This process has been prepared to contemplate the most 'common' and 'standard' estate plans available. If your estate planning affairs are considered complex or 'at risk of dispute', then we recommend you obtain a tailored estate plan, and we would be happy to assist.
You should only use this process with the assistance of a specialist lawyer from Chat Legal Pty Ltd.
This process represents the 'Basic' package of Chat Legal Pty Ltd's estate planning packages found here.
Before proceeding, we note the following terms of service:
The Work (what's included)
- Estate planning advice in relation to assets forming part of your Will; superannuation; and jointly held assets.
- Broader estate planning information in relation to non-estate assets, Will challenges, business succession and international Wills (as necessary).
- Preparation of your Will.
- Preparation of your enduring power of attorney document.
- Provision of a template memo of directions (discussed in this interview).
- Preparation of a 'to-do' list of all other estate planning issues to be considered and documents that you may require.
- Attendance at a two (2) hour online meeting with a specialist lawyer to walk you through this app (this meeting will be recorded for our records).
- All documents provided in electronic format only.
- Cover letter providing summary of the above documents; printing, signing and witnessing instructions; summary of general estate planning issues; and information on when to review/update your estate planning affairs.
The fixed prices below do not include the following (please note the below is not an exhaustive list):
- If your instructions change following our online meeting. We will provide you with a fixed price to assist with any further amendments. We strongly recommend you consider the issues in this interview prior to our online meeting.
- No overseas Will advice - we strongly recommend you consider obtaining a Will in any Country where you hold substantial immovable assets.
- No physical documents for signing - we provide you with printing and signing instructions when emailing your documents in final.
- No assistance with witnessing - we provide you with witnessing instructions.
- No searches - if you require us to confirm how certain property is held or the details in relation to a company you have an interest in, then search fees may apply to undertake the search.
- No superannuation nominations - we will provide you with estate planning advice in relation to your superannuation, and show you how to complete a superannuation nomination. You may be required to obtain financial/tax advice from your financial planner/accountant in relation to how to structure a superannuation nomination.
- No documents changing how joint assets are held - we will discuss with you the general estate planning issues relating to jointly held assets. If you require documentation to be prepared to change how joint assets are held, then this will need to be separately organised.
- No specific entity advice - if you have interests in trusts, companies, partnerships, joint ventures, or other agreements with third parties, then we strongly recommend you obtain specific advice in relation to the succession planning issues relating to such entities/arrangements. We will include such 'to-do' items in the 'to-do' list for your consideration.
- No estate challenge advice - if there are persons who are likely to challenge your Will, we will discuss the broad basis one can challenge your Will. If you require strategies to be effected, or detailed estate challenge advice, then additional advice will need to be sought.
We will provide you with line items in the 'to-do' list if we recommend you consider obtaining further advice.
We would also be happy to assist you as you see necessary.
- Our Service Agreement can be found here.
- By submitting your instructions through this interview, you (or the entity you represent) agree to be bound by the Service Agreement with Chat Legal Pty Ltd ABN 64 621 391 553 (Chat Legal).
- Use and the provision of instructions through this interview constitutes electronic communication of the Work you engage Chat Legal to undertake.
- Our Work is limited to the items listed above. If you require additional advice, we can provide some broad guidance during our online meeting, but will confirm with you if you should obtain further specific advice.
- Fixed prices can be provided to assist with any outstanding issues.
- We have provided general information relating to the Work in this interview to assist you with understanding the potential estate planning issues to be aware of.
- Our fixed price to undertake the Work for an individual is $500 (GST inclusive).
- Our fixed price to undertake the Work for a couple with 'mirror documents' (i.e. documents that are identical other than for the names being swapped) is $700 (GST inclusive).
- A tax invoice will be issued at the time of providing the documents to you.
Privacy and use of personal information
- Chat Legal respects your privacy.
- Any personal information you provide to enable Chat Legal to generate the required documents will only be used for that purpose.
- If you do not want your personal information disclosed or used in any way by Chat Legal, please contact our Director, Darius Hii at email@example.com. We may be unable to act for you in this case.
If you would like to proceed with this package, then please complete this interview, and we will review and get in touch with you as to the best way to proceed with an online meeting (roughly 2 to 2.5 hours in length).
Below are the steps required to undertake the Work:
Estate planning information
We have provided you with estate planning information in this interview to assist you in considering the various complexities that may arise in relation to your estate plan.
You will see and hear some legal terms used throughout this process. Here is the list of common 'legal' terms that you will see, and a brief summary on what they stand for:
What is estate planning?
