Advanced Health Directive (Living Will)

Why do business owners, sole company directors/shareholders need protection?

As business owners we often neglect putting our own house in order.

We are so busy working at our trade and our business that we often skip some of the things that can protect our business in the face of an unexpected event.

For example, if you die without a Will:-

• Delays can occur with the disposal and distribution of the Estate, particularly the business
• Dependents (widows, children, etc) can be left waiting for lengthy periods for access to money.

When a sole director of a company dies without leaving a Will, there can be complications with an even greater impact, particularly where the sole director is also the sole shareholder.

• Under legislation, in the event of the death of a single member/director of a proprietary company, the executor or other personal representative appointed to administer the deceased’s estate may appoint a new director to the company.
• The new director has all the powers, rights and duties of the deceased director and can keep the company running until shares are transferred to beneficiaries who may then appoint new directors if they wish.

The executor is normally and most efficiently appointed by means of a valid Will.

Where there is no Will:

• A near relative, if available and capable, would have to apply to the local Supreme Court for Letters of Administration to manage the estate, which could take considerable time
• In the absence of any immediate relatives or other obvious people to deal with the estate, the Public Trustee may step in and administer the deceased estate but this process can also take months

If there is a period when there is no director, the company may be  unable to operate.

With no-one properly authorised to make management decisions or act for the company, it may be unable to trade.

If you are a sole shareholder/director of a company you might need to consider who is the beneficiary or beneficiaries of your shares.

Did you know your company is considered a separate legal entity from yourself and is capable of holding property in its own right? As a result, when you pass, property that is owned by your company is not passed under your Will automatically.

If your company owns an office, for example, or office furniture and perhaps a company vehicle,  your company is the owner of that property, not you personally, even if you are the sole director and sole shareholder of your company. Both your Will and your company constitution affect the distribution of your assets upon your death. A Will and company constitution both need to meet your succession planning needs.

Although a child may inherit a gift made in a will prior to the age of 18, many parents feel that it is better to have a ‘trustee’ look after the money until a specific age has been attained.

A children’s trust can be set up to give the trustees certain powers and discretions over in managing the money or assets for the benefit of nominated children.

These powers and directions allow the trustee to apply income and capital for the benefit of named children usually for:

• General Living [clothing spending money etc];
• Education – Schooling and Training;
• Education – Sporting [includes club fees, training and equipment]
• Education – Life skills [driving lessons is an example]
• Education – Experience [Clubs, travel and excursions are an example];
• Assistance to acquire a car;
• Assistance to acquire a house; or
• Assistance in setting up house.

Many parents want to control when their children receive their inheritance as they believe that it may be better for the child to reach a certain age when they are able to accept the responsibility of managing their own finances.

A children’s trust can allow the Will maker to set the age when the child is to receive their inheritance.

A children’s trust can contain these provisions and more.

Things to think about if you are thinking of leaving someone out of your Will.

A considered person is generally a family member that has been left out of a deceased persons Will that normally would have been a rightful beneficiary of the deceased’s estate.

Although you have a right to choose the people who will benefit from your estate after your death, it is important to be aware that there are occasions when a will can be challenged or contested.

The people who can challenge a Will (‘eligible people’) are usually;

• A person who was the spouse of the deceased at the time of the Will makers  death;
• A person with whom the deceased person was living in a de facto relationship at the time of the Will makers death;
• A child of the deceased person;
• A former wife or husband of the deceased person;
• A person, who was, at any particular time, wholly or partly dependent on the deceased person;
• A grandchild of the deceased person who may have lost their own parent, (a child of the deceased) or was, at that particular time or at any other time, a member of the household of which the deceased person was a member;
• A person with whom the deceased person was living in a close personal relationship at the time of the deceased person’s death.

When a Will is contested the Court has the power and can make orders that provision be made from the estate for the ‘eligible persons’ maintenance, education and advancement in life.

