Estate Planning.. Not Just For The Wealthy!

Estate planning, or ‘life planning’ as we call it, isn’t just a tool for wealthy families.  Estate planning is useful for all of us, many of us accumulate a substantial estate reflecting a lifetime commitment to work.  It is our interest and our family’s that we don’t waste unnecessary money on tax or expose your hard-earned assets to potential risks and otherwise accommodate families to future conflicts and disputes.

Life planning covers your future estate, assets, and tax planning.  Generally, the easiest place to start is with your Will.  Your will is central to your estate plan, and there are mechanisms which can be included in your will to ensure that your family are all adequately provided for.

You can choose a simple Will or a testamentary discretionary trust, which is a special type of discretionary trust that is created by a person’s Will.  The Trust comes into existence after the will-maker dies.  Instead of passing the assets directly to the beneficiary, the executor transfers the assets into a discretionary trust to be held by a separate trustee for the benefit of the beneficiary (and a general class of beneficiaries).

There are a number of benefits that come with the creation of a testamentary discretionary trust, some of which include:

1. TAX PLANNING

An advantage of a testamentary discretionary trust is that the trustee of the trust can stream the income earned from the trust assets through to a class of beneficiaries in the most tax-effective way.  This usually includes immediate family members such as children.

2. ASSET PROTECTION

When a testamentary discretionary trust holds assets, your beneficiaries are protected from being at risk of personal liability such as from creditor claims, the application of bankruptcy or family law claims.  This is because the trustee has legal ownership and uses their discretion to distribute any income or capital to the beneficiaries and until they receive that share, they do not own the asset.

3. PROTECTION OF GOVERNMENT ENTITLEMENTS

Finally, if your beneficiary is receiving Centrelink entitlements now or in the future, trust structures can be used to preserve those entitlements, reflecting separate ownership.

All estate planning solutions need to be tailored to your personal circumstances.  For personalised estate planning advice and to organise an initial meeting with one of our legal team, please contact us.

 

Kayla Kennedy – Solicitor

LLB

Young Money – Estate Planning For Millennials

We understand life is busy, whether you are studying full-time, travelling the world or thriving in your career.  Like most of us, the last thing on many young peoples’ minds are what will happen to their assets if they were to pass away suddenly.

And what assets do young people have to be worried about?  Aside from personal items, many will be thinking that all they have is some money in the bank, personal items, and maybe, a first home with minimal equity. However, many don’t consider their superannuation fund as a personal asset worth worrying about, but we all should.

Superannuation is one of those assets that many people just set and forget.  Your superannuation can be your most valuable asset, particularly as a young person, when, although the balance of actual super you have accrued is minimal, the automatic life insurance attaching to many retail and industry superannuation funds may be worth hundreds of thousands of dollars.  This will form part of your ‘superannuation death benefit’ should you pass away.

Most superannuation funds allow their members to nominate who will receive their death benefit [accumulated super and life insurance] upon their death.  What is often not communicated by the super fund, is that superannuation law only allows a limited category of persons to benefit from your superannuation fund.  Those people are a spouse or de facto partner, children or your estate [distributed by your will].

So, what happens if you don’t have a partner or children?  Well by putting in place a simple Will, you can nominate your estate by completing a death benefit nomination, and by your will you can then distribute this significant asset to third parties [for example, to parents, siblings, friends or charities].

We also know that whilst you may know and understand that you need a will, you just don’t have the time [or inclination] for multiple appointments with a lawyer during business hours to get it done.  We like doing things differently here and have recently developed an online Will service to provide a reliable and accurate will for those with straightforward circumstances who want to prepare a will on their terms.  Our Off The Rack will option is fully autonomous and can be completed anytime and anywhere [ie. on your couch in trackies at 9pm with a glass of wine in-hand] and your document is delivered to your inbox within one business day.  We also have our Tailored will option which combines online preparation with a short appointment with our lawyers to finalise and sign it, and of course, should you want the piece of mind of a fully custom will with detailed advice, our Bespoke will option is also available.

