Importance of Tax Planning for the Terminally Ill
Tax planning is significant at any stage of your life. It is particularly important if you have been diagnosed with a terminal illness. Organising the financial affairs prior to passing away will help the executor of your Will to administer the estate more successfully. There are many issues to consider, however careful planning will heighten the chances of your instructions coming to fruition.
The first step is to ensure that there is a valid Will in place. This ensures that your estate will be distributed according to your intentions. You might have made a Will a long time ago, but a subsequent divorce or marriage may revoke it. Another point to bear in mind is that not all assets can form part of the estate. For example, assets owned by family companies cannot be dealt under the Will.
If you are thinking about donating cash or property to a charity after your death you should consider the tax implication of this transaction as the deceased estate cannot claim a deduction for a testamentary gift.
Superannuation death benefits payout is another issue to consider. If your superannuation will be passed on to adult children, the taxable component will be subject to tax. However, you may satisfy one of the conditions of release (e.g. terminal medical condition) and receive your superannuation benefit balance as a tax-free lump sum prior to death.
If you have a life insurance policy outside superannuation, you might need to review a beneficiary nomination to ensure that the proceeds will be distributed to the intended person(s).