%20(1).png){kind=small}
Inheritance Tax Advantages
No death taxes? No death duties? No Inheritance taxes?
What about income and capital gains taxes on inherited wealth?
Income Tax
While death taxes have been abolished, Will owners must consider the income tax that their beneficiary’s inheritance will be subject to.
Will Wizard® provides opportunities for family members to minimise income tax that their inheritance will be subject to.
By inheriting via Will Wizard’s testamentary trusts, beneficiaries are given the option to reduce personal income tax by splitting income from the investment of the inheritance between family members on low tax rates (i.e. spouse, children under 18, low income earners).
The beneficiary, who controls their own trust, can choose to distribute income to minor beneficiaries of the trust.
For example, a beneficiary is able to distribute $18,200 of income tax-free to family members on lower tax rates to pay for their living expenses, education, welfare etc.
For a one million dollar inheritance, assuming a 5% per annum return of $50,000 per year, if this income was distributed among family members on lower tax rates, over ten years a beneficiary could save up to half a million dollars in income tax alone.
A testamentary trust has special powers and can only be created by a Will on the death of the Will owner. They are cheap and simple to operate, and act as a beneficiaries 'personal bank' they control.
Learn more about testamentary trusts here.
Capital Gains Tax
It is also important that Will owners consider the capital gains tax that their beneficiary’s inheritance will be subject to.
Will Wizard® provides important opportunities for family members to minimise capital gains tax their inheritance will be subject to.
Gains Tax is not triggered when an asset belonging to you passes via your Will to the executor or the trustee of a testamentary trust. Also there is no Capital Gains Tax when your assets are transferred from the trustee of a testamentary trust to a beneficiary.
As with the income of the trust, the trustee can select which of the beneficiaries of the testamentary trust should take the capital gain.
By choosing to distribute the capital gain to a beneficiary on a low or nil income, the capital gains tax liability can be significantly reduced.
Holding inherited assets within a Will Wizard testamentary trust offers beneficiaries an opportunity to defer the need for the sale of assets (and therefore capital gains tax) until later when more numerous beneficiaries come into existence. Tax deferred is tax saved.
A testamentary trust has special powers and can only be created by a Will on the death of the Will owner. They are cheap and simple to operate, and act as a beneficiaries 'personal bank' they control.
Learn more about testamentary trusts here.
Special Tax Concessions
Normally penalty rates of tax apply to income derived from trusts which is paid to children under age 18.
However the Tax Act allows children under age 18 who receive income from a testamentary trust to be treated as adults for income tax purposes.
This could mean significant tax savings for beneficiaries who can split income with minor children.
As with the examples above, a beneficiary is able to distribute $18,200 of income to family members on lower tax rates to pay for their living expenses, education, welfare etc.
All Wills from Will Wizard® provide beneficiaries with the option to inherit via a testamentary trust.
Learn more about testamentary trusts here.
Superannuation
Will Wizard® includes provisions and directions for executors regarding super paid to the estate, including options for a spouse, partner or child to receive tax effective pensions.
This helps to minimise the chances that an ignorant executor who does not seek proper advice does not make decisions that deny some beneficiaries the receipt of a tax effective pension.
Throughout Will Wizard’s supplementary guides and documents, executors and beneficiaries are strongly encouraged to seek professional legal and financial advice.
Please note: If you have certain complexities such as family members with a disability, complex business interests or are part of a blended family we suggest you seek the advice of a experienced estate planning solicitor. If you are unsure about any of the information provided here please seek professional advice or contact us.