• Overview
• Estate Planning
• Is my Estate Planning simple or complex?
• Simple Will
• What’s better for me, a simple Will or a “TDT” (Testamentary Discretionary Trust)?
• Can a Testamentary Discretionary Trust help my children if their relationship breaks down?
• Enduring Powers of Attorney
• Insurance and Superannuation
• Managing a simple Estate
Overview
Wills are simple until they aren’t. Good, hardworking people like us want to be actively involved in our life’s direction and write our own story. We don’t want to go with our music still in us.
We want a sense of being part of things and making special things happen. We need to be challenged, and have a feeling that we are steering our ship, instead of just reacting and wondering what happened as life flies by so fast.
We want to play our part, have our chance and be bold enough to build something for our families and community.
We want to have enough and be safe and we don’t want the assets we’ve built up over a lifetime to go to waste. We want them to go to the people we care about and love.
The more we’ve climbed the mountain, the more we’ve seen and maybe accumulated, the more we benefit from writing our story down and making sure our people are looked after. We’re looking forward to capturing that story with you.
And if you’re the one helping a friend or family member after their story is already done, we’re here if you’d like a helping hand to carry out their wishes. Reach out to start working with us now.
Estate Planning
A good Will is an opportunity for us to see if we are on track or off track. It might show where we have some gaps in our strategy. It’s a gift to family and friends and also ourselves. I think a Will is our opportunity to write our last chapter from where we are now. It might be simple, aspirational or a grand series of interlocking documents which provide a blueprint for the start of the sequel. It’s up to you.
So Estate Planning is not only a boring cost only useful for when we’re gone. Wills are a measuring tool, an organisational tool and an accounting, an audit, an exam if you will and a record of what we did, who we knew and how effectively we negotiated reality including family, friends and the other people and organisations in our lives. Reach out to share your story and start working with us now.
Is my Estate Planning simple or complex?
We want to make sure that our loved ones receive our hard-earned assets to ease the loss of our passing, maintain their standard of living, improve their lives or give them a good start. There are a number of sometimes surprising parts to that formula:
What (who) are the risks? Can I do anything about them? Can I give my assets safely to my loved ones? Can anyone try to take my assets after I pass away? Will my family and friends be trapped in litigation after I pass away?
- The first big question is: Do I have a ‘blended’ “Brady Bunch” type of relationship including step-children in current or previous relationship(s)? Some blended families require careful estate planning if you feel in your heart that someone might try to make a claim against your estate or your partner’s estate. It’s a balance between spending to buy protection now and the uncertainty about the prospect of a potential claim
- The second big question is: How likely is it that someone children including step-children or adopted children, dependants (limited group) or spouses (including de-facto spouse) in your family (or step-family) will try to make a claim. Family Provision Application against you or your partner’s estate when you pass away?
Who can try to make that kind of claim? It’s a small group including children, step-children or adopted children, dependents A limited group of people being substantially ‘maintained’ or spouses (including de-facto spouses). A ‘classic’ common scenario is when the step-child(ren) make a claim against their parent’s estate to reduce the step-parent’s share.
- The third big question is: What percentage of your assets are exposed to such a claim? Generally speaking, assets which are owned in your own name are exposed. Examples include cash in your own bank accounts or a house owned in your own name, not as joint tenants
- The fourth big question is: What is the likely dollar amount of my estate / assets I control? Do I have a business, companies or trusts? Do I have significant insurance or superannuation assets? Who are my beneficiaries? The more sprawling and successful our business and investment affairs, the more likely our estate planning will need to be carefully reviewed and designed.
- The final big question is: Are there estranged people in my life? Do I want to make sure that someone does not receive my assets when I pass away? This kind of scenario can introduce some complexity into estate planning.
Depending on the situation, many of the above can be managed in a cost-effective and robust way. Reach out to start working with us now.
Simple Will
John wanted to make sure his assets, including superannuation and insurance money went to his children and not his ex-wife. He said that they had already been through that in their property settlement.
His mother had been happy with the Will Clearman Lawyers prepared for her, and John wanted help to prepare his Will before his trip to the Great Barrier Reef. We agreed that there’s no need for Wills to be complicated and hard to understand. They can be clear and simple and get the job done thoughtfully and well.
We sent him our Wills and EPOA Helpful Guide and talked through the important details, including arrangements for his insurance and superannuation monies over a Zoom call. Later that week we sent John a draft Will asking for some further information to finalise his Will and the Enduring Power of Attorney he had asked for.
Once John was happy with the Will he made a time to come in and sit down with us to witness his signatures. He left his original Will in our safe custody and then took the Enduring Power of Attorney to his Attorneys to sign before returning it to our office. Reach out to start working with us now.
What’s better for me, a simple Will or a “TDT” (Testamentary Discretionary Trust)?
Whether a normal Will or a TDT Will might be better for you is a spectrum. On one end you have a simple situation / Will which gives most of the Estate away relatively quickly and hardly requires the trustee role and on the other end of that spectrum you may have young children and/or a large asset rich or business portfolio which would benefit from having the trust terms set out very carefully to avoid misunderstandings and to make sure that the intentions of the Will maker can be carried out.