At it's simplest form, estate planning is:
Your assets can include:
- assets that you own in your personal name;
- assets that you own jointly with other people;
- assets held in your superannuation;
- assets held in entities such as trusts, companies and partnerships;
- business assets.
You should appreciate that not all assets listed above will be dealt with under your Will.
That is, you will need to do different things to make sure assets held in the above manner pass pursuant to your estate planning intentions. Later sections in this app will explain what you will need to consider.
The right people will often be whoever you choose. People who won't fall into this group can include:
- potential creditors of intended beneficiaries (i.e. people who might sue the intended Beneficiaries to benefit from your estate plan);
- the tax man (i.e. having the intended beneficiaries pay more than necessary in tax)
- intended beneficiaries who would spend the inheritance away;
- former or potential future spouses of intended beneficiaries; and
- lawyers (i.e. by having a prolonged dispute or having to apply to the Courts to interpret your estate plan).
Part of estate planning is considering whether special arrangements can be put in place to ensure the wrong people do not benefit. Specifically, it is about ensuring your assets go to the right people in the right manner>.
Later sections in this interview will explain such arrangements to you.
Crucially, it is important to appreciate the difference between owning an asset directly and having indirect control over an asset.
Direct control and indirect control
How you control an asset will depend how the asset is passed under an estate plan.
There is a difference in having direct legal ownership of an asset (direct control), compared to managing or controlling assets held by another person/entity (indirect control).
Generally, if you have direct control in an asset, that asset will be dealt with under your Will.
This is because your Will only deals with assets that you directly hold.
There are some exceptions to this rule, being:
If an asset is available to be dealt with under your Will, then you can dictate the terms (in your Will) on how an asset can be passed.
Assets in which you have indirect control over will not be dealt with under your Will automatically.
This is because assets held indirectly will be governed through either:
The rules governing these assets held indirectly will therefore need to be reviewed to confirm what happens to the indirect control if you pass away or lose capacity.
Two common assets that may be held by you are your:
Less common ways in owning assets indirectly include:
Later sections in this interview will explain exatly how such assets can be dealt with.
Summary of how assets held directly or indirectly can pass
Assets held in your personal name:
- are governed through your Will, and if no Will, then pursuant to the 'intestacy' law; and
- you can choose whether to directly pass the asset to a beneficiary, or pass control in the asset to persons for the benefit of one or more beneficiaries.
Assets held in your superannuation:
- are governed by the superannuation fund's rules; and
- you can actually choose who (from a limited group of recipients) can directly receive your superannuation.
Assets held jointly:
- if held as 'joint tenants', then the law states that any surviving co-owner automatically receives your joint interest; and
- if held as 'tenants in common', then your joint interest will be distributed as an asset held in your personal name (i.e. distributed pursuant to your Will, and if no Will, then the intestacy law).
Assets held in a company:
- continue to be owned in the company after death or lose of capacity of a director or shareholder;
- the governing rules for the company (company constitution) will need to be reviewed to determine who may be appointed a replacement director;
- the shareholder will need to consider their own estate plan to understand what happens to their shares in the company;
- therefore, given assets remain in the company, you are generally only able to pass control in the company under your estate plan to intended beneficiaries; and
- it is rare to directly transfer assets from a company to intended beneficiaries due to the uncertainty of the tax consequences on the relevant date of transfer.
Assets held in a trust:
- continue to be held in the trust relationship after the death or lose of capacity of a trustee, appointor or beneficiary;
- the governing rules for the trust (trust deed) will need to be reviewed to determine who will be the replacement trustee or appointor of the trust (i.e. who manages and indirectly controls the trust);
- therefore, given assets remain in the trust relationship, you are generally only able to pass control in the trust under your estate plan to intended beneficiaries; and
- it is rare to directly transfer assets from a trust to intended beneficiaries due to the uncertainty of the tax consequences on the relevant date of transfer.
Assets held in a partnership or other agreement with third parties:
- the rules surrounding such arrangements must be reviewed to understand what happens to your share in the arrangement; and
- the manner in which you own your interest in the arrangement will also factor in how the asset will be dealt with.
As you can see, depending on how you own an asset will impact what needs to be done from an estate planning perspective.
Importantly, your Will only deals with assets you own directly. Owning assets in other ways will mean that you may require additional documents or legal advice.
Having appreciated that not all assets will automatically form part of your Will, it is useful to know that there are laws that enable certain people to challenge your estate (through legal provisions called 'family provision applications').