Many considerations are made by the Court before determining whether the claim is valid, amongst them;

• Type of relationship between the Applicant and the deceased person such as family member or any other relationship including *Nature and duration of the relationship;
• Nature and extent of any obligation or responsibility owed by the deceased person towards the Applicant;
• Nature and extent of the deceased estate including any property that is or could be designated as notional estate of the deceased person and any liability or charge to which the deceased estate is subject to;
• Financial resources of the Applicant including earning capacity and financial needs – both present and future;
• Financial situation of the persons who were cohabiting with the Applicant;
• Any physical, intellectual or mental disability of the Applicant;
• Age of the Applicant when the application for Family Provision claims are being considered;
• Any contribution including financials by the Applicant relating to the acquisition, conservation and improvement of the estate of the *Deceased person or towards the welfare of the deceased person or towards the deceased person’s family, made before or after *The deceased person’s death, for which adequate consideration was not received by the Applicant;
• If the Applicant was maintained wholly or partly by the deceased person before the death and if the Court considers it to be relevant that the extent to which and the basis on which the deceased person did so;
• Character and conduct of the Applicant before and after the demise of the deceased person;
• Conduct of any other person before and after the demise of the deceased person;
• Any relevant Aboriginal or Torres Strait Islander customary law; and
• Any other relevant circumstances, including matters in existence at the time of the demise of the deceased person or at the time the application was being considered.

The age of the Applicant plays a vital role in determining Family Provision claims, for example a very young Applicant and a very old Applicant have greater needs for provision than a middle-aged Applicant who will be able to support themselves.

In any Court proceeding, the people making the claim have the onus of proving their eligibility.

In the case of Family Provision claims, the Applicants or the persons who are claiming for provisions out of a deceased estate have the onus of proving that they are the eligible persons and the provisions stated in the Will are inadequate.

Individuals are entitled to make a claim against a Will in situations where a Will is valid, but the provisions stated in the Will are inadequate. In such circumstances, the Court can make a few changes in the Will or can distribute the estate in their favour.

An eligible person, can make Family Provision claims to the Supreme Court. The Court will determine if there is a valid claim and can pass an Order to provide adequate provisions for proper maintenance, education and for advancement in their life.

Before determining a Family Provision claim, the Court investigates the requirements and needs of the Applicant. The Court also investigates the Applicant’s financial situation and whether such Applicant can meet financial requirements from their own resources or not.

Any provision made for the Applicant by the deceased person either during the deceased person’s lifetime or made from the deceased person’s estate; or

If the Applicant was maintained wholly or partly by the deceased person before the death and if the Court considers it to be relevant that the extent to which and the basis on which the deceased person did so.

If you are considering leaving one of your children out of your Will and that child, then makes a claim the Court will consider the following;

• The child’s needs for proper maintenance, education and advancement in life;
• The details of the relationship between the deceased and the child including the conduct of the child or the parent or both the child and the parent;
• The length of estrangement and the underlying reasons for it;
• The conduct of the child before and after the parent’s death;
  • * Written explanations made by the deceased;
    
• Whether the child has fallen on “hard times”;
• The child’s financial circumstances; and
• The size of the estate and competing beneficiaries and their financial circumstances.
  • * Written explanations made by the deceased

In cases where there has been a fall out between you and a child, or perhaps numerous children, it is a good idea to document, in detail, the history of the fall out, how it arose, whether any attempt has been made to mend the relationship etc.

Such things may include unpaid loans, family arguments, abuse etc.

This letter will give the Court your reasons for disinheriting a child (or leaving them less than other children) and therefore the claim will not be a one-sided argument from the claiming child.

It is advisable to seek legal advice if you are considering these issues before drafting a will.

You can discuss these matters with the lawyer for appropriate  advice on the options you have in these circumstances.

Enduring Power of Attorney

An Enduring Power of Attorney (EPA) is a legal agreement that enables a person to appoint a trusted person – or people – to make financial and property decisions on their behalf.

An EPA is an agreement made by choice, that can be executed by anyone over the age of 18, who has full legal capacity.

‘Full legal capacity’ means that the person must be able to understand the nature and effect of the document they are completing and the nature and extent of their estate.

An EPA cannot be made by another person on behalf of a donor whose capacity might be in doubt due to mental illness, acquired brain injury, cognitive impairment or dementia.

