Estate Planning

Estate Planning and Testamentary Trust

What is an Estate?

Your ESTATE is what you leave behind when you die. Your estate will consist of your personal property, any real estate you own, any cash assets you hold, any shares you hold on companies and anything else that you own. You can just leave your estate to your beneficiaries in your will or you can better plan how it is to be left. ESTATE PLANNING is about making a plan to ensure that your financial investments and commercial businesses are left to your beneficiaries in the most effective way.

Most people think that estate planning is only for the super rich and that it wouldn’t apply to them. Most people also do not have sufficient time to plan how their estate is to be dealt with after they die. Planning for this now will give your beneficiaries the best outcome from your estate and the greatest chance that your legacies will provide the greatest benefit.

Now that we have compulsory superannuation in Australia, most Australians will have a significant nest egg that will be left as part of their estate. There are laws which govern how a superannuation death benefit is taxed and who can obtain the benefit tax free. Superannuation funds also provide their members with the option of nominating a person to receive these benefits, however how these funds organise these nominations vary and members may not be aware that they can make such nominations.

A.L.F. Lawyers can assist you to make sure that your superannuation is left to the appropriate person to maximise its benefit.

When you undertake estate planning you will need to consider any trusts that you are a trustee or beneficiary of as well as the structure of any companies or partnerships to which you might be connected. Very often trust deeds and company documents will take succession matters into account but these may not reflect the wishes you have in your will. We can help you make sure that your wishes are carried out in respect of trusts and companies.

If you and your life partner own real property together, that is real estate, then the way that it is held on the title determines how it can be dealt with under your will. When two or more people own real property together it can be held primarily as tenants in common, or as joint tenants. If you own property held as tenants in common, when you die your part of that property is held in your estate.

If you own property as a joint tenant then the property will automatically pass to the other joint tenant. If you are the surviving joint tenant we can assist you in transferring the property solely into your name.

We also need to consider what might happen with property that you own the event that you lose legal capacity. Legal capacity is the ability to make decisions for yourself, understand the consequences of those decisions, and being able to communicate those decisions to other people. If you lose legal capacity through an accident or other misfortune and you own property and business interests, you should nominate someone to act on your behalf and in your best interests through an Enduring Power of Attorney. ALF Lawyers are experienced in providing advice and the preparation of Enduring Powers of Attorney.

Having a well thought out estate plan can minimise the risk of detriment to the assets and resources you have spent a lifetime accumulating. This could avoid your home, business and investments going into the wrong hands and being the subject of extremely costly litigation. The costs associated with estate litigation are generally paid from the estate and this will leave less for the beneficiaries.

Other issues can arise if a will is not properly drafted, signed and witnessed as it could be considered invalid leaving you intestate or making your executor prove to the court that the will is valid. A poorly drawn will may be left open to challenge or family provision application which may cost beneficiaries a significant amount in lost legacies.

Your Estate Plan and your WILL should be reviewed after any major change in your life to ensure they remain current and viable. In addition, you should review your Will every 5 years to ensure that it is still current.

Your Will may be affected by changes in your investments, status of personal home, financial situation, marital status, separation, divorce, entering into a de-facto relationship, death of a relative, birth of a child or a grandchild, adoption, stepchildren etc. You may also want to update your will if your personal situation changes with beneficiaries.

 

WHAT IS A TESTAMENTARY TRUST?

A Testamentary Trust is created when a testator dies and their will creates such a trust. A trust is generally property or assets held by one person called the trustee for the benefit of one or more other people called the beneficiaries. A Testamentary Trust holds part or all of the estate of the deceased person for the benefit of the beneficiaries of the will.

The Trustee of the trust manages the assets of the trust for the sole benefit of the beneficiaries. Testamentary Trusts are a valuable way of protecting assets where beneficiaries may be minors or likely to squander the legacies left in the will.

In creating a Testamentary Trust the will maker needs to ensure that the property and assets of the trust are clearly defined and that the beneficiaries are clearly defined. The terms of the trust give the trustee the powers they will need to manage the trust assets.

There are a number of testamentary trusts that can be created in a will. A discretionary trust allows the trustee to make distributions from the trust fund according to the needs of the beneficiaries without having to be equal. If you leave behind the child with disability, a special testamentary trust can be created to benefit the child which makes allowances in terms of government benefits.

A well-designed testamentary trust will ensure the benefits of your estate up past only to those people you designate as beneficiaries of the trust. This can be important in blended families where you may wish to leave your estate mainly to the children of your first relationship rather than any stepchildren.

ALF Lawyers are experienced in estate planning and the drafting of testamentary trusts. We can help you understand and avoid the pitfalls of leaving your estate to your loved ones.