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ESTATE PLANNING


About Estate Planning

Estate Planning is the process of planning for and documenting what happens to the ownership and control of assets and financial resources in the event of loss of capacity or death.  A Will is usually a critical document, however Estate Planning can commonly involve several legal documents and related steps in order to be most likely to achieve a person’s wishes.

Our approach to Estate Planning has always been that the individual client’s family and the circumstances of the client are the critical issues to take into account.  “One size fits all” is not a solution we apply.  We think each client deserves an estate plan driven by their own circumstances.

Worrall Lawyers is one of Tasmania’s leading providers of Estate Planning services to private clients, with a team of specialist lawyers and support staff focused on this area.

Wills

A Will is usually a key Estate Planning document.   Worrall Lawyers can ensure that you have an up to date and personalised Will, that fits with your overall Estate Plan.    The Wills we prepare for clients are driven by what the client wants to achieve.

A Will must comply with the formalities of the Wills Act 2008 (Tasmania), if it is to be valid in Tasmania.   The Willmaker must know and approve the contents of the Will, have testamentary capacity, and act freely in executing the Will.  Our approach to Wills and Estate Planning is to take the time, and genuine effort that is required to get to know what matters for our client who is the Willmaker.

Services offered by Worrall Lawyers

  • review of existing Wills to identify improvements that may be required – looking for errors, changes to reflect your circumstances, and other improvements based on your requirements
  • Estate Planning by one of our four expert, experienced and highly trained Estate Planning lawyers
  • a focus on knowing your personal and financial requirements, and tailoring advice and documents, and planning for what you need
  • drafting of Wills: everything from simple modern Wills, to complex Wills containing trusts and other special provisions
  • Special Disability Trusts – as part of a Will, or by a separate Trust
  • advice and Court applications for Statutory Wills for those who lack testamentary capacity to make or change their Will
  • drafting of Testamentary Discretionary Trusts, within Wills in terms appropriate to your circumstances and as determined by you after advice from us

Trusts

In Australia, it is relatively common for business interests and investments to be held through what is often referred to as a “family trust”.  These are often a discretionary trust.   In some cases, these trusts can hold significant assets.

Control of Trust

It is important to identify where “control” of the trust lies.   A person may be a trustee and be in a position to make decisions directly in relation to the exercise of the trustee’s discretionary powers.   Alternatively, they may be a shareholder and/or director of a corporation that acts as trustee, and be in a position to exercise their shareholder and/or director rights to control the trustee’s discretionary powers.   Another means of control is where they hold the office of Appointor, Guardian or Protector and have the power to remove and appoint trustees and/or to give directions to the trustees, or exercise powers about trustee decision-making.

Special Trust Roles:  Appointor; Guardian; and Protector

Where a person has a connection with a family trust, whether as a beneficiary, trustee, or the holder of a special office that has powers conferred on them as an “Appointor”, “Guardian”, or “Protector”, consideration will need to be given to those arrangements when you receive your advice on your Estate Planning.

Control

In each of these circumstances, the manner in which “control” is to be transferred on a client’s death or lack of capacity requires advance planning and review of existing documents. This is a specialised area of legal practice in which Worrall Lawyers regularly reviews documents for clients.

Role of Trustee

The role of a trustee of a family trust includes the following

  • holding the legal title to the trust property
  • being the legal entity through which the trust relationship operates on a daily basis
  • managing and administering the trust property
  • holding and exercising discretionary powers about income and capital, and other discretionary powers provided for by the terms of the trust

The trustee’s power to push income in a particular way, known technically as to “appoint” income between beneficiaries, is a key element of a discretionary family trust. The “appointment” of income involves the trustee making a decision about which beneficiaries are to benefit, which part of the trust income they are to receive, and the proportion or amount that they are to receive.

The trustee will often also have flexible discretionary powers about capital. Different tax implications apply around the distribution of capital, when compared to income.

The trustee will generally have broad powers of management and investment for the trust property, both under the terms of the trust deed and pursuant to legislation.  But the trust deed will need close examination to see what exact powers are in the case of your family trust.

Powers of Appointor, Guardian or Protector

The terms “appointor”, “protector” and “guardian” are used in some family trusts to refer to a person(s) or entity(s) holding powers and duties about the trust.   The particular role will vary from trust to trust.

Some of the powers that an Appointor, Guardian or Protector may have, include power to

  • remove and appoint trustees
  • review the trust accounts
  • change the jurisdiction of the trust
  • approve conflicts of interest
  • approve an early termination date
  • divide or clone the trust, or give approval for this
  • veto a loan of money, distribution of capital, or use or sale of trust property
  • replace themselves, or appoint additional or replacement people in

An Appointor, Protector or Guardian is in some cases permitted to appoint a successor Appointor by deed or by Will.