Although the laws may change from State by State, generally the following people can have a claim against your estate if they are unhappy about the provision under your Will:
- spouses (including de facto and potentially ex-partners);
- children (including step-children); or
- people who have been dependent on you.
The definitions can be complex, but you have to be aware that, if there are unhappy people who fall into any of the above categories, then your Will can be challenged.
But that is just step one.
Step two of a successful estate challenge is for the person challenging your Will (the applicant) to prove that they have not been properly provided for.
Factors that the Court will often consider in determining whether an eligible person is able to successfully challenge your Will and claim provision will include:
There is no one answer in determining if someone is successful, and the likelihood of a successful challenge will depend on your circumstances.
If things get to that stage, there will be lawyers involved. If you feel you might fall into the situation above, you need to contact a lawyer now, to discuss options to manage any risk.
Also, if you have assets in New South Wales, you should be aware that some of the strategies mentioned above may be ineffective due to a concept called ‘notional estates’.
The gist of this concept is that if you take steps before you pass away to move assets out of the way so that they do not fall under your Will, then those steps can be unwound, and those assets would fall under your Will.
As you can appreciate, there are various issues to consider if it is likely that there will be unhappy people as part of your estate plan.
We are happy to discuss this with you as you consider appropriate, and discuss potential strategies to mitigate or manage such risk.
Other ways a Will can be challenged
Other ways your Will can be challenged can include:
If any of the above may be relevant to you, please let us know so that we can consider to ensure your Wills are prepared in an appropriate manner.
How assets are passed
Having appreciated the many ways assets are held (and the different ways the asset or control over the asset can be passed), it is now useful to appreciate the ways assets can be passed.
The question is how flexible to do want to pass assets to people.
There are two general methods for making a gift. The first is to make the gift hardwired and the second is to keep it flexible.
Specifically, the first option gives the gifts directly to persons A, B and C.
In contrast, you may decide to give your assets to person D, and then write a non-binding wish that person D gives your assets to persons A, B and C in a particular manner. In a way, making a gift under this approach reflects gifting 'control' over such assets to a person to manage and look after for others.
Now, the second option sounds crazy as there would be nothing stopping person D from just pocketing all the assets. It is therefore important that if you want to offer flexibility in your estate plan, that you trust the persons you appoint in control of such assets.
In fact, in certain situations, it makes more sense to make gifts by passing control over assets to certain persons to look after for the ultimate beneficiaries.
Why you might want some flexibility - personal items
Specifically, when you pass away, you’ll leave a bunch of other assets that you may not immediately consider such as clothes, jewellery/watches, furniture and other items around the home (think pots, pans, board games and electronics). These are your personal items.
It might be very cumbersome to list how you would like to distribute each and every one of your personal items (even just think about collecting them all, valuing them and then splitting them in particular percentages), so some estate planning lawyers have developed a method to, say, for example, give all personal items to a person (or group of people), and it is up to those people to on-gift relevant items to people you mention in a nonbinding document (such as a letter).
The advantage of this approach is that you do not need to change your Will every time you wish to change who receives a personal item (which means not having to go to a lawyer if you want their legal advice on the effectiveness of your gift).
The disadvantage is that such a method is not legally binding, and there is nothing stopping the intermediaries from just pocketing all your personal items.
And this is why this method is generally only applied to personal items because under your Will, you can add certainty on who receives the more valuable assets of your estate (such as superannuation, life insurance, investment shares and real estate).
As part of this process, you will be offered the opportunity to make specific gifts in your Will. However, please consider if any gifts can be entrusted to a person (or group of people) to be on-gifted an intended recipient through directions in a nonbinding document (which we call a 'memo of directions'), as this will provide longevity to your Will and reduce the need to update your Will.
Why you might want some flexibility - valueable assets
Later sections will explain the benefit of a 'trust fund' structure in your Will to hold valuable assets in more detail.
Briefly, entrusting your valuable assets to trusted persons to manage and then 'on-gift' to the intended beneficiaries may be preferred, especially where:
Effectively, your Will could be set up to distribute the valuable assets into this 'trust fund' to be managed by others, whilst offering them the flexibility to manage the assets in the most appropriate manner possible. The nonbinding memo of directions could be used to provide some broad directions and comments on what how you would like such assets to be managed (without formally binding the persons managing the trust fund).
Who to trust
Ultimately, how flexible you want to make your Will, shall depend on how much you trust persons to manage assets.
You can potentially appoint up to four people jointly to generally manage assets for others.
We, however, recommend a maximum of two or three. Getting four people to agree on making all decisions unanimously can often be difficult.
Having two or three appointed persons are recommended as there can be some level of accountability.