An EPA can be operational while the person still has capacity but may be physically unable to attend to financial matters.

The benefit of an Enduring Power of Attorney is that unlike an ordinary Power of Attorney it will continue to operate even if the donor loses full legal capacity.

An EPA does not permit an attorney to make personal and lifestyle decisions, including decisions about treatment.

The authority of the attorney is limited to decisions about the donor’s property and financial affairs.

An EPA is legally binding.

To be made null and void it must be revoked by the donor or the State Administrative Tribunal.

An Enduring Power of Guardianship is a legal document that authorises a person of your choice, to make important personal, lifestyle and treatment decisions on your behalf should you ever become incapable of making such decisions yourself. This person is known as an enduring guardian.

An enduring guardian could be authorised to make decisions about things such as where you live, the support services you have access to and the treatment you receive.

An enduring guardian cannot be authorised to make property or financial decisions on your behalf.

To make an Enduring Power of Guardianship you must:

• be 18 years of age or older
• have full legal capacity (this means you must be able to make a formal agreement and understand the implications of statements contained in that agreement).

The person you appoint as your enduring guardian must also be 18 years of age or older and have full legal capacity.

You can appoint more than one enduring guardian as joint enduring guardians, but they must act jointly which means they must reach agreement on any decisions they make on your behalf. If you plan to appoint more than one enduring guardian it is important you consider their ability to work together on your behalf.

The Public Advocates recommends you appoint no more than two joint enduring guardians.

You may also appoint substitute enduring guardians who would take over decision-making responsibilities in the event one or more of your enduring guardians was unable to continue in the role.

The scope of authority given to your enduring guardian is determined by you when you make your EPG.

You may authorise your enduring guardian to make the same range of decisions as a plenary guardian, who is appointed by the State Administrative Tribunal.

This would enable your enduring guardian to:

• decide where you live, whether permanently or temporarily
• decide who you live with
• decide whether you work and, if so, any matters related to that work
• make treatment decisions on your behalf to any medical, surgical or dental treatment or other health care (including palliative care and life-sustaining measures such as assisted ventilation and cardio-pulmonary resuscitation)
• decide what education and training you receive
• determine who you associate with
• commence, defend, conduct or settle any legal proceedings on your behalf, except proceedings that relate to your property or estate
• advocate for and make decisions about the the support services you access
• seek and receive information on your behalf.

Alternatively, you may restrict the decision-making authority of your enduring guardian. For example, you may authorise your enduring guardian to make decisions about any treatment you receive, but not about where you live or who you associate with.

When making an Enduring Power of Guardianship you must also determine the circumstances under which your enduring and substitute enduring guardians will act.

For example, you might direct that your enduring guardian act only when they are in the same State as you.

Acting as an executor, for most people, is one of those ‘once in a lifetime’ experiences and can often appear daunting to a person who is also coming to terms with the death of a loved one.

The duties of an executor can, and usually do, include the following tasks: 

• Obtain Probate Application forms and death certificate
• Apply for probate
• Set up bank “Estate Account”
• Gather assets and value them
• Settle debts
• Distribute estate as per Will
• Set up Trust Fund(s) and/or any other form of trust as per the Will for dependents
• Prepare Estate account for beneficiaries
• Finalise taxation

It is important to ensure that you make provisions in the way of guardians for any children you have under the age of 18 because a Will is the only way of appointing guardians for your children.

If you do not appoint guardians then Courts could decide who is to be appointed as guardian to your children, which may not be the person/persons you would have chosen yourself.

Whilst making these decisions, it is possible that the Court may order that your children be taken into care whist it decides who would be the best person/persons to look after your children.   Any decision the Court makes will be on the basis of what the Court thinks is best for the child.

If one parent dies, the law provides that the surviving parent becomes the legal guardian of the child/children under 18.

A guardian appointed by a Will cannot be removed from that position unless by order of either the Supreme Court or Family Court. In making any determination the Court will operate on the presumption that the appointment by the Will is to be upheld.  Therefore, any change of guardian will only be because the guardian appointed by the Will is unsuitable for that role and not because someone else may be more suitable.

