Life insurance proceeds Selection of guardians/ representatives/ other fiduciaries Family succession planning overview

7 Preparing a Will is important Control Avoid family disputes To choose beneficiaries Appoint a guardian and name an executor Review

8 Is having a Will enough? If you answer ‘yes’ to any of the following questions, you may have more complex issues to consider: Do you have superannuation or life insurance? Do you have shared assets? Do you owe money? Are you receiving a Government pension? Have you bought any assets since September 1985? An effective family succession plan extends to asset protection and the ongoing minimisation of income tax for your beneficiaries

9 What are considered estate assets? All assets owned by the deceased at death Excludes: - Joint assets - Life insurance proceeds - Assets of companies/trusts - Superannuation (unless paid to the estate)

10 What happens to the business on the death of one of the owners? Is there a buy/sell agreement in place? Is it properly drawn up? Is there an associated insurance policy which enables the remaining owners to pay the deceased’s beneficiaries without having to sell the business? What about small business estate planning?

11 Don’t let your assets fall into the wrong hands!  Beneficiary’s creditors  Tax office  Former spouse  Child’s ex-spouse  Spouse  Children  Grandchildren  Trust

12 Two key issues WhoThe recipient of your choice Tax? Strategies for making as least an impact as possible

13 Structures to consider Discretionary family trusts – assets not owned by client Child support trusts Testamentary trusts Superannuation

14 Superannuation Restrictions Binding nominations Legislation

15 Tax effective distribution of assets? Superannuation Super lump sum death benefits paid directly Dependant ALL Tax Free Non-dependant Tax free element = 0% Taxed element =17% Untaxed element 32% Estate Estate pays tax according to distribution of assets Dependant ALL Tax Free Non-dependant Tax free element = 0% Taxed element = 17% Untaxed element = 32% Illustrates payment from accumulation phase of superannuation

16 How are estate assets distributed? LPR Other assets Estate assets Super Dependants WillIntestacy Family provision rules

17 Benefits of Life Insurance Cover CGT liability Maintain family’s lifestyle Pay off debts Pay cash legacies

Accidents happen, and no one is immune Source: ABS, Causes of Death, Australia, Source: Road Deaths Australia 2014 Statistical Summary, Bureau of Infrastructure, Transport and Regional Economics 3. Source: Safework Australia

19 Planning your estate Financial Adviser Solicitor Accountant... requires the advice of other professionals You

20 Don’t delay the inevitable Family succession planning and working out intergenerational finances is not just for the very wealthy It’s important for all adults, especially if dependent children, debts, blended families or family businesses are involved What issues do the next generation face?

21 The next generation You might have your current finances in order but what if something were to happen to a loved one? Would the people and possessions that matter to you be well cared for? Where would all your hard-earned assets end up? And what about your loved ones? – how are you children and grandchildren likely to manage the money gained through an inheritance?

22 Your beneficiaries – what’s their life stage? Child Marriage Mortgage Children Lifestyle change Retirement

23 What are their issues? The average Australian family has a number of financial issues: Housing affordability is at an all-time low, debt is at all time high A lot of marriages end in divorce - in 2013, there were 47,638 divorces granted in Australia1 The cost of raising two children from birth until when they leave home is about $812,0002 Most people will spend over 20 years without employment income to sustain them in retirement, do they have enough super to last? Men and women aged 45 – 64 have the highest levels of underinsurance (74%-83% of their total level of adequate insurance)3 Pension access and entitlements are undergoing review.