That said, if you trust a particular person, you can choose to appoint that person on their own to manage assets. You must just be aware of the potential for them to find ways to abuse their position.
You may, alternatively, choose to appoint independent and unbiased persons to fulfil such a role, or some combination of the above.
Where there are no persons available that you trust to manage your assets in an appropriate manner, then you may choose to have a Will that is more certain. Doing so, however, will mean that your estate planning documents may require consistent revisiting; as well losing some tax planning and 'asset protection' benefits.
Memo of directions
The above section mentioned a non-binding document that can be used to document how you would like to see assets distributed amoung people.
More broadly, such a non-binding document can provide guidance on the following issues:
- Any funeral and burial/cremation directions, as it may be too late before someone is able to get your Will approved through the Courts.
- Where your personal assets are located, to ensure for a smoother administration of your estate.
- Where relevant documentation relating to your personal assets and entities you control or have an interest in, are held to assist in the administration process - as you can appreciate, persons administering your Will may not have a complete picture as to your personal circumstances.
- How you intend some assets (such as household items) to pass.
- If there are certain investment tips or caring tips you may wish to leave for people to follow at their discretion.
- Although non-binding in nature, it is useful in ensuring your Will does not contain extra pages of specific gifts that may be deemed redundant in a few years’ time, and allows you to convey wishes and directions that are not ordinarily enforceable under a Will or may be too restrictive to put in your Will.
Although this document can be a blank piece of paper, or anything that you put together, we will provide you with a template document, with suggested sections and prompts of various issues you may wish complete - so that the document may not be accidently considered an 'informal Will'.
Please feel free to complete this document on your own, without fear of making things to restrictive, or needing such wording to be legally correct.
Those looking after your affairs will at least then have a document they can refer to when looking after your affairs.
You should ideally, keep a signed copy of the document with your Will, and potentially circulate it with key persons involved with your estate plan (after ensuring any sensitive information is blacked out).
Having considered the non-legal document that will be provided to you, it is now time to consider some of the features of your Will, which is the legal document ensuring assets pass in a manner consistent with your intentions.
Before people can benefit from your Will, someone has to be appointed to administer your Will.
Please note, this person deals with the assets you own in your personal name, and not assets held by other entities such as trusts and companies.
For most people, that is still the majority of all assets they may own, however if you have assets in trusts, companies and other structures (including business interests), do not assume your executor will take control over those structures.
When considering your estate plan, it is important to ensure the right people are appointed to administer your estate.
Having clarity on who administers your estate as your executor is important as it reduces any delays and costs after you pass away, as it is clear who is responsible for administering your Will.
But also, it’s important for you to pick an appropriate person who is tasked with getting your Will proven, assets located, debts managed and having your assets distributed pursuant to your Will.
For example, someone who is savvy in dealing with professionals such as lawyers and advisors would be able to ensure your estate is administered seamlessly compared to another person who just goes with the flow (and may not take administering your estate seriously).
Do note that whoever you appoint as your executor, is bound to administer your estate properly. Failure to do so may mean that they are personally liable for any losses.
Here’s an example of what it means to be personally liable.
- The executor will receive your estate assets.
- The executor has a responsibility to pay those assets pursuant to your Will (subject to any debts you may owe).
- If your executor does not follow their duty, they may have to pay out of their own pocket to correct their mistake.
- Whoever you appoint as your executor needs to be aware that if they act in an incorrect manner, they may have to pay out of their own pocket.
- They are somewhat incentivised to act in the best interest of your estate, but that doesn’t prevent them from going against your Will and dealing with the fallout afterwards.
Some questions you might want to consider when appointing your executor:
- Who would you like to appoint as executor of your estate if you pass away? Who would you like to appoint as a backup executor of your estate?
- You can appoint multiple people (up to a maximum of four), but ultimately, the more people you appoint, the more they will each have to liaise with each other as they must make decisions jointly and all sign necessary transfer documents as executor for your estate.
- You could even appoint a professional to act as your executor, you will just need to be aware that your estate may be charged a fee for their service.
- It is most common to see trusted family members and friends appointed, and it may make sense to appoint two or three persons at a time if each person can contribute in a meaningfulway to the estate administration.
Please note that while your executor holds your assets to be administered under your Will, they will effectively be also acting as the legal owner of your assets. They will also, therefore, be known as a ‘trustee’ during this period of time until they are no longer the legal owner of your assets as your assets have been distributed under your Will to the relevant beneficiaries.
This section is only relevant if you have minor children. Probably more important than your assets are your children.
