Avoiding Estate Litigation – Why A Statutory Will Might Be Your Best Answer

About statutory wills

To put it simply, a statutory will is a Will or Codicil made by the Court on behalf of a person that lacks testamentary capacity.

The legal framework

In April 2006, Queensland introduced a statutory framework for the manner in which the Court may make a statutory will. An application, usually by a litigation guardian, on behalf of the adult is made to the Court under the provisions of the Succession Act 1981 (Qld).

The circumstances in which the Court may make an order are summarised as follows:

  1. The person must lack “testamentary capacity” and be alive when the order is made;
  2. The applicant is the appropriate person to seek the orders;
  3. Adequate steps have been taken to allow representation of other persons with a proper interest; 
  4. The proposed Will or Codicil, would have been made by the testator if the person had testamentary capacity; and
  5. The Court considers the proposed Will or Codicil is suitable.

However, it is only when an order for leave to proceed is made that the Court will proceed to hear the substantive application. The court must first be convinced the circumstances warrant such application.

There are a number of factors that the Court considers on the hearing of an application for leave. The full list is set out in the legislation. Some of the factors include evidence of the lack of testamentary capacity (and the likelihood of the person ever regaining capacity), the size and character of the estate, evidence of the person’s wishes and the likelihood of a family provision application (claims on the estate).

When should you consider making an application?  

The decision in Re APB, ex parte Sheehy [2017] QSC 201 is a great example of a situation when an application to the Court for a statutory Will should be made.

The case involved a 91 year old male, who had a very large estate.  The adult (referred to as APB in the judgment) held assets valued at approximately $70,000,000. He had a significant interest in a shopping centre which was operated under a joint venture agreement. He wanted the venture to continue after his death.

There were unusual circumstances leading up to the application, involving a number of people befriending the adult when he was vulnerable, with the intention of advancing their own interests. He was alienated from family and friends. There was also evidence of Will making without the requisite capacity.

The Court considered whether APB would make provision from his estate for those people. It also considered the amount of provision for his three children, their respective spouses and his grandson. 

Due to the complexity of the estate assets, including a property joint venture, there was an issue whether there should be one or two testamentary trusts established by the Will and who was to be appointed as trustee and executors.

The case shows, and it was recognised that, had these issues not been determined prior to the adult’s death, it is most likely that costly and complex litigation would have ensued. Both the adult and the parties were clearly better off resolving the issues before the courts whilst the adult was alive and to preserve and protect his assets.

Take away points

So, whilst some may feel daunted by the process of applying to the Court on behalf of a person without testamentary capacity, for an Order authorising a Will, it may save loss of potential assets and avoid disputes in the longer time.

This is particularly so in circumstances where there are multiple parties seeking to benefit from an estate, the nature of the assets are inherently complex and there is evidence of a lack of testamentary capacity.

If you would like to fund out more, please contact either Elizabeth Ulrick or Tony Crilly at Perspective Law on 07 3839 7555.

Tax and Duties of Executors and Trustees – Are you liable for tax?

Executors and Trustees are personally liable for the tax assessable on a trust estate, so it is critical that they be absolutely sure the extent of that tax liability. But how can you be sure? What action can you take? What forms of application can you make, to ensure you are protected as far as possible from future claims or a re-assessment?

The requirement of self-assessment puts much greater responsibility on taxpayers to ensure their income tax returns were correct before lodgement with the ATO. Much greater certainty about the ATO’s views on the technical enforcement of the tax law is necessary to protect yourself from strict liability. 

Consider firstly, what is “advice” in terms of a communication from the ATO? Advice consists of “public” and “private rulings, which are very different and have a weight that applies at public or private levels. public and private rulings are now ‘binding’ on the ATO and it is recommended that trustees obtain clarity using these.

Public Rulings  

Public rulings explain the application of the tax law to taxpayers generally (for example Taxation Rulings and Determinations), a class of taxpayers (Class Rulings) or a particular arrangement (Product Rulings). These apply particular sections of the legislation in detailed factual circumstances, to confirm a binding position taken by the ATO regarding assessments.

A public ruling provides protection until it is withdrawn, or when it specifies that it ceases to apply.

You don’t need to know of the existence of a public ruling to rely on it.

What are not Public Rulings?

