Consider tax implications of your estate
If you currently earn, or will be earning, an income from an estate it could be creating an unnecessary tax burden for you.
Take the following situation as a simple explanation of the type of tax burden that may be created:
Sue’s assets, including her family home, were valued at $500,000 and she had no liabilities. She obtained a simple will which left her assets equally between her daughter Jessica and son Sean.
At the time of Sue’s death, Jessica was married, had three young children and both Jessica and her spouse earned an above average wage. Sean was going through a messy divorce.
On Sue’s death each of the children received an equal share of their mother’s assets as an outright gift. There was no flexibility and they had no input on when or how they could use or protect their share of their inheritance.
The income earned from Jessica’s share of the estate pushed her income into the highest tax bracket and increased her tax liability. If Sue had included a testamentary trust in her will, Jessica would have had more flexibility in distribution of the income earned on her inheritance. Her children could receive up to $20,425.00 tax free each year – saving Jessica $19,608.00 in tax, including medicare levy.
For Sean, he lost the majority of his inheritance to his ex-wife in the family law property settlement. If Sue had included a testamentary trust in her will, Sean would have been able to isolate his estate entitlements from matrimonial assets. This would have protected his estate entitlements from being considered as property in the family law property proceedings, although the court can have regard to his inheritance as a “resource”.
These kinds of situations highlight the importance of a thorough and specific will for your unique circumstances to ensure that your assets are protected and so your beneficiaries get the best result for their situation.
Contact the Osborn Jensen office to discuss your will, or any other legal concerns you might have.