WILL

The starting point is to ensure that you have a valid will that correctly reflects how you want your estate to be distributed. If you have had a change of circumstances, such as a marriage, divorce, or beneficiary’s death, then it is important to revisit the will. It is also important to ensure that you have executors who will carry out the terms and wishes in your will.

ADVANCED CARE DIRECTIVE (ACD)

An ACD allows you to write your wishes and instructions regarding future health care, end-of-life care, living arrangements, and personal matters, and appoint one or more decision-makers to make these decisions on your behalf when you are unable to do so yourself.

POWER OF ATTORNEY

It is also important to have an Enduring Power of Attorney (EPA). The EPA allows for the effective administration of your affairs in the case of loss of mental capacity. It also allows (in appropriate circumstances) for the continued compliance of a Self-Managed Superannuation Fund.

BINDING DEATH NOMINATION (BDN)

If you have a superannuation fund (self-managed or externally managed, such as a Retail or Industry Fund), it is important to give consideration to a binding death nomination. Superannuation does not automatically form part of your estate, as the superannuation fund is considered to be a separate trust. Barring any direction to the trustees of the superfund, the payment of your balance is at their discretion (with overriding requirements regarding that discretion).

A BDN will allow you to direct the superannuation either to a specific person, such as a surviving spouse, or to your Legal Personal Representative, in which case the superannuation will form part of your estate to be dealt with under the terms of your will.

Under most Retail and Industry Funds, the BDN will need to be renewed every three years. Depending on the SMSF Trust Deed, some BDNs within your SMSF also need to be renewed every three years.

If you have a Reversionary Pension within your fund, then depending on the trust deed, that may take precedence over the BDN.

You will also need to ensure that the person nominated in the BDN is considered a dependent under the Superannuation Industry(Supervision) Act 1993 (SISA). For example, grandchildren are not SISA dependents, so any superannuation bequests to a grandchild must be dealt with under your will.

DISCRETIONARY/FAMILY TRUSTS

If you have a trust, either for business or investing purposes, then it is important to realize that the assets of the trust do not automatically form part of your estate to be dealt with under your will. You will need to formulate other ways to transfer the assets in the trust to the beneficiaries you want them to go to. This may involve transferring shares in the trustee if there is a corporate trustee, changing the trust deed to allow the Appointor of the trust to be nominated pursuant to the will, or naming a default Appointor in the case of the death of the primary Appointor.

TESTAMENTARY TRUSTS (TT)

If there are children under the age of 18 years (either your own or grandchildren) or dependents with financial or matrimonial problems, then consideration should be given to creating a TT within your will. A TT cannot be created after the event.

In the case of children under the age of 18 years, the TT allows them to receive distributions and be taxed at normal rates rather than the punitive rates for minors. For example, the child will have the $18,200 tax-free threshold rather than the $416 threshold.

If there is a dependent with financial difficulties, the TT will allow any bequest under the will to be protected from creditors.

The TT may allow some protection in the case of marriage difficulties; however, you should consult a solicitor if this is a consideration so that the TT is correctly established.

CONCLUSION

Estate planning can involve many issues, so it is important to ensure that you engage a competent solicitor to prepare the plan. There have been many court cases due to deficiently prepared documents. I recently reviewed a will for a client that mentioned how their superannuation was to be split under the will, but there was no Binding Death Nomination to ensure the superannuation was to be paid into the estate.