Visit https://www.cannygroup.com.au/wills/ to find out more or to get your will started, and if you’re not sure which option is right for you, complete the short questionnaire to point you in the right direction.

Powers of Attorney are another vital element of estate planning that are generally overlooked by young people. Download our free Seven Essentials of Estate Planning Guide, or look out for a future bulletin to learn more.

 

Kayla Kennedy – Solicitor

LLB

Superannuation Nominations – Make It Legit!

Don’t be trapped by the pitfalls of superannuation nominations – make it legit!

Have your circumstances changed recently?  Have you married, separated, divorced, had kids, or are your kids now over 18 years old?  It may be time to consider and/or review your superannuation nomination.

A superannuation nomination is a notice to your superfund trustee outlining who you want to receive your superannuation benefits after your death.  However, your superfund trustee is only bound by a nomination that is valid [in accordance with superannuation laws].

Many superannuation funds will not guide you through what constitutes a valid superannuation nomination, which makes it all the more difficult.

So, what constitutes a valid superannuation nomination? Your superfund trustee will look at the following hierarchy of people when considering how to distribute your super:

  1. Your spouse or ex-spouse;
  2. Your children [or other financial dependents]; and
  3. Your Estate.

Let’s break these categories down a bit further…

1. YOUR SPOUSE OR EX-SPOUSE

It may seem common sense that a superfund trustee would pay your super benefits to your partner automatically.  And this is true, particularly if you have made a nomination directing the payment to your spouse.  However, if, since making the nomination, you have separated or divorced from your spouse, the nomination is not revoked and, in fact, remains valid. Thus, your benefits may be paid to an ex!

2. YOUR CHILDREN

The intention of superannuation is to fund the retirement of you and your dependents.  Accordingly, a spouse and children who are considered to be financially dependent upon you will receive the most beneficial treatment under superannuation law.  Your children who are under 25 or have a disability will be considered dependents.

You must be careful with nominations to children as there can be pitfalls, including:

  1. You cannot nominate nieces or nephews [invalid];
  2. If the children are under 25 and you have a spouse or an ex-spouse who is alive, that person will be considered the guardians and your super will be paid to them [to hold upon trust for your children until they attain the age of 18];
  3. Children who are over 25 are determined as not being financially dependent upon you, and if the super benefit is paid to them then they will be heavily taxed upon receiving the death benefit.
  4. The taxation consequences can be different for children depending on their ages at the time of your death, which will create an uneven division in real [net] terms;
  5. As long as your children are over the age of 18 years, the superannuation fund will pay an entitlement directly to nominated children, meaning you cannot protect that benefit for your children until they attain an older age.

If you intend for your super benefits to benefit your children, and any of the above issues are in concern in your current circumstances, one solution may be to nominate your Estate as the beneficiary [provided you have an up-to-date Will].  Your Will then controls the distribution of the super death benefits to your chosen beneficiaries and much can be done to reduce or avoid the tax consequences described above!

3. YOUR ESTATE

As mentioned, nominating your Estate is a great way to cover most pitfalls of superfund nominations.  Tax can be avoided or reduced where you have children under and over the age of 25, you can implement asset protection strategies for your personal and superannuation assets for your children, and you can distribute your super death benefits to third parties [who aren’t your spouse or child] through your Will.

The potential consequences of this option are that this can create a further delay between your date of death and the distribution of the superannuation death benefits, and it also has the effect of increasing the value of your estate.  If your Will is challenged after your passing, the superannuation benefits will form part of the asset pool which can be claimed against.  Some food for thought regarding the significant asset that is your superannuation.

So, maybe it’s time to review your superannuation nomination – and for the greatest benefit, we suggest reviewing it concurrently with your Will and Powers of Attorney.

Contact our Legal Team for an appointment to review your Estate Planning to find out how we can help.

 

Katherine Taylor – Solicitor

BCriminology [History], LLB

Spring Clean Your Life Planning

Spring has sprung, the days are getting longer and the sun is getting warmer – if you haven’t already, you are likely getting out in the garden, cleaning the house, and planning your summer projects around your home and garden.