Whilst children who are 18 are able to at least make legal decisions on their own (even if those decisions are questionable), those who are still under 18 will require someone to look after them.
This is where the role of a guardian comes into your Will. The guardian’s responsibility really is to just care for your children once both parents have passed away.
There’s nothing stopping your child leaving the guardian once your child turns 18, but at least having someone nominated to care for your minor children (should both parents of the children pass away) will ensure they are cared for when they need it most.
If your Will does not nominate a guardian, unnecessary costs and delays may be incurred to have a Court nominate an appropriate person to act as legal guardian for your children.
Think about who you would like to appoint to act as guardian for your minor children. Think about if there are any backup persons you would like to appoint as guardian.
Again, you can have multiple guardians, but, if you do, then it is worth making sure your guardians are able to work together (whilst also considering the practical implications if there are multiple guardians who all live in separate locations).
If you see a lawyer when drafting a Will, do consider if there are appropriate financial assistance provisions in your Will that enable your guardians to receive compensation for caring for your children.
It might be that you have a structure set up in your Will that enables income to be paid to your minor children or to the guardians on behalf of the minor children. Regardless, there are appropriate strategies for ensuring your children benefit from your estate without having their guardians be out of pocket.
Further, additional care may be taken to ensure that any of your children with special needs (even if they are over 18) are also cared for in an appropriate manner and any assets to be given to them managed accordingly. These are called ‘special disability trusts’ but they do impose extra rules and limitations.
As mentioned above, please note that guardians for your minor children are not set in stone. If more appropriate people are available to care for any minor children, the Court may consider appointing them to act as guardians for your minor children. They will, however, consider the persons you have picked as a factor at the end of the day.
How to pass your assets
There are many ways to give personally owned assets to someone under your Will. Here are some examples:
As part of this package, we do not give assets to persons by 'way of life estate' or 'right of occupancy' due to the complex tax consequences that could arise, or the potential disputes that can arise when persons residing or using the property clash with the ultimate owner of such assets.
If you wish to give such assets to particular persons via a life estate or right of occupancy, then we recommend you selecting a higher package so that the advantages and disadvantages of such a gift can be discussed.
In relation to the two other options:
- Giving an asset directly to someone under your Will is the simplest option to structure your Will. This means any asset passes straight to the intended beneficiary. It means the intended beneficiary receives the asset in their name and they do what they want with the asset in whatever manner they wish.
- Whilst this is great as it’s simple and cost-effective, if you have beneficiaries who do not wish to receive assets in their names (think people who get sued all the time, or might get sued by way of being in a high risk occupation), giving them assets may cause them more headaches than not.
- At the end of the day, they should be happy to receive something from your estate, but if you want, you can consider where they come from and pass your assets into a testamentary trust for the beneficiary to control and benefit from.
A testamentary trust is like the 'trust fund' structure mentioned in prior sections of this app, the following section will discuss this structure in more detail.
What is a testamentary trust?
A testamentary trust, or testamentary discretionary trust is a trust only established after you have passed away and will last for 80 years after your death (except for South Australia which has an indefinite lifespan) unless wound up earlier.
A testamentary discretionary trust can be differentiated from a direct gift to someone as instead of giving an asset directly to an individual, you are giving an asset to someone (who will act as the legal owner of the asset and called the Trustee) to look after that asset (and other assets accumulated in the trust into the future) for the benefit of a broad range of beneficiaries (this group of people are called the Beneficiaries).
A testamentary discretionary trust therefore must have two key roles:
- the Trustee – who is the person who looks after the inheritance and is also the legal owner of the inheritance; and
- the Beneficiaries – who are the people who can benefit from the inheritance.
It is important to appreciate that although the Beneficiaries of a testamentary discretionary trust can be very broad, we have limited persons who can benefit from a testamentary discretionary trust in your Will to the following:
- a named person or group of people (often called the Primary Beneficiary);
- lineal descendants of the Primary Beneficiary; and
- other entities.
Whilst the above class is limited it should be noted that persons in control of the trust may still be able to divert income and assets of the testamentary discretionary trust to other persons (through various intermediary distributions). The potential for these intermediary distributions have been left open on the basis that all the individual beneficiaries are deceased, then there is the potential to distribute the income and assets of the testamentary discretionary trust to other persons.
There are strategies you can implement to gift to other persons not mentioned in a testamentary discretionary trust after the testamentary discretionary trust is set up, but these only should be considered if required at the later point in time.