The Income Tax (IT) and Capital Gains Tax (CGT) Determination series which were published prior to 1 July 1992 when the legislative framework for public rulings was established, are not legally binding on the Commissioner. Income Tax Ruling IT2622 (about present entitlement during the stages of administration of deceased estates)  is of particular importance in this regard. The Commissioner will treat these determinations as “administratively binding”.

A draft public ruling is a document that sets out the Commissioner’s preliminary view about the way in which a relevant provision applies. This means that reliance on a statement in a draft ruling provides the same level of protection as ‘guidance’ (penalty and interest protection). 

In the context of deceased estates and trusts , rulings within this category include TR 2004/D25 (about absolute entitlement) and TR 2010/D1 about the meaning of income of a trust estate.       

Private Rulings

In the absence of a binding ATO position, a trustee or executor might apply for a private ruling from the ATO. This gives the person certainty about how the facts will be applied to the law and assessment made, rather than assuming a position which could be open to interpretation. No one  wants a nasty surprise by way of a re-assessment long after the estate assets have been distributed.

The ATO is bound to follow a private ruling on which the rule relies. This is unless a section of the Act, is repealed or amended to have a different effect, or a Court makes a judgment that takes a view about the section that is more favourable to the rule.

A ruling assists in deciding whether the taxpayer has taken reasonable care when determining penalties. Be careful not  to rely on views  in edited versions of private rulings  published on the ATO  Legal Database.  The devil is always in the detail.

A private ruling  provides protection to the taxpayer it is issued to and only for the tax years covered. (There is an exception where a trustee obtains a private ruling in relation to a trust. In that case, the private ruling will apply to the beneficiaries of the trust (other than an indirect tax or excise ruling) and to any trustee that replaces the applicant trustee, for as long as the ruling remains current.

An edited version reflects the law (and the Commissioner’s view of the law) at the time it was issued – so it is very important to check if either have changed since the ruling was published.

For example, there are issues about the application of the complex partial main residence exemption provisions. For executors who are risk averse, we would suggest that they obtain a private ruling.

What can a ruling be about?

A private ruling can cover anything involved in the application of a relevant tax law, including issues relating to:

  1. Liability for tax;
  2. Administration;
  3. procedure and collection;
  4. ultimate conclusions of fact (such as residency status);
  5. Status to apply for a private ruling:

You can apply for a private ruling about:

  1. your own affairs
  2. the affairs of another entity (including a person) if you’re their agent or legal personal representative (LPR).

Various private ruling application forms together with instructions are available on the ATO website. The person applying for the ruling must indicate whether or not they will include detailed reasoning to support their application and should do so to support their case. An application must contain a full description of all relevant facts and circumstances.

The website also lists supporting information that should accompany private ruling applications on particular topics (including for example, those about death benefits, child maintenance trusts and capital gains for deceased estates).

A word of warning trustees must note carefully. The ATO will not be bound by a private ruling if you do not provide all material facts or the scheme which the ATO has ruled upon is not implemented in the way set out in the ruling.

Refusal to rule

The ATO may decline to give a private ruling in some circumstances, including if:

the making of the ruling would prejudice or unduly restrict the administration of the law – for example:

  1. the application is frivolous or vexatious;
  2. the arrangement is not seriously contemplated;
  3. making the ruling would not have any practical consequences – (e.g. the transaction in question occurred in the past and the amendment period has expired).
  4. the issue has been, or is being considered  – (e.g. in an audit relating to the particular question);
  5. the taxpayer has made an objection on the same matter;
  6. information requested by the ATO was not provided in a reasonable time;
  7. the ATO exercises a particular power available under the law, rather than provide advice on how that power would be exercised, (e.g. you should normally ask the Commissioner for an extension of time to lodge a form rather than seeking a ruling on the issue).
  8. the ATO considers that the correctness of a private ruling will depend on certain assumptions and it chooses not to make a ruling subject to those assumptions; (go figure!)
  9. you decline to pay the cost of obtaining an accurate valuation required for the ruling.

So consider these possible opportunities to clarify and obtain certainty as a trustee or executor in any potential tax liabilities. In some cases taxpayers have looked back over many years and raised concerns about historical tax returns and to ensure they will not be assessed at any future time, they lodge a voluntary submission for assessment. If the ATO decides there is nothing to assess then the trustee will be relatively insulated from any further re-assessments.

If we can assist with the estate administration and work with your accountant to ensure certainty for you as the “at risk” trustee or executor, please give us a call on (07) 3839 7555.