In all the excitement of improving your physical environment, spare a thought for your life planning; that is, your future estate, asset and tax planning – it is a great time of year to give these a freshen up too!

Your Will is an easy place to start.  We recommend that a review of your existing Wills should be undertaken every 5 years, or earlier, if your current circumstances change.  If you don’t have a Will, NOW is the perfect time to get that process started.

Aside from regular reviews, there are certain milestones which are ideal point to consider and update your Will.  If any of the following have occurred in the last 12 months, or are likely to occur in the next 12 months, a review is necessary:

  • ENTERING A NEW RELATIONSHIP
  • MARRIAGE
  • CHILDREN
  • PURCHASING OR SELLING PROPERTY
  • CHILDREN BECOMING ADULTS
  • RETIREMENT
  • ESTABLISHING A BUSINESS
  • BUSINESS OR TRUST CHANGES
  • RELATIONSHIP BREAKDOWN, SUCH AS SEPARATION OR DIVORCE

If any of the above scenarios have recently changed in your life, it would be a good idea to grab copies of your signed Will, have a sit down and read over what you have in place.  If you see anything which requires change, or you are unsure about the impact of a life event, come see our legal team and we will assist you with the review.

Another issue worth noting is how marriage, separation and divorce can affect your Will if you fail to update it.  Each has a different consequence, and failing to consider and update your Will and Powers of Attorney at the time can result in the wrong people being in control of, and entitled to, your hard-earned assets.

The key to good long-term life planning is to be prepared, and obtain advice before committing to a significant life, asset or business change [where possible].  This isn’t limited to Wills, as changes can also impact Powers of Attorney, ownership of assets [ie. if owned jointly with others], business structures and agreements and superannuation entitlements.

Contact our Legal Team today to get your Life Planning spring clean underway.

 

Kayla Kennedy – Solicitor

LLB

Estate Planning

I’ve often thought that ‘life planning’ would be a much more appropriate label than ‘estate planning’; estate planning is [and should be] so much more than simply planning for your death.

Of course, planning for how your assets should be dealt with upon your death by preparing a Will is an important component of the plan, but it only one component of what should be much broader life planning – and that planning should begin as early as possible.

Estate planning extends well beyond Wills, to incorporate Powers of Attorney, Superannuation, business ownership, trust structures, tax planning and broader family arrangements, all of which may have no effect until you are unwell or pass away, but should all be part of your planning whilst you are fit and well and enjoying life.

Your estate planning should be front of mind during many of life’s big moments, including the following:

  • PURCHASING A PROPERTY // planning should include how the property is owned, whether that is in your sole name, joint names with another person, or in the name of a company or trust. Getting this right will determine who can receive an interest in the property should you pass away, and can also avoid unnecessary stamp duty, tax and legal expenses in transferring the property down the track;
  • GETTING MARRIED OR SEPARATING FROM YOUR SPOUSE PARTNER // the joy of getting married, or the difficulty of a relationship breakdown, both have an impact on your estate planning. Prior to the event, you should be reviewing any existing wills, powers of attorney, superannuation arrangements, business ownership structures and the ownership of your own assets;
  • HAVING CHILDREN, OR YOUR CHILDREN BECOMING YOUNG ADULTS // your children are the centre of your world, and should also be the centre of your estate plan, whether that is to provide for the care and provision of your minor children, or to benefit and protect your adult children for the challenges in their own lives;
  • STARTING A BUSINESS, OR PLANNING YOUR TRANSITION OUT OF A BUSINESS // both extremely exciting times, and both requiring significant planning to ensure smooth operation of the business and treatment of key people within it.

For bonus points, great estate/life planning will combine elements of legal advice and documents, financial advice and accounting advice, which is addressed in a cohesive, open and organised manner.

 

For further information regarding estate planning, please contact us to receive a FREE copy of our ‘7 Steps to Estate Planning Guide’, and look out for future dates for our ‘Estate of Mind’ seminar series at https://www.eventbrite.com.au/e/estate-of-mind-tickets-66157682409

 

Stefan Manche – Senior Associate Solicitor

LLB, BComm

What To Consider When Making Specific Gifts in Your Will

What to consider when making specific gifts in your Will

When preparing your Will there are a number of things to consider such as who to appoint as your Executor, the beneficiaries of your estate and whether you wish to leave any specific gifts to a particular family member or friend.