Here are some of the relevant factors about whether a TDT Will might make sense:
- TimeframeThe estate will be managed for a long time, for example if the Will maker passes away unexpectedly early / with younger children.
- Assets Significant asset pool / business assets. A TDT Will makes sense if there are larger assets, benefits to a good tax environment and a longer timeframe required to manage capital / assets.
- Clarity If the Will maker would like their Executors / Trustees to have a clear roadmap and boundaries rather than an open slate to figure out as they go.
- Issues If children have substance abuse / spending / relationship issues.
- Changes Instead of making a lot of ‘control’ type changes to a standard Will, including adding complex trust requirements, it may be more cost-effective to just start with a TDT Will.
- Control Will maker wants significant control over assets and time.
Although we can’t offer tax or financial planning advice, we’re happy to connect our clients with excellent tax professionals we understand that a TDT Will may provide potential tax benefits. If there are multiple children you can set up multiple trusts in the TDT Will or a single trust if you prefer.
Set up Although a TDT is generally created when the Will maker passes away, couples may set up their TDT(s) in a few different ways (see three example situations). 1. TDT only created after last person standing passes away. 2. TDT created if person responsible for finances passes away first and when survivor passes away, their assets go to the established TDT (otherwise when the last person standing passes away). 3. TDT created when first person passes away and another created when the second person passes away. There are plenty of options depending on your situation.
Although trusts in normal Wills are (generally) governed pursuant to the Trusts Act 1973, the trust deed embedded in a TDT will often set out further information (as decided by the testator) like:
- Specify Appointor function and replacement process (Appointor role is generally to hire and fire Trustees)
- Nominate Trustee(s)
- Specifies how Trustees are to deal with capital and income.
- Powers of trustees (perhaps amending those in the Trusts Act 1973.
- Accounting information (periods, who gets money by default if not disbursed etc)
- Sets out normal provisions of a trust deed (including trustee powers) eg to lend money, mortgage property, occupy trust property etc. Reach out to start working with us now.
Can a Testamentary Discretionary Trust Will help my children if their relationship breaks down?
Parents hope that by setting up a Testamentary Discretionary Trust their assets will be quarantined by any claim made against a beneficiary of that trust. So we’re often asked by parents if a Testamentary Discretionary Trust will protect assets if their children go through a marital (or defacto relationship) breakdown. It’s a good question and the answer may surprise you.
It’s probably worth mentioning that there’s a fair amount of misinformation on this topic online, including from law firms.
Let’s go through what makes a trust useful to protect assets, when that protection may not be available and what can be done to protect your assets / their inheritance.
Three things first, trusts generally have:
- Beneficiaries who may receive distributions from the trust
- Trustees who carry out the day to day work of making decisions and managing the trust. For this kind of Will they probably have wide discretion about who receives the assets of the trust and when
- Appointors mostly to ‘hire and fire’ trustees to make sure they’re doing a good job
People often set up trusts to reduce business or financial risks compared to doing business in their own names. They want to cheaply and simply improve their tax position and manage their commercial risks.
There’s a spectrum from whether a court would likely consider a trust to be genuine or just some documents set up to avoid risk / tax / marital property settlement payments etc.
- If Joe Bloggs is the Trustee, Appointor and Beneficiary and the accounts show that Joe (as Trustee) regularly (or only) pays out money to Joe as the Beneficiary, it’s really the Joe Bloggs show and a court could consider that the whole trust is really all for Joe Bloggs’ benefit and Joe is just trying to create the appearance of a trust, without the heart a trust. There’s no real discretion being exercised here, it’s all just Joe, Joe, Joe.
- But if Joe Bloggs is the Trustee, someone else is the Appointor and Joe (as Trustee) regularly makes payments to John and Jane Doe as well as to Joe Bloggs, then it’s much less likely to be considered “the Joe Bloggs show”. It’s much more likely that a court would consider this to be a genuine trust rather than just a document designed to give Joe Bloggs some tax advantages by jumping through a couple of hoops and claiming that he has a trust.
Is there real independence in the roles and decision making and is real discretion being exercised by the Trustee in disbursing to various Beneficiaries?
So the answer to our main questionabout whether a TDT Will can provide protection from Beneficiary relationship breakdown is a very qualified “Yes” because jumping through the hoops to get that protection might mean that “the juice may not be worth the squeeze”. If the trust is genuinely set up with the intention that the Trustee manages the assets and has a track record of exercising discretion and distributing those assets to Beneficiaries, then the trust is much more likely to provide some protection for Beneficiaries going through a relationship breakdown.
What can you do to protect your family’s assets / their inheritance? A Binding Financial Agreement (already in place) between the child experiencing the marital or relationship breakdown can be an excellent tool to protect inheritances. Reach out to start working with us now.
Note, although we regularly assist clients with their Estate Planning, we want to confirm that we don’t offer any Family Law services, apart from answering this question regularly and assisting clients with Binding Financial Agreements (“prenups”). However, we are happy to connect our clients to our favourite and amazing family lawyers.