As the Trustee looks after the inheritance, the Trustee also has the ability to decide who from the above Beneficiaries can benefit from the inheritance. This is because the Trustee:
- is the legal owner of the inheritance and therefore has the ability to deal with such assets based on their own decision; and
- the testamentary trust created under your Will is known as a testamentary discretionary trusts which means the Trustee has the discretion to decide who benefits and in what proportion. This decision can change on an annual basis and we would recommend the Trustee obtain specialist advice prior to 30 June of a relevant year and making such a decision.
It is therefore important to trust whoever is the Trustee. If there are doubts in who is left as a Trustee, steps can be taken to reduce the abuse of power by appointing multiple Trustees to act jointly or an independent Trustee (which could be a professional advisor). A combination of appointments could also be considered as discussed in prior sections.
The importance of the Trustee role is critical as if the Trustee is not trustworthy, then they may decide to ultimately pay out the inheritance to themselves. Trying to limit what the Trustee can do is not recommended as:
- limiting what the Trustee can do will mean that you limit what potential future beneficiaries can do and thereby reducing the usefulness of the structure;
- you do not know what the Trustee may need to do in the future, so limiting such a structure will cause problems in the future;
- even if you limit what the Trustee can do, unless extensive time is spent deleting and tailoring clauses, the Trustee may find loopholes to pay the inheritance to themselves, in which case it would have been simplest to not use a testamentary discretionary trust.
It is therefore simpler to trust the person to take control of the testamentary discretionary trust.
The Trustee can always step down when appropriate and pass control accordingly. If you wish to provide some guidance on when the Trustee should step down, you can include this in the memo of directions provided.
We do not recommend hardwiring automatic changes as we are unable to predict the circumstance of a future trustee and whether they would be suitable to take control of the inheritance at that point in time. For example, if a future trustee is going through a bankruptcy, it is unwise to automatically enable them to take control of a testamentary discretionary trust.
The testamentary discretionary trust will also have a third role called the Appointor. The only real responsibility of the Appointor is to hire and fire the Trustee.
If the testamentary discretionary trust has this role, it is useful in allowing more experienced persons to oversee the Trustee and replace the Trustee if appropriate. This provides people who succeed you with broad succession planning powers.
For example, if you have a testamentary discretionary trust for the benefit of any children, and certain family members are appointed as the Trustee and Appointor. Having an Appointor role will allow your family members to step back from the Trustee role and introduce your children into that role when they are of mature age, whilst allowing your family members to retain the Appointor role to watch over any children.
Testamentary discretionary trusts - advantages and disadvantages
The above provides a summary about the structure of the testamentary discretionary trust, but the benefits are broadly as follows:
- because no beneficiary of the testamentary discretionary trust owns the inheritance directly, the inheritance is protected from the bankruptcy of such beneficiary;
- having the ability to decide which beneficiaries can benefit and in what proportion provides the ability to tax plan where necessary. There is a further concession for testamentary discretionary trusts in that you can distribute income generated from the trust to minor children and such children will be taxed at adult rates (i.e. they will be able to receive testamentary discretionary trust distributions up to the adult tax free threshold, tax free);
- having the ability to stager when people take control of the testamentary discretionary trust by appointed other trusted persons to look after the inheritance until certain beneficiaries are appropriate to take over; and
- there are some relationship breakdown protections in certain circumstances as the inheritance is not directly received by an individual. These protections, however, are subject to the Family Court choosing not to effectively look through the structure and whether the Family Court chooses to do so will depend on various circumstances at the date of the relationship breakdown.
Please note that testamentary discretionary trusts may affect Centrelink benefits, so this must be weighed against the benefits above.
Testamentary discretionary trusts, once established, will also likely incur annual accounting fees and it is therefore crucial that you have sufficient assets passing into a testamentary discretionary trust (it is usually recommended that a testamentary discretionary trust holds at least $400,000 after debts have been repaid to be considered worthwhile).
Should you have a testamentary discretionary trust in your Will?
If the above does not make sense, then you should either obtain further advice with a specialist lawyer to determine the suitability of a trust fund structure in your Will.
If, on the other hand, the following applies to you:
- including any superannuation and life insurance you may have and after repayment of debts, the total value of your estate will exceed at least $400,000; and
- you understand and appreciate there will be maintenance fees to maintain the testamentary discretionary trust once established (being after your Will is administered),
, and any of the following scenarios makes sense to you:
- an intended beneficiary considers themselves as a high-risk individual due to the nature of their work (for example, they are a surgeon, accountant or lawyer). The beneficiary wants to own as little assets as possible due to a potential claim against them personally. Giving assets to a testamentary trust allows the beneficiary to receive assets in an entity separate from them so they are not assets of the beneficiary if a lawsuit rises, but, the beneficiary can still benefit from the assets;
- you want to give assets to your children, but you do not believe them to be responsible enough to receive full control of the assets. You give the relevant assets into a testamentary trust and you give control jointly between your respective children and a responsible family member (such as a sibling). This way, your children will not blow all the money as they need to liaise with another family member. This helps protect their inheritance.