If there were to be an accident and both of the parents were to perish at the same time, then guardian would be called to act.

When choosing the guardian for your children it is important to consider the factors below:

• Age of proposed guardian(s)
• Frequency of contact children have with proposed guardians
• Children’s wishes
• Values of guardians, will they continue your parenting methods?
• Location of guardians
• Guardians do not have to be family members

In addition, it is also relevant and most important that you understand that a Will can be updated at any time to accommodate changes in guardian’s circumstances and contributing factors.

First example: You choose parents/grandparents to be guardians as they have most contact with your children right now. In 10 years’ time they may be unsuitable because of age, health etc. so a change to the guardian section of your will can then be affected.

Second example: You choose a sister and a brother in law as guardians again because of frequency of contact/values etc. however 5 years after making this decision they move away or separate and divorce. This again would require a change to the will to meet the current needs.

Administrator(s). A person or people appointed by the Supreme Court to administrate the estate of a deceased person who has died without leaving a Will.  The Administrator’s powers are similar to those of an Executor.  These powers are identified in the Administration Act.

Advanced Health Directive. A document prescribed by the Guardianship and Administration Act whereby a person can outline their decisions about their future medical care.  It only comes into effect when the person is unable to make reasonable treatment decisions about their own medical treatment or care.  Advanced Health Directives are commonly known as Living Wills.

Appointor. A person who is appointing another to perform a particular function.  In the contexts of Wills and Estates it refers to the person who is making an Enduring Power of Guardianship. In the case of a Trust it means the person who administers the trust.

Assets. Things that belong to you and form part of your Estate.

Beneficiary(ies). Any person or people that you would like to benefit from your estate, or a part of it.

Donor. A person who is granting a power or defined right to another.  In the context of Wills and Estates it refers to the person who is making an Enduring Power of Attorney.

Donee. A person who is receiving the grant of a power or defined right from another.  In the context of Wills and Estates it refers to the person who is appointed attorney pursuant to any form of Power of Attorney including an Enduring Power of Attorney.

Enduring Power of Attorney. A Power of Attorney whereby the Donor appoints others to make financial and legal decisions.  The difference with this type of Power of Attorney is that the Donor is able to exercise the powers that are given even though the Donor has lost legal capacity.  The form of this document is prescribed by the Guardianship and Administration Act.

Enduring Power of Guardianship. This form, regulated by the Guardianship and Administration Act, allows a person (the Appointor) to appoint other(s) to make decisions regarding the Appointor’s personal welfare, lifestyle and medical treatment options if the Appointor loses the ability to make those decisions for himself/herself.
Executor(s). The person or people that you appoint to carry out the wishes that you express in your Will.

Guardian(s). The person or people that you have appointed to take care of the upbringing of your children under the age of 18.

Informal Will. A Will that does not conform to the formal requirements of the Wills Act.  It may be incorrectly signed or witnessed or even unsigned.  The Supreme Court has the discretion whether to grant Probate on an informal Will.

Intestacy. If you die without a Will then you are said to have died ‘intestate’.  The effect of intestacy is that Parliament has enacted a law dealing with the payment of your debts and how your assets will be distributed.  This is through the Administration Act.

Issue. The word refers to a person’s first level lineal descendants meaning children.  This follows blood lines and does not include adopted children.

Legacy. A gift within a Will.

Legal Capacity. The state of an adult person’s mind, decision making process and health whereby the person is able to make decisions that deal with that person’s legal rights. Assessment of capacity can be complicated.

Letters of Administration. A process of the Supreme Court, Probate Division, that is like the granting of Probate whereby either:

1. A person is appointed to administrator an intestate estate; or
2. A person is appointed Administrator to a Will where the nominated executor is unwilling or unable to accept the appointment

Liabilities. What you owe at the date of your death e.g. debts, a mortgage, loan, credit card, tax etc.

Life Interest. Means an interest in property that allows a nominated to stay in that property for their lifetime.

Living Will. See Advanced Health Directive.

Pecuniary Gifts. Gifts of money.

