Estate planning

It is also more complex than that as considerations must be made in the event you lose capacity in addition to various other factors (such as if you own assets jointly, through other structures, overseas or have complex family or business circumstances).

Your Will and enduring power of attorney forms a core part of your estate plan as they govern all your personally owned assets.

Your Will

Specifically, assets held by you personally will fall under a Will, in which case, the assets that can pass to your intended beneficiaries will be those that remain after any existing debts owed by you personally have been repaid or adequately dealt with.

Assets held in companies and trusts do not fall under your Will, and you may need to consider other documents to deal with them (to ensure the assets in those entities pass to the right people).

Other than having your assets pass to the right people, it is important to appoint people to ensure your estate is appropriately administered. This person is called an executor, and acts as your legal personal representative when you pass away. They will be responsible for making decisions in relation to your assets, and are required to sign transfer documents on your behalf when you are deceased.

Your estate plan should also appoint a guardian if you have minor children at the date of your death. This ensures there is certainty in relation to who is intended to look after any of your minor children, as opposed to having to go to Court to have this confirmed (which would, again, be more costly and add delays to who takes care of your children).

Enduring power of attorney documents

Your Will contemplate what happens if you pass away. However, as part of a holistic estate plan, we need to consider what happens if you need someone to act on your behalf while you are still alive (but either are not able to make such a decision or have lost capacity). These are governed through your enduring power of attorney documents.

Generally, financial attorneys are able to make any financial decision you can make. This is necessary if you are unable to make decisions yourself, and someone is required to make those decisions (paying the bills, or transferring money from one bank account to another) on your behalf.

Whilst lawyers’ preferences differ on this point. Some recommend that a financial attorney is only able to act on your behalf once you lose capacity (so your attorney cannot abuse their power). Other lawyers recommend to have this power effective immediately (having someone able to make decisions on your behalf when you can’t, for example, while you are overseas, on a cruise or ill in hospital). We can discuss with you what is most suitable for you based on your intentions and objectives.

In contrast to a power of attorney for financial decisions, personal/health matters are only effective once you lose capacity. They also generally relate to minor health decisions.

There is also another health document called an advance health directive that you should consider walking through with a medical practitioner so that there is clarity on what should happen to you if you were to be in a critical health condition, and wish to document your preferred treatment.

Dealing with non-Will assets

A Will may not always be enough when dealing with non-Will assets. Additional documents may be required to complement your Will and assist with ensuring your estate planning intentions as reflected. These documents can include:

• Nomination forms detailing who benefits from your superannuation.
• Title office forms converting an asset held as joint tenants to tenants in common (and vice versa).
• Deeds updating your trust document to enable successor controllers to be appointed.
• Deeds in relation to a trust appointing a successor controller on the death or loss of capacity of a current controller.
• Constitution updates embedding who may act as a director upon the death of a current director and additional succession planning considerations
• Documents providing certainty in relation to a business interest on the death or loss of capacity of an owner.
• Additional strategies to enable multiple assets held in a single structure to be 'split' and separately passed onto intended beneficiaries.

Why choose us to assist with your estate plan?

We believe that part of estate planning is knowing about the bigger issues regardless of whether they are relevant for you today or not. As such, we focus in ensuring you understand the bigger picture so that you can stay on top of the estate planning issues relevant to you as your circumstances change. We do this by providing you with an estate planning presentation to breakdown and explain the complex legal issues and considerations so that you know what you don’t know.

We also don't expect you to remember everything discussed in our meeting, so any recommendations in relation to non-Will assets will be confirmed in writing in a ‘To-do List’ to you when we provide your Will documents.

Finally, we have a deep interest in trusts, superannuation and tax, and leverage from our expertise in these fields to assist in providing suitable tax effective solutions regarding complex estate planning intentions for your structures.

There are two common ways to gift assets under your Will. The first is to pass the gift directly to a person. The second is to pass the gift into a structure where someone (called the trustee) will look after the gift for a range of other people (called the beneficiaries). This second way utilises a structure called a testamentary trust.

Testamentary trusts are useful in allowing gifts to pass to trusted people to manage, invest and then subsequently pass control of the gifts to the ultimate recipients at the appropriate time. This is commonly used for gifting inheritances to minor children, but can also be useful gifts made to adults who are either in a risky profession or unstable relationship, or who have minor children.

The structure works for gifting to minors as you can pass the assets to someone you trust to look after it and manage it, whilst the structure works for adults as the recipient does not receive assets in their name.

The advantages of utilising a testamentary trust includes the:

• ability to provide gifts in a structure offering some form of protection against bankruptcy and relationship breakdowns;
• ability to provide gifts in a tax effective manner; and
• ability to entrust gifts to trusted persons with the flexibility for such persons to invest and pass down the gift in the most appropriate manner after your death.