Consider your Insurance requirements before you enter into a Contract to Purchase

The Risk of a residential Property passes to a Purchaser one Business day after the contract date.

When a purchaser enters into a contract to purchase a residential property in Queensland it is a standard term of the contract that the property is at the buyers Risk from 5.00 pm on the next business day after the contract date.

What Insurance should the buyer obtain?

For the standard standalone dwelling the buyer should obtain Building insurance, contents insurance and public liability cover.  Should a claim arise during the period between contract and settlement insurance companies are aware of these standard conditions in the contract and will rely upon these contract terms if they are entitled to do so.

Contents Insurance

A common misconception by buyers is that they do not have any of their possessions in the residence before settlement and therefore there is no need for contents insurance. The contents insurance is an important aspect of the insurance requirements as most building insurance policies will not cover any damage caused to the internal part of the dwelling due an insurable event (i.e. storm damage to the internal fixtures and fittings such as curtains, shutters, blinds, stoves, fridges, microwave, washing machines, dryers, built in BBQ, exhaust and fans). These items are normally covered by a contents policy.

Body Corporate Contracts

Though there are a few exceptions, the Body corporate normally has a Building insurance policy for the complex and the building is covered under the Body Corporate policy. The internal area of each lot is therefore the responsibility of the lot owner or buyer under a contract of sale and contents and public liability insurance should be arranged with respect to the property within the time frames as set out above.

When insuring your unit you must also consider whether your policy covers any escape from your unit (i.e. water leaks) that may damage other units and whether your policy covers this eventuality in the event the Body Corporate insurer declines to cover the event or whether the assistance of an insurance broker to ensure you are fully covered should be considered.

When do you think about insurance?

Think about your insurance requirements before you enter into a contract to purchase.

The above examples are the standard considerations that a buyer must take into account when arranging insurance after signing a contract, however not all properties or situations are the same and the short time frame from the contract date to the time risk passes to a buyer can leave buyers limited opportunity to secure insurance if the property they are intending to purchase is outside the standard or if there are other circumstances which may affect their ability to obtain insurance; for example:

  1. Is the proposed purchase price in excess of the upper limit of cover offered by some insurance companies – do you need specialist assistance?
  2. Is there a natural event imminent that would cause insurance companies to decline offering insurance i.e. Cyclone warnings;
  3. Is there something particular about the property you are purchasing that would require specialised insurance assistance.

Should the Seller continue their Insurance Policies until settlement?

The simple answer is yes. The property is still your property until settlement has been completed and there are a variety of events that can take place which can prevent completion of the sale, even after the contract goes unconditional.  A seller should always ensure that their position is protected and not rely on the buyers to adequately insure their property.

If you require further information regarding purchasing property, please do not hesitate to call us and talk through any of these issues on (07) 3839 7555.

Changes to QLD’s Enduring Power of Attorneys and Advance Health Directives

On 30 November 2020 new forms for Enduring Powers of Attorney (“EPAs”) and Advance Health Directives (“AHDs”) were introduced by the Queensland Government.  These new forms are mandatory and the previous forms can no longer be used

EPAs are one of the most important documents a person can sign.  By executing an EPA, you are giving someone the power to make decisions on your behalf in relation to personal/health matters and financial affairs.  An AHD is an additional document which enables you to give someone power in relation to your future health care.  We provide further information regarding EPAs here https://crillylaw.blog/2021/02/01/what-is-an-enduring-power-of-attorney-and-why-is-it-necessary/ and AHDs here https://crillylaw.blog/2021/02/09/advance-health-directive-benefits-to-you-and-your-family/.

The key changes to EPAs and AHDs include:

