Estate Planning

Wills & Estates Planning

Kurt Topper leads our Wills & Estates team and he is the only Law Society of NSW Accredited Specialist in Wills & Estates Law in the Illawarra and greater South Coast region.

We provide a holistic and comprehensive approach to estate planning and this is enhanced by our strong professional relationships with other advisers in areas of taxation, accounting and financial planning.

It is important to think about your estate planning because life is never static and changes often occur over time to relationships, family, health and financial circumstances.

Failure to consider, plan and give attention to changing circumstances and objectives may result in the reduction in value of assets (e.g. by unnecessary taxation), loss of assets (e.g. in the event of relationship breakdown or bankruptcy) or loss of control (e.g. upon ill-health or incapacity). Upon your death or during your lifetime, your changed circumstances can result in reduced wealth to beneficiaries and limited flexibility, unnecessary taxation, and benefits or control going to the wrong persons which may lead to costly disputes.

The common ‘trifecta’ of estate planning documents typically includes a Will which is current, comprehensive and reflects your wishes, an Enduring Power of Attorney for financial decision-making and an Enduring Power of Guardianship for health and lifestyle decision-making.

However, modern estate planning often encompasses other important considerations such as considering funding requirements, effectively passing control of assets, tax minimisation, asset protection and flexibility for yourself and your beneficiaries as well as minimising or averting potential disputes or claims upon your passing or any incapacity.

Wills

Wills Establishing Testamentary Trusts and Other Protective Trusts

Enduring Powers of Attorney

Enduring Powers of Guardianship

Advance Health Care Directives (living wills)

Superannuation and Death Benefit Nominations

Family and Personal Trusts

Succession for Business and Family Trusts

Asset Protection

Preventative Estate Planning

Special Disability Trusts

Aged Care, Retirement Villages and ‘Granny Flat’ Interests Advice

Wills

A Will is a key estate planning document required to address your wishes and objectives upon your death.

A Will enables you to appoint an executor to have the responsibility and power to administer your estate, and importantly, to specify the estate beneficiaries and the nature and extent of their entitlements.

If you die without a Will, the law sets out the persons entitled by default. This may not accord with your wishes and offers little or no protection or flexibility to such persons.
Failure to properly structure and implement a valid Will may result in your wishes and objectives not being achieved, frustrated beneficiaries and disputes. The costs and associated delays of your estate administration may also be increased as a consequence.

We can assist with basic and complex Wills.

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Wills Establishing Testamentary Trusts and Other Protective Trusts

A Will creating one or more testamentary trusts gives you greater control over how your wealth is passed on to your beneficiaries and may also provide tax and asset protection benefits. This makes testamentary trusts an effective estate planning tool.

With the increasing diversity of family dynamics and ordinary household wealth rising due to property market gains and accumulated superannuation, testamentary trusts are becoming more and more an appropriate and accessible estate planning option.

A testamentary trust is simply a trust that is established by the terms of a Will and which takes effect upon the death of the willmaker.

A ‘basic’ Will which does not contain testamentary trusts typically offers little or no flexibility with respect to taxation and estate management and exposes an inheritance to a beneficiary’s personal risks. For example, a basic Will does not provide any assistance to a beneficiary against claims from third parties (i.e. claims from creditors or spouses/partners) or against vulnerabilities of a beneficiary (i.e. loss of decision-making capacity, immaturity, substance abuse or susceptibility to improper influence or exploitation by other persons).

Wills creating testamentary or protective trusts are not just reserved for the super wealthy but are becoming increasingly more common and may be useful if you have a concern or desire to:

provide asset protection for intended beneficiaries;
provide flexibility in asset management and disposal;
minimise taxation for beneficiaries;
protect a disabled or vulnerable beneficiary;
protect a beneficiary who is at risk, i.e. professionals, business owners or guarantors;
help minimise potential family law claims;
help minimise potential family provision/estate claims;
provide or secure the future income for survivor of you and your partner/spouse;
provide a fund for the education of your children and/or grandchildren;
provide for the ongoing maintenance of infant children.

A Will may establish a range of testamentary trusts, starting on one end with a protective trust (which may be restrictive and aimed to protect a vulnerable beneficiary or preserve family wealth across generations) and on the other end a fully discretionary BCTT (which is aimed to provide flexibility, a layer of asset protection and tax advantages).

Testamentary trusts may also be tailored to sit somewhere in between with varying degrees of protection, control and flexibility. Good estate planning should aim to get the ‘balance’ right between building in layers of protection for any perceived or actual risks but not unduly restricting the use, benefit and flexibility.

It is therefore important to obtain legal advice specific to your objectives and family and financial circumstances to make sure the Will structure is right for you.

Click here to access our ‘Why a Testamentary Trust Will? Factsheet.

