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Creating equity between beneficiaries when planning your estate

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The first principle of estate planning is to decide who should receive your assets following your death. For many people this means sharing their estate equally between family members.

To achieve any meaningful estate planning, you must have a valid Will, otherwise State and Territory based intestacy laws will decide the outcome.

Even with a valid Will, you cannot deal with all of your assets. For example, a Will is unable to deal with:

a home owned jointly with someone else, normally your spouse
other jointly-owned investments like bank accounts
superannuation (unless the fund pays the death benefit to the
assets owned by a family or company trust
benefits of certain life insurance contracts.

You may also want to leave specific assets to specific people for a variety of reasons. For example, you may think that leaving one child a portfolio of shares balances leaving another your superannuation where they are of a similar value. But because of the way the tax system works, on final distribution the reality may be quite different.

What it means for you
There are 2 common ways to deal with this imbalance. One is to ensure your Will includes an equalisation clause. The other is to create balance with life insurance.

An equalisation clause requires your executor to treat particular assets, including non-estate assets, as if they all form part of the estate assets and adjust the distribution to your beneficiaries accordingly.

Life insurance lets you nominate a beneficiary to receive a specific amount in the event of your death. This allows a particular beneficiary's share to be topped up to deal with any imbalance.

If you need help planning your estate or would like more information, speak to your adviser.

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