Per Stirpes. A Latin phrase meaning “by stocks and branches” that determines who receives a legacy of a deceased beneficiary; the reference point for which is a common ancestor who has died.  The provision in which the phrase is used has the effect of providing for a deceased beneficiary’s share to be divided equally between that beneficiary’s children who survive, or the children or remoter issue [only those who are living] of the beneficiary’s beneficiary who has died.  The diagrammatic representation is a family tree.

Power of Attorney. A document pursuant to which a person appoints another to exercise their power over assets and many legal rights normally related to business matters.

Probate. The legal process that a Will goes through whereby the Supreme Court reviews the Will to ensure that it is in order and complies with the law.  The result is that the Court issues a Grant of Probate which then empowers the Executor.  Until a Grant of Probate is issued an Executor has no power or authority to act.

Remoter Issue. The phrase refers to a person’s lineal descendants beyond children, meaning grandchildren, etc.  This follows blood lines and does not include adopted or step grandchildren and beyond.

Residue. What is left in an estate once debts are paid and specific items have been gifted as specified in the Will.

Specific Gifts. Gifts within a Will of specific items to named beneficiary(ies).

Specific Legacy(ies). Gifts within a Will of specific items to named beneficiary(ies).

Statutory Provisions. The Law; contained in many statutes including the Trustees Act, the Wills Act; the Administration Act;  the Guardian and Administration Act; the Inheritance [Family and Dependents] Provisions Act and so on.

Testamentary Trust(s). A real bit of jargon; in simple terms it is any trust that is set up by or within a Will.

Testator. A male Will maker.

Testatrix. A female Will maker.

Trustee(s). The person or people that you have appointed to control any trusts you set up in your Will. They will have to make decisions such as when, if or for what reason cash should be advanced before a child attains the age stated in the Will.  They may also decide on what investments should be made with the capital that is not advanced.

General Information on Mutual Wills

By making Mutual Wills you are entering into a contract with each other that neither of you will alter your Wills after the death of the first to die (Promise).

The advantage of making Mutual Wills is that your combined assets will pass to the survivor subject to a constructive trust in favour of your children or grandchildren.

Your Wills will be drafted so that:

• You cannot change your Wills without giving written notice to the other (Promise).  However the difficulty is that once one of you loses capacity or dies the Promise becomes irrevocable.
• The Promise only applies to your Mutual Estate (the combined assets you own at the date of the first person’s death).  [You can, if you wish for certainty, identify your combined assets in your Wills.]
• The Survivor can deal with any other separate property as they wish.
• The Survivor can use the Mutual Estate during their lifetime.  [Note unfortunately the reality is that ultimately if the survivor wants to they can undermine the Mutual Will for example by disposing of property during their lifetime.)
• You can in your Wills place restrictions on what the survivor can do with the combined assets.  However, there is still the ability of the survivor to dispose of the property or dissipate the assets in breach of the Mutual Wills.]

Joint Property

Where you own a property jointly on the death of one joint tenant that person’s title or interest in the property automatically passes to the surviving joint tenant by operation of law.

The effect of this is that the jointly owned property does not form part of your Estate (including the combined asset pool) under your Wills.

While there is case law that indicates a Mutual Will severs a joint tenancy it is uncertain.

NOTE: As such if you want any jointly owned property to come into your estate and be covered by your Mutual Wills then you will need to sever the joint tenancy and own it as tenants in common.

The interest of a tenant in common can be left under that person’s will and forms part of their estate. There is no automatic transfer to the other.

We can assist you to change from joint tenants to tenants in common.

Other assets that may pass outside your Will (and not form part of your Estate) are Superannuation Death Benefits paid directly to dependents and Insurance proceeds paid directly to a named beneficiary and assets owned by companies or held in trust.

You can make a binding nomination so that your Superannuation Death Benefits are paid to your Estate, if your superannuation fund allows ‘binding death nominations’.

Please also be aware that divorce and marriage revoke a Will (including a Mutual Will).

Many people today have a pet and rightly have concerns about their pet’s welfare in the event of their death.