  • Explanatory Guidelines have been released for each form.  It is important to review these Guidelines as you complete the EPA and AHD;
  • You are now able to state your views, wishes and preferences.  These are not binding on the attorney, however, your attorneys are required to consider your views when exercising their power.  For example, you could specify the area where you wish to live or religious concerns. You are still able to set terms for your attorneys which are binding and must be followed; 
  • You can nominate persons who your attorneys must notify when exercising their powers, what information they need to provide and when.  For example, you may wish for your attorneys to let family members or other attorneys know when they are about to begin exercising their power;
  • In your AHD you can give specific instructions about blood transfusions;
  • The witness to your EPA must certify that you are capable of making the EPA freely and voluntarily.  This is in addition to the prior requirement that the witness be satisfied that you are capable of understanding the nature and effect of the EPA. This change is to ensure that you are not being pressured into making the document;
  • Capacity Assessment Guidelines have been introduced which emphasise the presumption that an adult has capacity and that attorneys need to take into account their human rights.  The guidelines can be used to determine whether the power has commenced or the support that the adult needs;
  • Your attorneys cannot enter into conflict transactions unless authorised by the principal or the Court.  A conflict transaction occurs where there is a breach between an attorney’s duty to you and their own interests.  An example is where spouses own property jointly which needs to be used for the sole benefit of only one spouse. Authorisation can be obtained retrospectively, however, the attorney would be in breach of their obligation until authorisation is obtained.  Conflict transaction clauses should be drafted carefully and limited to particular transactions where possible;
  • EPAs made interstate and in New Zealand under Queensland legislation will be recognised in Queensland;
  • There are additional eligibility requirements.  For EPAs, the attorney must have capacity and must not have been a paid carer for the principal for three years prior to their appointment.  For AHDs, an eligible attorney must not be a service provider for a residential service where the principal resides.

Although it is possible to download the forms and complete at home, it is always recommended to obtain legal advice.  EPAs have the ability to extend to superannuation, companies and family trusts.  It is vital that they contain terms, powers and limitations as appropriate to each individual and their particular circumstances.

If we can assist with preparing your EPA, AHD or any other aspect of your estate plan, please call Tony or Lauren on 07 3317 4313. Otherwise you can go to our website at any time and click “Start your estate plan Now”.

Joint Tenants or Tenants in Common – How it will impact your ownership rights

If you are considering purchasing a property with another person, it is important that you understand how you will own that land. When more than one buyer is involved, you will have the option to elect to be either joint tenants or tenants in common.

Though these terms may sound similar, each of these agreements confer different rights and interests upon owners. Regardless of whether you are buying property with a partner, family member or friend, determining which type of ownership is right for you before purchasing property can prevent substantial legal and financial difficulty in the long run.

It is critical that you decide how to hold the property before you sign a contract, as any change can incur further stamp duty at the normal rates. It is possible to transfer from one name into joint names as spouse and it will be exempt from stamp duty. However, the same opportunity to does not apply to the reverse for a transfer from joint names into one name only. You might do this for asset protection purposes because that person is at risk of creditors in a trading company.

The Differences between Joint Tenancy and Tenants in Common

Joint tenancy is where two or more people jointly and equally own property together rather than a quantified share of it. At law, joint tenants are recognised as the single owner of the property. This type of arrangement is common between married or long-term couples.

As it is not possible to separate each tenant’s share, there are limited circumstances in which joint tenancy agreements can come to an end. Such circumstances include but are not limited to where the property is sold to a third party, or where one joint tenant transfers their interest in the property to another person. On the death of one joint tenant, the property “vests” automatically in the surviving person. All that is required is to record the death on title and the property will be in the sole name of the survivor. This is an important step as you cannot sell the property unless and until it is in the correct name.

In contrast, tenants in common own separate and distinct shares of a single property.  These shares may be equal or unequal. For example, one tenant in common may own a 10% share of the property, while the other owns the remaining 90%. These shares may be disposed of as each owner chooses. Though each owner will own a portion share of the property, the land is not physically divided between them. Rather, each tenant in common is entitled to full physical possession of the land.

However, the key difference between these arrangements concerns what happens to the property after one owner passes away. In this situation, if a property is owned by joint tenants, the deceased’s interest in the property is transferred to the surviving tenants. The property does not become an asset of the deceased’s estate. This is called the “right of survivorship”.

In a tenant in common arrangement however, no such right of survivorship exists. Instead, the property will become an asset of the deceased’s estate. As a result, the deceased owner’s share must be transferred only to the beneficiary of the estate or be otherwise dealt with by the estate’s legal representative.

Due to these essential differences in your rights as owner, it is important to ensure you enter into the ownership arrangement that is right for you.

At Perspective Law, we can assist you to evaluate your circumstances and make sure that you are entering an arrangement tailored to your needs. Should you be interested in our advice or more information, please contact us for an obligation free discussion (07) 3839 7555.