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Enduring Powers of Attorney

A power of attorney is an important planning tool and can provide the person or persons appointed with a range of powers to act for you in various circumstances including dealing with personal financial decisions in the event you lose capacity due to ill health or an accident or are otherwise unavailable.

A power of attorney provides certainty, minimises the risk of disputes amongst family members and other third parties and removes the costs and delays that might otherwise arise with an unexpected health emergency or absence.

A power of attorney may be tailored by:

Directions and limitations (e.g. to address specific assets only, superannuation and trusts, and maintenance or support for dependent family members);
Controlling its commencement (e.g immediately, loss of capacity or for a specific period such as whilst travelling);
Structuring your attorneys appointment (e.g. one or more attorneys and alternative attorneys and specifying how they must act such as together or independently).

There are formal legislative requirements as to the form of the power of attorney, who can act as an attorney, and acceptance and witnessing requirements in order for the document to be valid.

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Enduring Powers of Guardianship

Your ability to make your own decisions may become impaired through accidents, illness or degenerative health conditions. An enduring power of guardianship can provide the person or persons appointed with the power to make personal health and lifestyle decisions on your behalf if you are not capable of doing this for yourself (e.g. to decide where you live, medical treatment and healthcare services).

An enduring power of guardianship enables you to choose who you want to make decisions for you. In doing so, this provides certainty and minimises the risk of disputes as well as potential costs and delays.

An enduring power of guardianship may be tailored so that you direct which kind of decisions you want your guardians to make and how to carry out those decisions. You may appoint one or more guardians and alternative guardians and specify how they must act, e.g. together or independently.

There are formal legislative requirements as to the form of the enduring power of guardianship, who can act as a guardian, and acceptance and witnessing requirements in order for the document to be valid.

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Advance health care directives (living wills)

You may appoint someone to act on your behalf to make personal health and lifestyle decisions for you if you are not capable of doing this yourself. This is known as an enduring power of guardianship.

Additionally or alternatively, you may want to document your own decisions for medical care and treatment by preparing an advance health care directive (AHCD). An AHCD is a document that states your wishes or directions regarding your future health care for various medical conditions in the event you are unable to make your own decisions or if you are terminally ill.

An AHCD differs from an enduring power of guardianship because it represents your own decisions made in advance as opposed to your guardian deciding for you upon any illness or incapacity.

An AHCD is intended to provide you confidence and peace of mind that your wishes regarding health care will be carried out if you cannot speak for yourself, and in so doing, assist in avoiding, or at least reducing, potential physical and emotional suffering, brought about by unwanted treatment.

There are limitations as to the directions which may be provided in an AHCD and it is recommended that your wishes be considered and documented carefully.

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Superannuation and Death Benefit Nominations

Superannuation is generally a non-estate asset in that the distribution of your superannuation death benefits upon your death is dealt with according to the governing rules of the superannuation fund and the superannuation law, not automatically according to your Will.

Generally, upon a member’s death the trustee of the superannuation fund will pay the superannuation death benefits to the member’s dependents or legal personal representative.

Many funds permit members to nominate a beneficiary and such nominations can be binding on the trustee. If there is no binding nomination, the trustee generally has a discretion and this may be undesirable in circumstances where a dispute amongst family members is likely to arise or should you have specific wishes for payment.

The terms of a death benefit nomination must be carefully considered to avoid unnecessary taxation and other potential pitfalls.

In the case of self-managed superannuation funds, it is also essential that the control of the fund upon your death is effectively addressed to avoid the powers of the trustee passing to the wrong person/s, which in turn, may be exercised to the detriment of intended beneficiaries or create inequalities.

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Family and Personal Trusts

Discretionary family trusts are established and used for various reasons, i.e. to hold investments, to operate or participate in a business, or to finance the purchase of a business, investment or lifestyle assets.

Key attractions of a discretionary family trust are (1) flexibility, which enables the trustee to select which beneficiary is to receive trust income or capital; and (2) asset protection against future creditors and other third party claims.

There are numerous other personal trusts that are not fully discretionary which can be established to meet planning needs depending on individual circumstances and objectives, including, for example, unit or hybrid trusts, capital reserved trusts, testamentary trusts, special disability trusts, child support/maintenance trusts, superannuation proceeds trusts, and custodian/bare trusts.

Establishing a discretionary family trust or other personal trust involves important estate planning considerations at the outset and requires ongoing review, including:

the choice of an appropriate trust structure;
who is to have control of the trust;
who are to be the potential beneficiaries of the trust.
the methods of funding the trust, i.e. by way of gifts and/or loans; and
trust law and taxation considerations.

Correctly drafting and settling the terms of the trust is critical to ensuring planning needs and objectives are achieved.

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Succession for Business and Family Trusts

Businesses

The loss of capacity or death of owners or other key persons of a business may have drastic and negative consequences upon the business, its operations and the owners’ and/or key persons’ families.