A pet trust can ensure the future wellbeing of a pet as well as be a valuable contribution to a pet charity or animal sanctuary.

An amount of money may be set aside for the sole benefit of a surviving pet for welfare, care, veterinary fees etc.

The executor/trustee would look after the legacy in your Will thus ensuring the trust was spent for the sole benefit of the named pet.

On the death of the pet any amount left in the trust would be distributed as per the residue or to a named beneficiary.

This beneficiary could be the person nominated to look after the pet or alternatively an animal home or pet charity.

Example:

Janice Smith is a widow and lives alone apart from the company of her 2 cats.

She is very concerned about their care and welfare when she dies and wishes for her friend to look after them when she has gone.

She calculates that the cats cost around $40 a week and that if they live a long and healthy life they have at least 10 years left.

$40 per week x 52 weeks = $2080 x 10 years = $20,800

She also wishes to leave her friend $1,000 as a gift for looking after them and her friend can have the balance of the money when the cats pass on.

N.B.     This is an example and of course there are many variations, the pet could be a dog, horse etc. and the person nominated to look after them could be an animal Sanctuary or Charity.

The following information is provided as an explanation of how a right to reside clause in a will is utilised.

It does not relate to any specific individual case simply as an overview of the workings of same.

A right to reside requires specific drafting for the individual requirements for both the will maker and the beneficiary/life tenant.

This is because the beneficiary/life tenant could need different protection for different periods of time.

Examples:

• Giving a parent a ‘right to reside’ in the home would likely be for the rest of their life, or, until they are no longer able to continue living there. (Have to go into residential care etc.)
• Giving a spouse a ‘right to reside’ may include a restriction such as a certain period/number of years, or until the surviving spouse remarries or co-habits etc.
• Giving an adult child a ‘right to reside’ may have a time limit such as when they finish college or university studies, or a specific time frame, such as until they are 25 for example.

You cannot give a ‘minor child (under 18) a right to reside as a guardian is appointed to oversee their upbringing.

A right to reside is not part of a simple will.

The clause specifies the rights and obligations of the life tenant and what is to happen to the property on the death of the beneficiary/life tenant, or at the end of the period of the right to reside if a specific period is required.

There are also powers for the executors/trustees to assist the beneficiary/life tenant if they are unable to perform their obligations in relation to the property.

The clause is for the protection of the executors and the beneficiary/life tenant and is to ensure that the will maker’s wishes in relation to giving the right are followed.

On the death of the life tenant, or, at the end of the specified period, the will maker specifies what is to happen to the property; does it form part of the residue of the estate and go to the residuary beneficiaries?

Alternatively, is the property to be transferred to a specific beneficiary? Is it transferred subject to any mortgages that may be over the property? Are the executors to pay out the mortgagor and the beneficiary take the property free of a mortgage?

Often the instructions are that on the death of the beneficiary/life tenant, the residual beneficiaries under the Will, usually the children, are to take the house equally as part of the residue.

Alternatively the house may be gifted to another beneficiary.

A dependent is someone who relies on you, perhaps financially as well as in other ways (e.g. their daily care and every day welfare has to be taken care of)

There are endless possibilities that someone will be dependent on others either permanentlyor temporarily.

This could be as a result of a permanent disability or illness and also temporarily in the event of an accident or long term illness.

So who is a dependent person?

• A child under the age of 18
• A parent or step parent who may or may not be living with you
• A person with a disability who you look after and is dependent on you
• A family member that may have an inability to manage their own finances

As we said the list is endless as we explore who may or may not be dependent on another person for their welfare and financial well being.

In a situation where a person is dependent on you and there is no Will to make provision for that person then many problems are likely to open up not only for the dependent person but for the family left behind to look after them.

It is not uncommon for people suffering a variety of disabilities to be unable to properly manage their financial affairs.

At the same time, families wish to ensure that an adequate fund is set up to meet their reasonable needs but so as not to affect any social security or pension rights they may have.

The flexibility of a Will trust for these people, especially if combined with a memorandum of wishes as to how the trust should be administered, can be an appropriate arrangement.