Estates- Tax, Super and the other stuff

Managing a deceased estate is no easy feat for an Executor. If appointed to the task of collecting the deceased’s assets, like selling the main residence, shares, bank accounts, superannuation and other property, it can get complicated. There can be the additional challenge of dealing with the interest in private companies and family trusts.  We highlight below some of the issues in an estate administration that we see on a daily basis.

  • Tax and superannuation

It is likely that an Executor will have to deal with the deceased’s superannuation benefits as part of the estate administration process. Very often a Binding Death benefit Nomination is made directing the member balance to either the spouse or the estate. Once the executor has redeemed the superannuation death benefits, they should consider the most tax effective way to distribute these to the beneficiaries.  The executor should obtain a calculation of the withholding tax on the superannuation benefits payable to any non-residents for tax purposes. There is an obligation to withhold tax from any super paid to non-dependant, and this should be taken into account when making distributions to reflect the entitlements under the Will.

  • Find my super

During the course of a person’s life, they might become a member of multiple industry super funds. There can be substantial benefits attached to some member accounts in additional funds, including significant life insurance. Consider whether to perform a “find my super” search, with the Australian Taxation Office as early as possible in the estate administration process.

  • Interest on Bank Accounts

One of the issues in dealing with interest on the deceased’s bank accounts, is whether a beneficiary is “presently entitled” to receive that income. This will determine whether the beneficiary or the estate is liable to pay tax on the net income. A beneficiary will not be presently entitled to income of the estate until it has been fully administered. Note this does not mean that the estate has to be wound up, just that the executor makes provision for the tax payable on interest as well as all debts and all specific assets or cash payments.

  • Sale of main residence within 24 months date of death

The sale of the deceased’s main residence is generally exempt from capital gains tax as it falls within the main residence exemption. However, for this exemption to apply, the property must be sold within 24 months from the date of death. Beware of circumstances that might affect the main residence exemption, such as if the deceased’s ownership in the main residence passed to them as a beneficiary of a deceased estate, or they had rented out the property for some period of time. It is crucial to get evidence of the cost base such as original land purchase, building contract construction price and the exact dates the property was rented out and when use as a main residence resumed.

  • Cancellation of credit cards and auto debits

Credit card and auto debit facilities should be cancelled immediately to prevent identity fraud. The executor should return the credit cards to the relevant facility for cancellation. However, be aware of any loan repayments by way of a direct debit, as alternative arrangements may need to be made.

  • Estate Bank Account

It is important that the Executor opens an estate bank account for the collection of estate assets. Any income earnt on estate assets should also be paid into this account, including any dividend payments on shares and interest on bank accounts.

This serves two purposes. Not only does it assist to distribute the estate assets according to law, but it also assist the Executor to comply with their duty to account, which can be required by the Court and requires the Executor to produce a full inventory of the estate at any time during the administration.

  • Tax returns for personal, trusts and companies

The Executor is responsible for fulfilling the tax obligations of the deceased person and is personally liable for the tax payable. They will have to conduct investigations to find out whether the deceased had interest in any trusts or companies, as these will need to be declared to the Australian Taxation Office. If the estate is earning interest on assets, an estate tax return will need to be prepared and lodged. It is important to contact the deceased’s accountant to find out this information and obtain advice. 

  • Cancel passport driver license and electoral roll membership

As with credit cards, the driver’s licence of the deceased should be sent to the Department of Transport and Main roads for cancellation. The executor should request confirmation of the details of registration of any motor vehicles owned by the deceased and arrange for the interest in the motor vehicle to be transferred to the Executor.

The electoral roll should also be notified of the death. This is important, particularly if it is an election year, otherwise the estate will be at risk of incurring a fine.

If you require further information on the administration of an estate, please do not hesitate to call us and talk through any of these issues on (07) 3839 7555.

Discretionary trusts – What happens to the assets held on death?

Discretionary trusts are an incredibly valuable tool for structuring the affairs of your business, investments and family finances. These trusts allow the trustee to split the income of the trust assets between a family group. This has significant tax advantages as the trustee can vary the amount of income paid to a beneficiary in light of that beneficiary’s other income.

It is important to consider what will happen to the assets held under a discretionary trust when you pass away. After all, you are unable to directly bequeath these assets through your Will. This is because a trust is a separate legal entity. Under a trust structure, the assets are owned by the trustee of the trust and do not automatically form part of your estate.

