Executing an estate with a tax-effective result for all

Key services

  • Estate planning
  • Capital gains tax
  •  Non-resident taxation
  • Inheritance tax

Estate planning is a critical part of wealth planning. It sets out the legally binding conditions of how a person’s wealth – their legacy – will be distributed and used after they die. For families with considerable wealth, estate planning can be a complex affair involving the distribution of wealth and assets to family members, organisations, causes, and more. Other considerations include the estate’s value, debts that need to be paid off, and any taxes that may be owed. The estate executor will need to ensure that all these requirements are met before distributing the assets to the beneficiaries. In some cases, this can take months or even years to complete.

The challenge
A client had passed away, and the executors of the estate required assistance with the distribution of the assets to the estate’s beneficiaries. A complex issue arose because one of the beneficiaries was a foreign tax resident. While there are no inheritance taxes in Australia (certain superannuation and capital gains taxes may apply), different rules apply to non-resident beneficiaries. As a result, in some cases, capital gains tax will be levied on the inherited assets.

The solution
We liaised with the executor of the estate to ensure the most tax-effective outcome from the distribution of assets to the residual beneficiaries in accordance with the Will. This included dividing the investments between each beneficiary and liaising with their financial advisor to sell the equities on the market to allow for the distribution of cash to the foreign tax resident.

We met with the family and beneficiaries to ensure they understood how trust funds worked and the implications of setting up Testamentary Trusts. This also included discussions with the foreign tax resident to ensure that she understood why her distribution from the estate was different – due to her residency status. The client and the beneficiaries were all incredibly appreciative of our assistance in navigating the tax framework to produce a tax-effective distribution result.