Plan Now for a Dependents Current and Future Welfare.

Providing for a dependent relative, whether disabled or not, is a profound concern for many families.

Wills with special provisions for dependents (perhaps with a Disability Trust if required) enable families to make provisions for the current and future care and accommodation of family members who meet the dependent and disability criteria.

In making a Will with a Disability Trust, family members are allowed a gifting concession for certain amounts depending on the rules of the country, state or territory of the Will maker. This money is put in a trust for the dependent person.

If the beneficiary is disabled then they are allowed an assets test exemption which in many countries, States and territories preserves their eligibility for public assistance where appropriate.  When the recipient dies, the trust ends and the assets are distributed according to the provisions of your will.

If you have a disabled or dependent person in your family, please contact us to discuss how a Dependent/Disability Trust Will can provide security for that person, and peace of mind for you and your family.

IMPORTANT NOTE:

Whether a Special Disability Trust is suitable for your purposes is a complex matter that involves the need to carefully consider your personal circumstances and those of the intended beneficiary.

Those circumstances may change over time, as may other factors such as relevant laws, taxation treatment and relevant policies.

You should always seek advice from qualified legal, taxation and other professional advisers before taking any action in respect to a Special Disability Trust and take into account both long term and short term considerations as applicable to your individual circumstances.

The Special Disability Trust Questions and Answers and all associated information are intended to provide you with generic and high level information only.

While we believe the Information is generally accurate, it is intended for general consideration only and not for decision making purposes.

You should not rely on this Information for any purpose. To the extent permitted by law we are providing this information without any representation or warranty of any kind including, without limitation, in respect to accuracy, completeness or currency and will have no liability to you of any kind in respect to any use that you may make of the Information.

There is a lot of misinformation and misconception about the interaction of superannuation and Wills. This fact sheet is limited to the interaction of superannuation and Wills and is of general information only.

To begin with superannuation is there to provide for benefits to be paid to a member on the member’s retirement through illness or age.

As this is a social policy of successive governments there are taxation concessions for contributions and earnings of superannuation funds as well as when the member receives his/her benefits.

When a member dies the social policy is that the taxation benefits that a member would have had on retirement are available to a limited class of persons called dependants.

These dependants include spouse and others who have a financial dependency on the deceased member, usually former spouses [who are being financially supported by the deceased member], children and in some cases grandchildren.

The taxation benefits include a tax advantaged income stream and tax free lump sum payments.

Beneficiaries who are non-dependants will be taxed on the benefit that they receive.

Superannuation monies are managed by Trustees and regulated by both the trust deeds, which set up the fund, as well as statutes that regulate superannuation.

WHAT IS A DISCRETIONARY TESTAMENTARY TRUST?

It is a trust created through your Will on your death to give your beneficiaries (the person(s) you leave gifts to) flexibility in dealing with the gift/s you leave them.  Briefly, you leave the gift/s in trust to be held by the trustee/s for the benefit of your nominated beneficiaries in accordance with your wishes as spelt out in your Will.

Generally, under a discretionary testamentary trust:

• The beneficiary is usually the trustee of their own trust (so they have control over their inheritance). A third party can be appointed trustee in place of or in addition to the beneficiary if necessary.  For example, where the beneficiary is facing bankruptcy, matrimonial problems or has limited capacity to manage their own affairs.
• Usually few restrictions are placed on how the trustee can deal with the trust assets. The trustee (usually the beneficiary) will have total control unless restricted under the trust provisions.  This flexibility is for tax purposes.

WHY A TESTAMENTARY TRUST WILL?

The main advantages are:

• Taxation effectiveness – a Testamentary Trust can minimise the amount of tax a beneficiary pays. The discretionary power to distribute income/capital among a wide range of potential beneficiaries can result in considerable and continuing tax savings.  Minors (children under 18 years) under a Testamentary Trust get the benefit of the same tax concessions as adults. That is, a distribution from a Testamentary Trust is exempted from the penalty tax rates on minors.

Talk to your accountant or other taxation expert about the tax benefits of a Testamentary Trust.