However, the trust can be structured in a way that preserves its longevity after you pass away. This can be considered through a holistic estate planning process.

One such strategy involves drafting your trust to include a clause which stipulates who will become the appointor or “controller” of the trust should you die or become incapable of performing this role. The role of an appointor is highly important, as this person has the power to appoint and remove trustees. They have the power to decide if any changes are made to the trust. The Appointor can nominate in writing or by a Will a trusted replacement Appointor to oversee the function of the trustee.

If you are the trustee of your own trust, a second option might be to draft the trust to stipulate who will replace you as the trustee by default when you pass away.

Alternatively, if the trust is managed by a corporate trustee, you can also nominate who will be the director or shareholder of the trust. This can be done through your Will, by company resolution, or through a Business Succession Agreement. By nominating a trusted replacement trustee, you can be confident that the trust will be efficiently managed when you pass away.

During the estate administration process, it is also important to check the balance sheets of the trust to determine whether there are any unpaid present entitlements or loan accounts owed from the trust to the deceased. This can be paid out by the trust to the deceased’s estate and is payable on demand by the executor as a debt due and owing.  The alternative is to forgive these loans so that the capital remains held by the trustee of the trust to the amount of the loan.

Through these strategies, you can ensure that your family members continue to benefit from the advantages of the discretionary trust continue once you pass away. At Perspective Law, we approach the estate planning process as a holistic strategy which addresses all aspects of your legal affairs. For further information, please do not hesitate to call our office on (07) 3839 7555.

Maintain Value- Why we recommend Business Succession Agreements

Where a business is run by multiple owners, it is important to secure the ongoing viability of the business in the event that one of the owners passes away or suffers from a critical injury, disability or illness. A Business Succession Agreement is a useful tool to ensure the seamless transfer of ownership over the company in one of these unfortunate events.

The importance of a Business Succession Agreement is best explained through a hypothetical scenario. Let’s say that two owners named Cathie and Barney carried on a business supplying building materials to government builders. When Barney died, Cathie offered to purchase Barney’s shares in the company from his estate. However, Barney’s Will left everything equally between his two teenage sons, Bill and Bob. Unfortunately, the boys fancied themselves as business owners. Rather than selling the shares, the boys insisted on taking an active role in the business. After a year of indecision, arguing and stagnant growth, the business failed.

The failure of the business could have been avoided if Barney and Cathie had executed a Business Succession Agreement which transferred Barney’s interest in the company to Cathie as the continuing owner.   

Essentially, a Business Succession Agreement is a legally binding document which stipulates what happens to each owner’s respective interest in the company should they pass away or lose the ability to continue running the business. Typically, this involves allowing the continuing owners to buy the outgoing owner’s shares in the company. This gives the remaining owners certainty that their rights to continue on in the business while also ensuring fair value for the family of the outgoing owner whose interest has come to an end.

This Agreement also ensures that third parties do not have an unacceptable level of control or influence over the business, the estate cannot demand an unreasonable amount for the interest in the business, loans are not called in without proper funding, and the continuing business owners can protect the asset that they have worked hard to build up. 

The Agreement functions through a grant of an option in favour of the continuing owners to purchase the outgoing owner’s interest. At the same time, there is a grant of an option for the outgoing owner or their executor to require the continuing owners to purchase the interest in the business on set terms. The Agreement will also set out the mechanisms by which these options can be exercised and the time periods within which a valuation of the interest must occur and payment of that interest.

To fund these buy and sell obligations, the Agreement may impose obligations on the parties to maintain policies of insurance to provide all or part of the funds to purchase the outgoing owner’s interest in the business.

Ultimately, a Business Succession Agreement is only part of an overall strategy that must be formulated. It is imperative that the other documents that form part of the legal framework under which a business operates are reviewed carefully.  Therefore, Trust Deeds, Company Constitutions, Loan Agreements and other arrangements must be reviewed and, where appropriate, updated. It is our pleasure to assist our clients and their advisors in achieving these goals. Should you be interested in arranging a Business Succession Agreement, please contact Tony direct on (07) 3317 4312.

What happens to your super when you pass away?

While this may seem like a morbid question for a Monday morning, dealing with your superannuation is an important part of estate planning. After all, your super funds may represent a sizeable portion of your asset pool when you pass away.

