Estate Planning
Lawyers

An estate plan records what you want done with your assets in your estate when you die, or if you could no longer make decisions for yourself.  It includes documents, such as:

1. your will;
2. binding death benefit nomination(s); 
3. enduring power of attorney; and
4. appointment of medical treatment decision maker.

Your Will 

Your will is a legal document stating what you want to happen to your assets when you die. Your will covers:

1. who will administer your estate and carry out your wishes (executor);
2. who will look after your minor children (guardian);
3. who will be the financial controller of any asset left in trust (trustee); and
4. who benefits from your estate (beneficiaries). 

Binding Death Benefit Nominations  

A binding death benefit nomination directs how your superannuation is to be paid when you die. 

You can nominate either:

1. a dependent, such as a spouse or child, or
2. your estate. 

If you do not have a valid binding death benefit nomination in place the superannuation trustee decides how to pay your superannuation. 

Enduring Power of Attorney

An enduring power of attorney allows someone to make financial and legal decisions for you, including if you are unable to make decisions for yourself.  

You can appoint more than one person, to act jointly or separately. 

Appointment of Medical Treatment Decision Maker 

If you are unable to make decisions for yourself, your medical treatment decision maker will be called upon to make those decisions. 

You can appoint more than one person, but only one person acts at any one time.

I often get asked: do I really need a lawyer to draft my will, ‘can’t I just write my intentions down on a piece of paper or get a DIY will kit’. You can, but at the end of the day a will is a legal document and if you fudge it there is no cheap fix. The jurisdiction for estate matters is the Supreme Court. 

“But I have a simple estate” I hear you say…. Is there really such a thing as a simple estate? Drafting a will is more complex than it looks. There are tax considerations, risk of potential claims, and other technical nuances that are unlikely to be covered in a will kit. The will is only part of the picture. You also need to consider what happens to assets which sit outside of your estate, such as superannuation and life insurance.

If any of the following situations apply to you, you DO NOT have a simple estate and it is recommended that you get legal advice on your estate plan: 

1. You have more than $500,000 in your estate (including superannuation and life insurance).
2. You are in a blended family, i.e. you or your partner have children from a previous relationship. 
3. You intend to make no provision or a lesser provision for a spouse, de-facto partner, child, step- child, a registered carer, or other member of your household.  
4. You intend to make provision for a person with a special disability. 
5. You or your partner own a business which is operated through a company, trust or partnership.
6. You or your partner are involved in a family trust or unit trust. 
7. You or your partner have a self-managed super fund.

A common mistake people make is assuming the will can gift assets that do not form part of the estate, such as jointly held assets, assets held in trusts/ companies, and superannuation. 

Sometimes it is not clear-cut whether an asset will form part of an estate, e.g. whilst superannuation generally sits outside of the estate, it can be paid to the estate if there are no dependents or if there is binding nomination in favour of the estate. 

Below is as a diagram of what generally sits inside and outside of the estate.

When you own property as joint tenants, it means that:

• You and the other owners have equal interest in the property; and
• If one of the owners dies, the property will automatically pass to the surviving owners. This is called a right to survivorship.  

When you own property as a tenants in common, it means that:

• You and the other owners own the property in defined shares;
• The shares owned by each owner can be equal or unequal. For example, you may own 99% with the other owning 1%.
• There is no right to survivorship, meaning you can dispose of your share by will.

It is very important that you understand how the property is held because it impacts on whether the property can be dealt with by your will. If you are unsure, we can do a title search to confirm. 

A testamentary trust is a fancy way of saying a trust in a will. Trusts work by separating the control of the asset from the benefit. The trustee is the legal owner of the asset holding it on behalf of the person who benefits from the asset (the beneficiary). 

If your financial adviser or accountant is talking about a testamentary trust, they are most likely referring to a testamentary discretionary trust. Which is a fancy way of saying a family trust in a will. Don’t know what a family trust is? It is a trust where there are numerous people who may benefit and the trustee determines which people are to receive trust funds, and how much each will receive.

There are several reasons for the use of a testamentary discretionary trust: 

1. asset protection for your beneficiaries, i.e. from a relationship breakdown or bankruptcy; and  
2. tax flexibility, i.e. through income streaming to beneficiaries, including to minors.

The asset protection comes from the discretionary nature of the testamentary trust. Within a testamentary discretionary trust structure, the beneficiary does not own in the assets of the trust. Rather they have a mere expectation to be considered when the trustee makes a distribution. Having no interest in the trust property makes it difficult for creditors to get an order on the trust property or for a party in a family law dispute to argue that trust assets be included in the marital pool.