- you want to give assets to your children, but you just don’t trust the relationship they are in or the relationship they might be in. You can give your assets into a testamentary trust structured appropriately to reduce the risk of the relevant spouse receiving any of your hard-earned assets.
- you want to give assets to your children, and you know they may have children in the future (your grandchildren). Giving assets into a testamentary trust structure provides some tax planning opportunities for your children to invest the assets transferred into the trust and having the income generated from the investment distributed to their children (your grandchildren). There is a specific tax provision that states income generated from a deceased estate may be distributed to minors, and those minors will be taxed as if they were adults. This means your children don’t have to pay tax on such amounts at their tax rate, but they can give some income to their children to pay on separate tax-free thresholds.
If you are a couple looking to utilise a testamentary discretionary trust, then you should consider if you would like your spouse to benefit from such a testamentary discretionary trust, or if a testamentary discretionary trust is only set up after you both are deceased. The above scenarios will provide you with an indicator on when a testamentary discretionary trust may be of use.
Finally, you should consider how many testamentary discretionary trusts you would like to utilise in your Will.
There is no additional fee as part of this process if you would like to utilise a tesatmentary discretionary trust as part of your estate plan.
Enduring power of attorney documents
Everything so far has been spent discussing about what you would like to see in your Will.
That said, your Will only applies if you pass away.
There is a document that governs what happens if you are living, but are unable to make decisions.
The document that can govern these decisions is called an enduring power of attorney>.
Enduring means it continues (endures) when you are unable to make these types of decisions for yourself.
This is particularly useful where:
In particular, the document looks to appoint persons to make decisions on your behalf for two types of decisions, being ‘financial matters’ and ‘health/personal matters’.
Please note that appointing someone to act as your financial attorney means that they can effectively enter into any financial transaction that you could, which includes opening bank accounts and selling assets in your name.
It is therefore recommended that you trust those persons who you appoint to act as your financial attorney. This is because having a limited financial attorney power would defeat the purpose of this document.
For example, there is a specific power to enable your attorney to act despite a conflict, as well as make gifts in your name and amend any superannuation nominations you may have made. Whilst broad in power, experience has shown us the need to have these clauses, in particular if you choose to appoint a spouse or a trusted family member as an attorney.
Failure to include these broad powers may mean that your financial attorney may be limited in the actions they can undertake on your behalf.
This may mean that your financial attorney could sell any of your assets, that may impact the assets forming part of your Will.
We again stress the importance of having the implicit trust of the persons you nominate as your attorney.
Although legal and ‘fiduciary’ obligations will be imposed on your attorney (in that breaches of an attorney’s obligation to act in your interest will result in legal consequences against your attorney), your attorney will still be in a position where an abuse of power is possible.
We are able to draft this document so that your attorney’s power is only effective once you have lost capacity or immediately. If the financial power is only effective upon lost of capacity then you will have to ensure you take steps to enter into a general power of attorney document if you require someone to act on your behalf whilst you still have capacity. If the financial power is effective immediately, then you need to be aware that your attorney may make decisions on your behalf whilst you have capacity, but only if they hold the original document with them when making decisions.
In relation to your health/personal attorney, their power is limited to making daily decisions for you such as where and with whom you live, or when and where you go to obtain health care.
In contrast to the financial attorney power, these decisions can only be made once you have lost the capacity to make decisions on your own.
An advance care/health directive can also be prepared if you wish to consider more serious health decisions, and it is recommended you discuss such a document with your doctor. Decisions dealt with under this document can include:
- Giving directions on treatment that you would not like undertaken on you,
- Giving directions if your religious beliefs might affect your treatment.
- Confirmation on the type of treatment you would prefer if you are in the terminal phase of an incurable illness or permanently unconscious etc.
Please let us know if you would like us to provide you with a template of the advance health directive for your reference. We do not assist with completing such a document.
Automatic changes to your enduring power of attorney
Please note that:
- On your death, the enduring power of attorney is automatically revoked and your personal affairs will be administered under your Will, or if you do not have a valid Will, then the intestacy rules.
- If you marry or enter a civil partnership, the enduring power of attorney is revoked to the extent that it gives someone else other than your partner to act as your attorney.