• Asset protection – general The assets belong to the trust and not the beneficiary. As such the trust assets are protected from a beneficiary’s creditors (including the enforcement of any personal guarantees the beneficiary may have given), the effect of marriage breakdown (although it is difficult to protect assets of a beneficiary from being accessed by the court for matrimonial property settlement), the bankruptcy of a beneficiary.  
• Asset protection for problem beneficiaries– If a beneficiary becomes mentally incapacitated (including but not limited to drug addiction and alcoholism) control of the trust is not given to them until and only if the problem can be resolved. In this way, the trust gives protection to problem beneficiaries by protecting them against themselves, so they cannot waste their inheritance.
• Asset protection for young/immature beneficiaries – A Testamentary Trust allows you to choose the minimum age a beneficiary can take control of his or her trust (i.e. 18, 21 or 25 or any other age you choose.). Prior to reaching that age the assets must be held in trust for the benefit of the beneficiary.   In this way, the trust gives protection to children who are minors and protects immature beneficiaries against themselves, so they cannot waste their inheritance.
• Disabled beneficiaries –A Testamentary Trust can be set up to protect someone with a disability.This is a specialist area and other forms of trust such as a Special Disability Trust” may apply.   will be happy to discuss your requirements with you.

The main disadvantage is the perceived complexity of a Testamentary Trust Will.  It is important to get appropriate legal advice if you think you need a Testamentary Trust Will.

There are two different ways in which a property may be owned jointly by two or more persons:

1. Joint Tenants

If you own the property as joint tenants then the property automatically passes to the survivor(s) should one of you die.  You will not be able to give away your share of the property through your Will.

This is the arrangement most often used by couples buying property as it does mean an easy transfer of the property to the survivor when one dies.

A person’s share of a jointly held property does not form part of their estate if it is held on a joint tenancy basis.  Where the property is held jointly in this way by a married couple the property will pass to the surviving spouse irrespective of any wishes expressed in the deceased’s will regarding other assets they hold.

2. Tenants in Common

If two or more people own the property as “Tenants in Common”, then they will each have a distinct share in the property which need not be in equal percentages.  For example, if two people have provided monies for the purchase of a property in different proportions, then the ownership could be shared in direct relation to those proportions.  Alternatively, it could be shared in any other way as agreed.  The proportions will normally be expressed as a percentage.

The “Tenants in Common” approach is typically adopted in the following situations:

1. a)Where one partner in a couple has children from a previous marriage whom he/she wishes to benefit from his/her share in the property on his/her death.  Often the Will includes a clause giving the surviving partner/spouse the right of occupancy of the property until their own death (or remarriage/or other condition if you wish) and then transferred to the children.

(b)    In the case of an unmarried couple who have jointly purchased a property and wish their individual interest to be dealt with separately.

Summary

For many people the standard arrangement of joint tenants will meet their requirements and will be the most convenient form of ownership.  However, in a number of circumstances, particularly where couples may have been married before it may be appropriate to reorganise the ownership as Tenants in Common.

To change from Tenants in Common

1. Assuming the property is owned as joint tenants by two people and they both agree then Landgate requires that paperwork is completed in order to “sever the joint tenancy”.

There is a charge for this service. You also have to inform the mortgagee (lender) if there is a mortgage on the property as the copy land title the mortgagee holds would need to change to reflect the change of ownership. In most cases this is just part of the process and the mortgagee would consent to this as the couple would remain jointly liable for the loan on the property.

2. Assuming the property is owned as joint tenants by two people but one does not agree then:

The party wishing to sever the Tenancy Agreement must go through the family court to effect this change.

Advantages of severing tenancy

• Can ensure named beneficiaries will inherit a share of a property.
• It gives you freedom to gift a share of the property either outright or by giving a right of occupancy (e.g. to your spouse or partner) with directions as to what happens to the share of the property after the occupants death.

Disadvantages of severing a tenancy

• If the surviving partner has been given the right of occupancy only. then they are only able to access the equity in their share of the property (the other share does not belong to them).
• This could in the long term cause financial hardship and also leave the surviving spouse/partner living in a property they no longer wish to live in.