However, unlike your other assets, your super death benefit is not automatically considered to be part of your estate. Your super therefore cannot be dealt with by your Will unless you have directed your super fund to leave the benefit to your legal personal representative (‘LPR’), otherwise known as the executor of your estate.

This is because your Will deals with the assets already owned by your estate such as your savings, property, shares and other personal items. Conversely, your super is held on trust by the trustee of your super fund.

We recommend executing a Binding Death Benefit Nomination form through your super fund to specify who you wish to receive your death benefit. This is a legally binding document which must be submitted to your super fund and updated every three years.

You can choose to nominate either your dependants or your LPR.

Nominating your dependants

Section 10 of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SIS Act’) defines ‘dependant’ to include your spouse, children or a person with whom you have an ‘interdependent relationship’ with at the time of your death. An ‘interdependent relationship’ describes a close personal relationship between two people who live together and receive financial, domestic and personal support from each other. When you pass away, your super fund will distribute your death benefit to your dependants.

Nominating your LPR

Alternatively, you may nominate your LPR to distribute your super funds in accordance with the terms of your Will. This means that your super benefit forms part of your estate and may be distributed to your beneficiaries.

What happens if a Binding Death Benefit Nomination has not been completed?

If you do not give instructions to your super fund, or if your Binding Death Benefit Nomination is declared invalid, the trustee will have discretion to distribute your death benefit to either your dependents or your estate. Completing a Binding Death Benefit Nomination Form removes this discretion and ensures that your wishes are carried out.

At Perspective Law, we will submit a Binding Death Benefit Nomination to your super fund during the estate planning process. We have the experience to ensure that this form is completed properly to avoid any question of its validity.

Should you be interested in updating your estate planning, please do not hesitate to give us a call on (07) 3832 5555.

Advance Health Directive – Benefits to you and your family?

Life is full of surprises and not everything goes according to plan. The one thing we treasure is the freedom to make a choice about our life including our health care. As distinct from an Enduring power of Attorney, it is important to plan ahead for the possibility that you may no longer be able to make serious end of life decisions regarding your health care. What happens if you lose capacity to make health decisions on your own behalf?

A situation may arise where you suffer from an accident, dementia or a mental illness. It is absolutely vital to express your wishes for your future health care ahead of time, so that health professionals have clear directions about the types of treatment that you want to receive. Doing so can also relieve the burden experienced by your loved ones when making difficult decisions on your behalf. Every person we have spoken to that had to make that tough decision about continuing life support for their spouse felt terrible no what the decision made.

Certainty about your end if life health care can be achieved through an Advance Health Directive (‘AHD’), a binding legal document which spells out your future health care preferences. The  document under  ‘Your Directions’, is divided into three parts; life-sustaining treatment,  other health care and  blood transfusions. You can give binding directions in each category, so that a hospital or doctor knows exactly what you require.

An AHD allows you to give directions about life-sustaining treatments such as CPR, assisted ventilation and artificial nutrition (example naso-gastric feeding) which aim to prolong your life. To make a  decision, on whether you want this to be done, we recommend that you consider your age, state of health, your values and what quality of life means to you. You can choose to either choose yes or no to  particular treatment in different sets of circumstances to life-sustaining treatments, or even leave the decision with your attorneys.

The next part of the document allows you to give directions regarding both general and special health care. General health care relates to the majority of medical treatments, procedures and services for mental and physical conditions. Conversely, special health care includes procedures such as organ donation, experimental health care and participation in special medical research are options you can choose.

The final part of ‘Your Directions’ relates to blood transfusions. This includes the transfer of blood, red cells, platelets and/or plasma. You may stipulate the terms upon which you would consent to a blood transfusion or list the types of transfusions that you would accept. This section may also be useful if you have religious preferences that do not sanction the procedure.

Your doctor will need to explain the treatment options to you and witness your AHD to confirm that you have capacity to execute the document. During the appointment, your doctor will explain the medical implications of each health states and treatment in the context of your medical history. If you are terminal, palliative, unconscious or in a permanent negative state, you may consider treatments in a  different light and select different options.

It is also worth noting that an updated version of this document was recently released by the Queensland Government which allows you to appoint attorneys for health matters. This section does not need to be filled out if you have prepared an EPA.

If you wish to have an Advance Health Directive as part of your strategic estate plan to ensure that your wishes regarding your future health care are clearly recorded, please contact our office on (07) 3839 7555.