- If you divorce or terminate a civil partnership, then the enduring power of attorney is revoked to the extent that you gave the power to make financial and/or personal/health matters to your divorced/separated partner.
- If you enter into a defacto relationship or end a defacto relationship, then your enduring power of attorney document will not be automatically changed.
You can revoke your enduring power of attorney document at any time that you have the mental capacity to do so. You should obtain legal advice at that point in time to confirm what formal requirements must be met to revoke such appointment.
Issues to consider prior to our meeting
Having been provided with the above information, please consider the following issues before our online meeting so that we can discuss your thoughts and confirm the most appropriate way to draft your estate planning documents.
The first thing to consider in your Will, is who you would like to administer your Will and ensure your estate planning intentions are implemented.
As mentioned above, this person is called the ‘executor’ and is also commonly known as your ‘legal personal representative’ (that is, they represent your estate when you have passed away).
Their responsibility involves proving your Will when you pass away (the process called ‘probate’), aggregating your assets, settling debts owed by the deceased and distributing what remains pursuant to the Will.
Please consider who you would like to fulfil this role. Whoever you appoint does not need to prepare all the necessary documents as they can engage with professionals such as lawyers and accountants to assist them. Whoever you appoint will, however, need to execute the necessary documents, so we recommend that if you appoint more than one person to act as executor, that those persons are able to work together to administer your estate.
You should, however, trust such persons you appoint, as their role requires them to manage and care for your estate assets until your WIll is fully administered.
It is also common that these people are often the same persons who are chosen to manage any assets in structures that you control (including trust funds), given there ability to engage appropriate professionals to assist them.
You should also note that your executors must act unanimously (with a maximum of four people being able to be appointed at any one point in time) when administering your estate, so you should consider only naming those who are able to work together to act as the same time.
Please also consider who you would like to appoint to act as backup in the event your executor/s predecease you.
If relevant, he next issue to consider is who you would like to appoint to care for any minor children that survives you. Please note that it is standard for the surviving parent to care for any minor children, however, in circumstances where both parents are deceased, you may confirm your intentions on who you would like to care for your minor children.
Their responsibility can range from the day to day decision making for the raising of your minor children, to the long term planning.
We therefore recommend you nominate persons who are able to work together (if you would like to appoint more than one person to act as guardian at any point), and it may be preferable that they live together. That said, it is common for people to nominate a respective parent from each side of the family however, you need to be aware of the practical day to day issues when your guardians are required to make decisions. Alternatively, couples are commonly nominated to act as guardians for minor children.
Please also consider appointing additional guardians should any of your initial guardian/s or backup guardian/s be unable to act.
Having determined who you would like to manage your Will (i.e. act as the executor of your Will), it is now crucial to document how you would like assets forming part of your Will (referred as estate asset) to be distributed.
The Will generated for you separates asset distributions into three broad categories:
The reason for separating your Will into the above three categories are as follows:
You should consider who you would like to benefit from the above different types of assets; including if such gift should be made via a testamentary discretionary trust.
Enduring power of attorney details
You must carefully ensure the attorneys you have nominated have not unduly influenced you to appoint them.
The powers granted under the enduring power of attorney document is broad and extensive so you should have implicit trust in the appointed attorneys.
If you have any concerns or reservations, then you should not appoint such attorney to amend your document.
You muist appreciate that:
- Your attorney will be granted legal powers to act on your behalf and that certain duties will be imposed on them.
- Your attorney may not be strictly financially liable provided they have exercised their duty of care, diligence and skill that a prudent person engaged would be expected to exercise.
- If your attorney acts outside the limits of their powers or breach a duty, then you can be recompensated and the Courts/Tribunals have the power to review the actions of my attorney (although such an approach may be costly and limited in the level of assistance offered).
Before deciding who you would like to appoint as your attorney, please consider the following issues:
Tips for couples
It is common to appoint your spouse to be the person in all the relevant roles and the initial beneficiary of your affairs.
In the vent your spouse cannot act for you, it is also common to have either trusted children (ir relevant), or a family member on each side of your family in any administrative or managing roles.
The reason to have a family member on each side of your family acting jointly is that this offers a level of oversight on your attorney, but also a level of practicality. In terms of the attorney role, you and your spouse may own a range of assets jointly, and even if you each appoint different attorneys limited to your respective families - your family members would still need to act jointly when dealing with your joint assets.
That said, if you cannot see your families as being able to work together, then you should nominate a trusted person/s instead.
Please provide us with the following information about yourself.