A ‘gift’ can be anything from a particular item of jewellery to a sum of money.  Below it will be discussed the matters that should be considered if you want to leave a gift under your Will.

Firstly, you cannot gift an item if you do not own them.  This situation can arise where a property is held under a Self-Managed Superannuation Fund or under a Trust.  Another situation to mention is when an item is owned jointly with another person.  In this case, the surviving owner will obtain the asset upon your passing.  Consequently, if you gift an item that you do not own, or is jointly owned, will be ineffective under your Will.

Secondly, it is important to update your Will to ensure that if the asset you have gifted still exists when you pass away.  We understand that life happens and that items and assets are sold or given away during your lifetime.  Therefore it is important to update your Will if you know that you no longer hold an asset.  However, if you have made a gift that is no longer in your possession, the direction in your Will would be ineffective and result in the recipient not receiving the gift.

Finally, if you wish to gift a particular asset or item under your Will, it is important to consider these items are properly described.  It is recommended to provide adequate detail when describing your asset to ensure your wishes are consistent as under your Will.

If you wish to discuss your Will, please do not hesitate to contact our friendly Canny Legal team.

 

Kayla Kennedy

Law Clerk

 

 

 

New Year Resolutions that Will Make A Real Difference To You + Loved Ones

Now that the dust has settled on what was hopefully a fun-and-family-filled Christmas and New Year period, it is a great time to reflect on those hastily-made New Year’s resolutions, and consider the difference it will make if you actually see them through.

Perhaps you resolved that in 2019 you will exercise more, quit smoking, drink less, or spend less time looking at your phone.

For others, you may have decided that 2019 is the year you get your personal, financial or business affairs in order. That may include getting those Wills and Powers of Attorney prepared (which you’ve been meaning to do for years), getting that accounting or financial advice you know will make a difference, or kick-starting that business which you’ve been daydreaming about.

Now these are New Year’s resolutions that will make a real difference to you, your loved-ones, your financial health and your current/future employees.

The most important part is getting the process started. The second-most important part is making sure that each of the elements of your plan complement, and do not contradict each other. For example, the superannuation or asset planning which you undertake with an accountant or financial advisor should be reflected in your will, your business plan should be supported by adequate funding arrangements and succession agreements, and your business tax planning and compliance must be complemented by appropriate employment agreements for your staff.

Ideally, this means you should be seeing a lawyer, accountant and financial adviser contemporaneously, and have them talk to each other to ensure each element is consistent. But who has the time and energy for that?

This is where Canny Group can help you stick to your New Year’s resolutions. We have a team of experienced accountants, lawyers and financial advisers under one roof who are ready to listen, identify your needs or the needs of your business, and work cohesively to get your affairs in order, or your dream off the ground, for the best possible start to 2019.

 

Stefan Manche

Senior Associate Solicitor – LLB, BComm (Finance) 

Estate Planning for Blended Families

The term ‘blended family’ generally describes a family where either one, or both, parties to the current relationship have a child or children from a previous relationship, and may also have children together in the current relationship.

As you can imagine, estate planning can be a challenging task, both for the client and the advisor.  When thinking about your future and providing for your family after you have passed away, the role of your solicitor is to understand your wishes and assist in ensuring that you provide adequately for your spouse, the children of your current and previous relationships and any other dependents.  A key focus is often structuring your estate plan to avoid potential claims against your estate or other issues, and balancing this with your wishes.  It will often also encapsulate elements of tax planning to ensure that the benefit received by your family is not diminished with unnecessary tax or other duties or liabilities.

Depending on your individual circumstances and wishes, your solicitor may suggest the use of one or more of the following strategies as part of your blended family estate plan:

  1. BINDING FINANCIAL AGREEMENT

A binding financial agreement is an agreement between you and your current spouse detailing how each other’s assets are to be divided between the family in the event that the relationship ends.  The agreement may include different outcomes depending on the length of the relationship.  If proper formalities are met (such as each party receiving independent legal advice as to the impact of the agreement on them personally) then the agreement will be legally binding.  The terms of any such agreement should then be mirrored in the wills of each party.