The tax flexibility of a testamentary discretionary trust comes from the ability to income stream to beneficiaries.  What does this mean? The income earned from investing the trust assets can be divided up between your beneficiaries who pay tax on this income based on their marginal tax rate. Unlike family trusts, you can income stream to minors at their individual tax rate and take advantage of the $22,000 tax free threshold for minors.  This is the only environment where you can receive such favourable tax treatment.

You don’t have to be a high net wealth individual or a particularly complex estate to benefit from the use of a testamentary trust. If you have $500,000 or more in your estate (including superannuation and life-insurance) your beneficiaries could benefit from the use of a testamentary trust. 

You should consider the use of a testamentary trust in the following situations: 

• You are concerned about your spouse re-partnering after you pass away and your children’s inheritance going to the second (or third) wife/ husband. 
• You are leaving your estate to children or grandchildren who are under the age of 18. Did I mention, each minor could receive approximately $22,000 per year tax free income from your estate through a testamentary trust? (Mum you have three grandchildren, that is $66,000 per year!).  
• You own an income producing asset e.g. an investment property or personally owned business premises.  
• You are leaving an inheritance to a child or grandchild who isn’t the best at managing money (to put it gently);  
• You are concerned about your (grubby) son or daughter-in-law getting their hands on your estate in the event of marital breakdown. 
• One of your intended beneficiaries is bankrupt or bankruptcy is on the cards.
• One of your intended beneficiaries is overseas.

There are numerous possible approaches, depending on the size of your estate and the nature and severity of the disability. 

A discretionary trust for a person with a disability may be appropriate. However, Centrelink will attribute the value of the trust to the beneficiary which may affect the person’s entitlement to an income support payment (such as the Disability Support Pension).  

Another option is gifting assets through a special disability trust. A Special Disability Trust can have assets worth up to $626,000 (indexed annually and current as at 1 July 2014) which are exempt from the asset test for income support payments. To be eligible the beneficiary must be assessed by the Department of Social Services as being ‘severely disabled’. 

Superannuation trusts can also be adapted to provide pensions for the life of a child provided they continue to meet the requirements of disability tests under superannuation law.

I was speaking to my mum (a shop keeper) the other day and to my horror she mentions she wanted to make some changes to her will and was planning on writing the changes on a piece of paper instead of going to see her lawyer. THIS IS EXACTLY HOW PEOPLE END UP IN COURT arguing over whether that piece of paper was an informal will and whether it revoked her previous will. 

I have also seen original wills (yes plural) where “someone”, maybe the will writer or maybe not, had crossed out sections and handwritten changes.  The difficulty you have in that situation is proving the will-writer’s intentions. Did he/she intend for the changes to be binding or was it merely a draft? Did anyone see him/her make the changes? Can anyone identify the will-writer’s handwriting? When were the changes made? Did the will-writer have testamentary capacity at the time?

If you want to make changes to your will get a lawyer to do it to ensure that it is done correctly. The lawyer will either create a new will revoking the previous will, or they will draw up a document called a “codicil” amending the original will.   

There are only 3 ways to revoke or cancel a will: 

1. physically destroy the will; 
2. marry – unless the will states that it was made in contemplation of marriage; or 
3. make a new will, revoking your previous will. 

Physically destroying the will complicates matters. You may have intended for a previous will to apply. However, all previous wills would have been revoked by your last will if it was drafted and executed correctly.     

Revocation by marriage also isn’t that straightforward. Marriage does not invalidate any clause appointing your spouse as an executor or trustee, or any gifts left to your spouse.  Divorce on the other hand, does not revoke your will. However, divorce will revoke any part of your will appointing your ex-spouse as an executor or trustee and any gifts left to your ex. 

If you are wanting to revoke your will, it is recommended to make a new will to avoid any unintended consequences.

First let me get one thing straight, the Government WILL NOT get your estate if you don’t have a valid will when you die. State Trustees may step in to administer your estate where no family members are willing to act. However, ultimately your estate will go to your next of kin. 

A person who has died without a valid will is said to be “intestate”. Pronounced “in” – “test” – “ate”. Intestacy laws in your state and territory will provide how your estate is to be administered. 

Not having a Will means

• You don’t have a say about who will benefit from your estate. This can mean your assets are shared with relatives you don’t want to benefit.
• You don’t have a say about who manages and makes final decisions about your estate.
• Your estate may take longer to settle (more than 12 months)
• The cost to settle your estate may be higher than if you had a will