24 Case study Alex aged 36 years and his wife Helen aged 32 had three children under the age of 5 years when Alex was diagnosed with a brain tumour He was self-employed and was the sole source of income for the young family who had a mortgage of $250,000 Unfortunately the couple’s happy-go-lucky attitude meant they never considered terminal illness would happen to them so they had no insurance Alex had $30,000 in superannuation but no death or disability insurance through super because he was self employed at the time and not contributing to super

25 Case study Alex received his $30,000 payout due to terminal illness but nine months later when he passed away, the family had no money to live on Helen received financial help from both sets of parents while she lived on a single parent pension for a while and cared for her young children Helen then had to decide whether to sell their home and move in with her parents or continue to live in the home and depend on assistance from both sets of parents She chose to stay in the home and rely on parents for financial support Helen returned to work part-time while the grandparents babysat

26 Case study If Alex and Helen had addressed their personal situation with a financial adviser they could have provided finance and peace of mind for themselves and their young family They would have also relieved their parents of this burden on their own finances, lifestyle and retirement

Overall deaths in Australia in 2013 of people aged between 25 and 64 were 25, Source: ABS, Deaths, Australia 2013

28 How can you help your loved ones? Your hopes of a secure financial future for your family depend on how well you and your loved ones plan now If you want the beneficiaries of your estate spend their inheritance wisely it is recommended they seek financial advice to help them realise their dreams For decades, RI Advice Group has been showing clients how to make sure their assets are distributed in the way they want, to whom they want, in the most tax effective manner

29 Value of professional advice Your loved ones don’t have to be wealthy or thinking of retirement to get financial advice It’s about you and your family making the most of what you have and securing financial peace of mind both now and in the future

Case Studies

31 Case study 1 Case study Capital Gains Tax

32 Case study - CGT Zoe’s inheritance investment unit $ Sale Price 180,000 Less CGT30,000 Net Proceeds 150,000 Chris’s inheritance principal residence Sale Price 180,000 Less CGT Nil Net Proceeds 180,000 $ John owns  home unit as principal residence  an investment home unit His objective...?... to pass on a home unit of equal value to each child John Zoe Chris

33 Case study - CGT Executor Sale v Beneficiary Sale Estate holds: - share portfolio net capital gain $40,000 (after 50% discount) - $3,000 in other income Beneficiary on top marginal rate wants the cash Executor sells Tax on $40,000 gain*: $3,000 income =$5,522 Tax on $40,000 x 49% = $19,600 Result = $14,078 additional tax* Beneficiary sells * Ignores Medicare Levy

34 Case study 2 Case study Superannuation

35 Case study - Superannuation What are the tax implications of nominating Chris or Zoe as beneficiary of the policy? Age 15 and dependant Age 25 and non- dependant John Zoe Chris All Tax Free Up to 30%* lump sum tax (depending upon elements ) *Plus Medicare Levy

36 Case study 3 Case study Income Splitting

37 Case study - Income splitting Peter’s Estate $ Family can receive tax free TOTAL TAX FREE INCOME …….... $21,790 Rebecca invests $416 Rebecca $20,542

38 Peter’s Estate $ Family can receive tax free TOTAL TAX FREE INCOME $82,168 (about $42,000 MORE!) Includes effect of low income tax offset Will incorporates testamentary trust which invests funds Case study - Income splitting $20,542 Rebecca $20,542

39 Case study 4 Case study Family Law Property Dispute

40 Case study - Family law property dispute Janet is concerned David’s inheritance will be included in any divorce settlement Margaret Susan David Janet Edward (deceased)

41 Case study 5 Case study Creditor Protection

42 Case study - Creditor protection  Both aged 72 and concerned for daughter & grandchildren  Business in trouble  Mounting debts  Daughter liable  Potential bankruptcy Tom Jean Phillip Amy Sam

43 $ $ Case study - Creditor protection Phillip Jean $ Trust Trustee $ Tom Amy

44 Case study 6 Case study Social Security

45 Case study - Social Security Assets...  Their home  Other assets $800,000 including $80,000 in jewellery Receive age pension of approx $263 per fortnight in pension (combined) John Betty Sue

46 Without Family Succession Planning John receives  No pension  Access to Commonwealth Senior’s Health Card With Family Succession Planning John receives  $83 pension/fortnight Pension  Concession Card Case study - Social Security

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