  1. WILL CONTENT

Your will is central to your estate plan, and there are a number of mechanisms which can be included in your will to ensure that your spouse, children from your current relationship and children from a previous relationship are all adequately provided for.  Some of the more common mechanisms are the creation of a testamentary discretionary trust within the will, or a portable life interest or right to reside in a particular property.  These are strategies which provide a benefit to a person or multiple persons in the estate assets (usually the spouse), without actually transferring control or ownership of the asset to them, so that upon a designated time or event, that benefit will end and the control or ownership then passes to another party (usually children from a previous relationship).

  1. MUTUAL WILL AGREEMENT

Less restrictive then creating a trust or life interest, a Mutual Will Agreement is an agreement signed at the same time a couple makes their wills, with purpose of the agreement is to impose obligations on the surviving spouse to not change their will, even if they subsequently re-partner.  This generally ensures that all children of the parties (from the current and previous relationships) are provided for in the manner that the parties agreed, and can be enforced by the children should the surviving spouse change their Will to the detriment of the children.

  1. USE OF EXISTING STRUCTURES AND ASSETS

If may also be possible to use existing structures (such as a Family Trust or Self-managed Superannuation Fund holding valuable assets) to provide a benefit to particular parties outside of the Will, by transferring control of those entities either during your lifetime, or upon your death.  Another option may be to transfer assets to a particular person during your lifetime, or to change the ownership of the asset (such as a property) such that it will transfer to the intended beneficiary automatically upon your death (ie. by survivorship).  The benefit of such planning is that assets held in trust structures, held jointly or gifted by you during your lifetime will generally fall outside of those which can be claimed against by challenging your will.  However, there will also be potential control, stamp duty and tax consequences to be considered and therefore individual advice is required to ensure the best outcome for your situation.

The best outcomes for blended families are obtained when your family circumstances and individual wishes are considered carefully and holistically, to allow the most suitable combination of the above tools, structures and planning to be implemented.

If you wish to discuss your family estate planning please do not hesitate to contact our friendly Canny Legal team.

 

Kayla Kennedy

Law Clerk

The Importance of Having a Will

We can’t see the future and we can’t predict unfortunate circumstances, but we can plan for them, and we can help to make them easier for our loved ones.

As the saying goes, nobody likes to think about what is going to happen to our family and loved ones are going to be provided for when you die but something as simple as having a valid and up to date Will is one of the most important parts of planning for your family’s future.

With the appropriate advice from Canny Legal, the development of an effective Will is something that can be done quickly and easily.  Not to mention that once it’s done it will provide certainty and confidence that your family will be provided for in the future.

 

THREE THINGS YOU MAY NOW KNOW ABOUT WILLS!

  1. SUPERANNUATION // superannuation death benefits cannot be dealt with directly in a Will. However, depending on the rules of your fund, you may be able to make a sperate Binding Nomination to make sure any death benefit is distributed in accordance with your wishes.
  2. EFFECT OF MARRIAGE OR DIVORCE // in Victoria, marriage has the effect of revoking any previous Wills other than those specifically and expressly made “in contemplation of marriage”. Divorce, on the other hand, does not revoke an existing Will however, unless a contrary intention is shown, any appointment of your former spouse as an executor and any gift/s you may have left them are automatically revoked.
  3. EXECUTION REQUIREMENTS // to be valid a Will needs to be signed by the Will-maker and witnessed by at least two people. Each page also needs to be signed by the Will-maker and the witnesses and everyone needs to sign in each other’s presence.

 

WHAT ARE THE BENEFITS OF HAVING A WILL?

There are many key benefits of having a Will, including having the power to be able to:

  • Appoint one or more people you know and trust to be the executor of your estate
  • Nominate guardians for any of your children who are under 18
  • Specify exactly where are how your estate gets distributed and to whom
  • Allocate specific gifts to particular people or organisations EG. Charities
  • Make specific directions about your funeral arrangements or the way you would like your body to be treated after death EG. To be buried or cremated

In addition, the administration of your estate will generally be more efficient and less stressful if you have a clearly planned out Will.

