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 and AHDs here

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.