Tuesday, June 17, 2014

What strategies are there available to protect at risk beneficiaries?

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘What strategies are there available to protect at risk beneficiaries?’ at the following link - http://youtu.be/Joz2vYxhcDY

As usual, a transcript of the presentation for those that cannot (or choose not) to view the presentation is below –

The obvious solution is to try to minimise the number of distributions that go to the at risk beneficiary. That’s obviously a lot easier said than done. Particularly from a tax perspective, there is a bias towards making sure that the income does flow out to an individual beneficiary, particularly if there's a capital gain to be distributed.

Leaving that to one side, there are other ways to manage it, the biggest one seen in practice is making sure that the recipient beneficiary is themselves not exposed.

The classic example would be using a corporate beneficiary or company as the recipient. In that scenario, it's important to remember that the ownership structure of the shares in that company is going to be vital.

You don’t want to create a situation where even though the beneficiary exposed doesn't directly have the asset or the income distributed to them, they're the shareholder of the company, which is the recipient beneficiary. The risk is that the wealth is effectively in just as exposed a position as it would have otherwise been.

Until next week.