 

WHAT HAPPENS IF I DON’T HAVE A WILL?

In the circumstance that you should pass away without a valid Will:

  • The administration of your estate may be unnecessarily complicated for your surviving family members who may need to work through the courts to have your estate administered
  • The distribution of your estate will be undertaken in line with a legislated formula that may not reflect your wishes

In the event that you have ownership of property, this will be distributed according to the laws of the State or Territory in which you lived at the time of your death.

Similarly, if you have children under the age of 18, they will have a guardian appointed to them by the State and in most cases any such arrangements will not be entirely consisted with your wishes or desires.

“What happens if I die without a Will?” is one of the most common questions we are asked when preparing these documents.  This is usually followed by the question “is it true that the Government gets my money if I die without a Will?”  The short answer is NO, however, the Crown (Government) will receive assets of the Estate IF a person dies without leaving a surviving spouse, partner, child, grandchild, sibling, parent or cousin.

 

WHAT HAPPENS IF I DON’T HAVE A VALID OR UP TO DATE WILL?

If you already have a Will, then congratulations on being organised!  But have you reviewed it recently?  Unfortunately, if you have a Will which is old, not clearly drafted or incomplete the document may be subject to legal challenges or may not reflect your current circumstances or wishes.

The general rule is to review your Will every three to five years to make sure it still reflects your current wishes.  It is also important to review the document when any of the following events occur:

  • A change in your family EG. Marriage, divorce, children
  • A change in assets EG. You come into a large sum of money, acquire a significant asset or start running your own business
  • A change in the capacity or circumstances of key people EG. A family member needs long-term medical care of special assistance, your executor dies or loses capacity
  • A change in location EG. You move to a different state or country with different inheritance and estate laws
  • A change of heart EG. You want to add or remove a gift to a particular friend or relative, you want to provide a gift to a charity.

 

WHY IS IT IMPORTANT TO GIVE CONSIDERATION TO THE NEEDS OF FAMILY MEMBERS?

Many of us set out on our journey through life with goals in mind like; working towards our dream career, starting a business, travelling the world, getting married and having children – the list goes on!  In time, we acquire assets like family homes and our estate represents this lifetime of dedication and achievement that once passed on can continue to enrich the lives of our loved ones.

There are different types of Wills and ways of providing for family members and their circumstances.  It is important to consider the responsibilities the Will-maker has to the needs of their family.

For example, a parent who has two children, one who is disabled requiring care and the other wealth in his or her own right.  The Will-maker may choose to devote some or all of the Estate to the child in need, at the expense of the child who is not.

A properly drawn Will allows a higher level of certainty in the control of assets after death; who inherits what assets and how they’re distributed in the best interests of the surviving family.  Canny Legal can advice on the best way to provide for family members, including how to reduce the risk of a family members wasting his or her inheritance away.  Families always have competing needs and siblings can often be rivalrous so any potential challenges to a Will should be considered at this time.

It’s an unfortunate but not unusual situation where a family member believes their parents, partner or spouse have not taken their needs into consideration.  This may lead them to challenge the Estate by making an Application to the Court for an order of proper provision, or alternatively challenging the construction of a Will if there is evidence that the Will-maker was unduly influenced when making the Will.

Will disputes are very emotional and have become a highly litigated area of law.  It is also common for a party to commence litigation in an emotionally distressed state, without having properly considered the specific objectives of the claim and the evidence required to convince a Court that it should make favourable orders

Litigation is expensive, risky and can very quickly drain the value of the Estate.  The best way to reduce the chance of a challenge or limit a claim is to seek proper advice at the time of drafting your Will and ensure that it considered the Will-makers duties and obligations to family members.

Grieving the death of a family member is never easy.  This time is only made harder if it also brings to light unpleasant family disputes that have been looming between family members.  Take the time to speak to your family members and your loved ones and make time to prepare you Will today.