The disadvantages of utilising a testamentary trust includes:

• the added complexity in understanding the structure;
• ongoing maintenance costs once established after your death, as well as the updating of your Will if significant changes to the law occur prior to your death;
• the recommendation that gifts into testamentary trusts are at least $500,000 in value;
• additional thought required to 'structure' initially; and
• the potential for abuse of the trust funds if the persons controlling the testamentary trust are not trustworthy.

Critical in utilising testamentary trusts is appointing people you trust to look after the assets going into the testamentary trust. While the only real rule is that you can only appoint up to four people at any one time to act together, it is recommended to keep the numbers down to one or two. Pick one person if you 100% trust them to act in the best interest of the beneficiaries or pick two if you require some oversight between the nominated persons. If you are in a situation where there is no one or group of people you can trust, you may wish to consider appointing independent professionals to either act solely or jointly with your nominated controllers.

Why choose us for your testamentary trust?

Some providers charge an additional fee to utilise a testamentary trust as part of your Will. We do not. Our goal is to provide you with a Will for a fixed price regardless of whether you utilise a testamentary trust or not

We at Chat Legal have a deep interest in trust law and the taxation of trusts and the testamentary trusts established under your Will reflects our preference for a commercial and flexible structure able to be used for generations to come.

Testamentary trusts often come as standard clauses added to your Will and the inclusion of 'special terms' is often not included in a fixed price given the additional work required to tailor your wishes. We offer the inclusion of certain 'special terms' as part of our fixed price to assist with providing you with a Will reflecting your estate planning intentions, but strongly do not recommend being too prescriptive given the never ending additional scenarios and hypothetical circumstances to consider.

Instead, a variety of issues must be considered to properly understand how control of those structures pass upon various events occurring (such as death or lose of capacity of a controller).

Depending on the intentions relating to the succession of such entity, simple or complex succession plans can be drawn and prepared in relation to each entity.

Understanding the complexity of such plans will also depend on the current circumstances which would require a proper understanding of the governing rules of the entity and the financial circumstances.

An overview of the relevant issues to be considered regarding the succession plan of a trust or company is provided below.

Trust succession considerations

• Who takes control of the trust if you pass away or lose capacity?
• Who do you want to take control of the trust?
• Does the trust document state who the successor controller is?
• Are there multiple roles that can control the trust?
• Is there provision in the trust document enabling a successor to be nominated?
• Can the successor be nominated by Will?
• Can you update the trust document to include broad provisions to reflect your estate planning intentions?
• Can you update the trust document to hardwire specific beneficiaries or controllers?
• How are multiple controllers to act?
• Is a particular asset intended to be set aside for a certain beneficiary?

Company succession considerations

• Shares can only be dealt with under a Will if an individual owns the shares in their own right (i.e. not as trustee).
• Who should take control of company if the shares in the company are held by a trust?
• Does the company constitution or shareholders agreement outline a successor director?
• Are the provisions in the company document restricting who may be a shareholder of the company?
• Can the company constitution be updated to embed a successor director if you were to pass away or lose capacity?
• Can strategies be implemented to ensure particular assets in the company pass to specific recipients?

It is a question every business owner should consider, even more so if there are multiple partners in the business. If that is the case, the question becomes ‘What happens to my share in the business if I pass away?”.

The question holds more weight if you want to ensure your ‘share’ in the business comes back for the benefit of your family.

Alternatively, you may want to ensure a deceased business partner’s family does not interfere with the continuity of the business.

Regardless, an agreement can provide some certainty in ensuring the business continues to prosper and a deceased’s business partner’s family can benefit from their business interest.

The agreement can come in the form of a participant agreement (such as a shareholders agreement, unitholders agreement or partnership deed) that outlines the rules of the business relationship (including what happens on the death or incapacity of a business partner), or a document called a buy-sell deed (which provides a mechanism to ensure there is a clean exit of a business partner’s interest on death, total permanent disability or trauma). Additional information in relation to both of these agreements are outlined below.

Participant agreement

Although not strictly in relation to estate planning, a participant agreement is important in ensuring there is clarity regarding the rules around a business relationship. It can include clauses relating to (but not limited to):

• how directors of the company should be appointed (as well as the voting rights);
• any potential restraint/non-compete provisions;
• how business interests can be sold/transferred;
• how disputes are managed; and
• occassionally, what happens if a business pratner stops turning up, passes away or loses capacity.

It is best to get this document prepared when the business relationship is good (so that negotiations are done when all parties can agree on how to deal with issues) rather than wait for a dispute to arise. This agreement can be called different names depending on the structure of the business, such as a unitholders agreement, unitholders and shareholders agreement or partnership deeds.

Buy-sell deed

Also known as a 'put call option deed', this document is focused on ensuring each business partner (or their respective entity) receives market value for their share in the business upon certain events happening to them. For example, if you were to pass away, this document provides a mechanism so that your family is able to receive the value of your share in the business from your business partners, with your business partners acquiring your share in return.