Enduring Powers of Attorney
Evan’s mother and father weren’t getting any younger so they decided to have Enduring Powers of Attorney drawn up. They carefully chose trusted family and friends to be their Attorneys because being responsible for significant money and health care decisions can be a big job.
Very luckily, their adult children also decided to have Enduring Powers of Attorney prepared because their son Evan lost capacity soon afterwards in an accident and now cannot make new short-term memories. He is in care and has been dependent on his sister Peta to kindly manage his arrangements for the last ten years.
We normally prepare two original Enduring Power of Attorney documents. This is because the Titles Office keeps one original permanently if the Attorney wants to deal (Buy, sell, mortgage etc) with property. This happens for example if someone needs higher care and the family home is sold to raise funds for aged care assistance.
Once we’re discussed some of the most important items including choosing suitable attorneys we prepare the documents. After clients come in to have their signatures witnessed, they take the documents to have the attorneys sign and then return the Enduring Power of Attorney for us to hold in safe custody. They are then held safely without charge and released if the correct authority is provided. Reach out to start working with us now.
Managing a simple Estate
Tania’s mother had just passed away and she wasn’t really sure what to do next. Because she was named as the Executor (Person responsible for gathering in the assets and making sure liabilities are paid then distributing any surplus according to the Will in the Will), she knew she had to arrange and pay for the funeral but she hadn’t turned her mind to the financial side yet.
Tania and her sister came in and sat with us and we just talked through the first steps to gathering in the assets and taking care of any liabilities. Although we talked through the important timeframes to guard against a Family Provision Application, they were lucky that the family got along well and it was very unlikely that there would be any claims against her mother’s estate.
Because there were some significant assets, we made a to-do list together including first advertising and then applying for a Grant of Probate (Confirmation by the Supreme Court that the Will is valid) and writing to the banks her mother had used. We also agreed we’d write to the retirement village, make arrangements for the shares to be transferred to the beneficiaries and they would contact an excellent agent recommended by Clearman Lawyers to sell their mother’s holiday place in Noosa.
As usual it took about 12 weeks to receive the Grant of Probate from the Supreme Court and then some time for each of the asset holdersincluding banks, retirement villages, insurance companies and superannuation trusts to make their internal enquiries to process the requests to release funds to Clearman Lawyers’ trust account. We also assisted with the Titles Office requirements to transfer her mother’s investment properties. We kept records of each transaction and provided those records to Tania about every two weeks so she was always up to date.
Tania took care of the sentimental items her mother had wanted to give to family members and we referred Tania to a very good accounting firm to assist with the date of death tax return.
When the funds were all held in trust and Tania approved the breakdown, we disbursed the funds to the beneficiaries as her mother had wanted. Reach out to start working with us now.
Insurance and Superannuation
Insurance For many people it’s a surprise to find out that Wills do not automatically control how insurance money is paid.
We strongly recommend checking with your insurance provider(s) to make sure you’re happy with your nominated insurance beneficiaries. We recommend that you be especially careful if a beneficiary might struggle with money or relationships. We’re here to talk if you’d like help.
Depending on the circumstances (including the insurance Trust Deed terms) you can generally either nominate:
1. “Legal Personal Representative” which means that you want (all or part of) the funds to go to your estate; or
2. All or part of the funds to chosen beneficiaries (which could potentially include super).
Superannuation For many people it’s a surprise to find out that Wills do not automatically control superannuation (whether retail like Sunsuper or Q Super or a Self-Managed Superannuation Fund).
We strongly recommend checking with your superannuation provider(s) to make sure you’re happy with your nominated superannuation beneficiaries.
Who can be a super beneficiary? The super fund trustee has a discretion to choose between a fixed / limited group of “Dependants”. Dependants are limited to: the spouse of the person, any child of the person and any person with whom the person has an “interdependancy relationship” (last category can become complicated quickly).
Nominating beneficiaries There are broadly two ways to nominate superannuation beneficiaries: Binding or non-binding and the names explain it clearly. Depending on the circumstances (be especially careful if a beneficiary might struggle with money or relationships) you can either nominate (request) OR nominate (binding):
1. “Legal Personal Representative” which means that you want (all or part of) the funds to go to your estate; or
2. All or part of the funds to a limited group of “Dependants”.
It’s important to weigh the pros and cons of making a binding nomination very carefully. Removing Trustee discretion can lead to unexpected outcomes including, for example, funds being paid to a bankrupt person and then being given to their creditors. Reach out to start working with us now.
Confusingly
1. Retail superannuation binding nominations (Binding Death Benefit Nominations) expire after three years so need to be diarised and regularly updated. This can be tricky if, for example, someone lacks capacity to renew the binding nomination.
2. SMSF Binding Death Benefit Nominations (depending on the wording of the SMSF Deed) may not need to expire after three years. As always, read the Deed to be sure. Reach out to start working with us now.
Disclaimer
This page is not intended to provide legal advice and does not create a client-lawyer relationship. This post is provided for general information purposes and should not be relied upon as a substitute for legal advice. If you need help with legal advice for your particular situation, please contact our office (details below or on ‘Contact’ page) and we’ll be happy to assist you.
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