Understanding how a business is owned, controlled and operated and identifying the participants’ objectives is crucial to ensuring appropriate succession arrangements may be implemented.

This often entails reviewing and/or preparing other documentation in addition to a Will, including for example, shareholders agreements, buy/sell agreements, partnership agreements, leases and licences as well as considering and implementing any necessary funding arrangements via insurances or other means.

Family trusts

The assets in a discretionary family trust are not assets that are personally owned by any individual capable of being dealt with by making a simple Will.

Careful consideration is required of the circumstances of the trust and the trust documentation to evaluate and determine,

whether the family trust is to be wound up, and if so, during the lifetime or upon the death of the appointor; or
continue as a 2nd or subsequent generation family trust, and if so, whether the control of the trust is to pass during the lifetime or upon the death of the appointor and in what manner.

It is important to identify and assess the advantages and disadvantages of the family trust continuing to operate in the future as well as the adequacy of the current terms of the family trust to do so.

Changes to the terms of the family trust may be appropriate (e.g. to address the suitability of the control provisions, classes of beneficiaries, trust duration and access/restrictions to capital), and if so, this must be considered and implemented carefully to avoid a resettlement and triggering taxation and duties.

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Asset Protection

Wealth that an individual owns, controls or inherits may be at risk for various reasons, including for example, bankruptcy, breakdown of a relationship, enforcement of a personal guarantee or indemnity, occupational/professional risk, or director risk associated with operating a company.

Appropriate estate planning can assist structure asset ownership to minimise or avoid risk by considering, for example:

ownership options for investment and lifestyle assets i.e. individual or joint ownership, superannuation, family or personal trusts, or corporate ownership;
ownership options for businesses i.e. separation of business assets (such as the premises, plant/equipment and intellectual property) from trading activities through the use of holding entities and licensing.

Estate planning may also assist in securing assets, for example, by considering strategies such as:

home equity loans and mortgages;
personal property security interests and charges;
parent to child loan agreements;
marriage/domestic relationship binding financial agreements;
superannuation reversionary pensions and binding death benefit nominations.

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Preventative Estate Planning

Family relationships and dynamics are becoming increasingly complex and sometimes fragmented. Identifying potential risks and implementing appropriate estate planning may minimise or avoid challenges to a Will by disgruntled beneficiaries or excluded persons.

Appropriate estate planning may also provide some level of protection to you and your beneficiaries against other potential risks, such as:

getting into relationship difficulties (i.e. spouse or de facto partner claims upon separation or divorce);
occupational or professional liability (i.e. persons at risk of professional negligence or other work-related claims);
financial liability (i.e. business owners, guarantors, directors of companies or trustees of self-managed superannuation funds); or
vulnerable beneficiaries (i.e. lack of decision-making capacity, immaturity, substance abuse or susceptibility to improper influence by other persons).

Minimising or avoiding a potential claim and/or enhancing protection against potential risks may serve to thwart a challenge and provide greater security to you and your beneficiaries.

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Special Disability Trusts

Special Disability Trusts (SDTs) are a Federal Government initiative intended as an estate planning option to assist family members and carers to make private financial provision for the current and future care and accommodation needs of a family member with a severe disability.

A SDT may be created to operate during your lifetime or upon your death via your Will.

SDTs attract social security means test concessions for the disabled beneficiary in relation to his or her pension (i.e. the disability pension) and for contributing immediate family members.

The main social security benefits of a SDT include:

an assets test assessment exemption for the beneficiary of up to $681,750 (indexed 1 July each year);
all trust income is excluded from the income test assessment for the beneficiary;
a gifting concession is available of up to $500,000 combined by one or more immediate family members. This allows certain family members who are also in receipt of social security benefits to gift money or property to the SDT without being a deprived asset in breach of the so-called ‘gifting rules’;
accumulated income is assessed at the beneficiary’s marginal tax rate instead of the top marginal tax rate which ordinarily applies to accumulated income in trusts;
the SDT may access the capital gains tax main residence exemption for any principal residence occupied by the beneficiary.

In order to qualify as a SDT a trust must meet formal legislative and drafting requirements.

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Aged Care, Retirement Villages and ‘Granny Flat’ Interests Advice

There are a vast number of options to consider when choosing your future accommodation and this is often affected by lifestyle, financial circumstances, health and care needs.

Due to market pressures it is common for people to choose hastily simply because there has been an opening at a village or facility. However it is important to obtain independent legal and financial advice before doing so.

We provide contractual advice relating to retirement village agreements, residential aged care agreements and accommodation bond agreements to help you understand the terms and conditions so that you and your family are fully aware of the short-term and long-term consequences.

We also provide advice and assistance structuring and preparing ‘granny flat’ family arrangements to ensure key family members are protected and to maintain family harmony.

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