Services offered by Worrall Lawyers

  • creation of Family Trusts, Unit Trusts, Special Disability Trusts and other specialised forms of Trust
  • amendments to existing Trust documents
  • advice and assistance to plan for and control the transfer of control roles in Trust if there is incapacity or death
  • advice and assistances to Trustees, Appointors, Guardians and Protectors to assist them to make decisions, and carry out their role
  • advice and assistance to Beneficiaries, including seeking documents, information and accounting from Trustees
  • changes of Trustees, Appointors, Guardians and Protectors
  • Estate Planning by expert, experienced and highly trained lawyers
  • a focus on getting to know your personal and financial requirements, and tailoring advice, documents and planning to suit your needs
  • full range of Commercial & Property Law services for private clients required for investments and businesses held through a Trust structure

Memorandum of Wishes

A Memorandum of Wishes may be used to provide written guidance to the Trustee, to assist the Trustee in carrying out their duties, and exercising their discretionary powers.  This guidance may be provided in a document that is commonly referred to as a “memorandum of wishes” or a “letter of wishes”.  The document does not bind the trustee and is usually phrased in less formal language.

A letter or memorandum of wishes may include

  • the key reasons why the Trust was established
  • how long the Trust should operate
  • how discretionary decisions about who is to benefit from the income and/or capital of the trust fund (including when, how, and in what amounts or proportions) might be made by the Trustee
  • how particular beneficiaries, or groups of beneficiaries, are to be treated
  • matters about investment decisions, and the management of Trust assets

Services offered by Worrall Lawyers

  • drafting Memorandum of Wishes
  • updating Memorandum of Wishes
  • special provisions for Memorandum of Wishes, including: wishes about grandchildren; views about investment and wealth; wishes about education for beneficiaries; wishes about funeral and related matters; and guidance to Trustees about how to operate Trusts in the future
  • relaying matters relevant to the client

Powers of Attorney

Having an expertly drafted, up to date and appropriate Enduring Power of Attorney in place can be one of the most important steps that a person can take to provide for the proper management of their financial affairs in the future.

A person can, in Tasmania, appoint an Attorney under a registered Power of Attorney to make financial and related decisions for them.

Often, the main reason to appoint an Attorney will be to provide for decisions to be made on your behalf if you lose capacity.   However, a Power of Attorney can also be drafted to operate if it is necessary or convenient for an Attorney to act, even if the person they act for has not lost capacity.

Services offered by Worrall Lawyers

  • advice about the need for, effect of and considerations when granting an Enduring Power of Attorney
  • drafting Enduring Powers of Attorney in accordance with the Donor’s personal circumstances and requirements
  • drafting special clauses, including limitations on powers, and default appointment provisions
  • registering Enduring Powers of Attorney, and providing copies and guidance notes to Attorneys
  • advice about the adequacy and appropriateness of existing Enduring Powers of Attorney
  • advice and representation in applications to the Guardianship & Administration Board about the use of powers under a Power of Attorney
  • advice to Attorneys about matters including their role, particular decisions, and the Enduring Power of Attorney document
  • Commercial & Property Law services to Attorneys involved in transactions on behalf of their Donor, including conveyancing
  • advice and assistance to Attorneys with accountings, disputes with Donors, and disputes with other family members
  • claims against Attorneys including requiring accounting for money they have handled, equitable damages, and applications to remove an Attorney from office
  • advice and assistance to Attorneys where a Statutory Will for the Donor is being considered or applied for to the Court or the Guardianship & Administration Board

Guardianship

In Tasmania, a Guardian can be appointed to make medical, lifestyle and other non-financial decisions for a person, when the time comes that the person loses or does not have the capacity to make their own decisions.

A Guardian can be appointed in two ways – by the person making an Instrument Appointing an Enduring Guardian, or by the Guardianship and Administration Board.     This part focuses on the appointment of a Guardian by an Instrument Appointing an Enduring Guardian at a time when a person has capacity to make an appointment themselves.

Appointing an Enduring Guardian can be an important part of comprehensive Estate Planning, as it provides for substitute decision making in the event of loss of capacity in the future.   It is a form of insurance to make sure those decisions can be made, by an appropriate person, chosen by the Donor of the Instrument Appointing an Enduring Guardian.

You can find detailed information about Guardianship here.

Services offered by Worrall Lawyers

  • advice about making or updating an Instrument Appointing an Enduring Guardian
  • drafting of an Instrument Appointing an Enduring Guardian, tailored to the circumstances and wishes of the individual
  • drafting of special provisions for the inclusion in an appointment including about consultation requirements, reporting requirements, default appointments, how Guardians must act between themselves, and the expression of wishes and directions
  • registration of Instruments Appointing Enduring Guardians
  • revocation of Instruments Appointing Enduring Guardian
  • advice and assistance to Guardians to enable them to properly make decisions and undertake their role
  • applications to the Guardianship and Administration Board seeking the appointment of a Guardian
  • representation and advice in disputes about Guardianships – for the person in question, their Guardian or interested family members
  • representation and advocacy at hearings of the Guardianship & Administration Board in relation to Guardianship issues
  • representations and applications to revoke or review an Instrument Appointing an Enduring Guardian
  • full Estate Planning services including planning relating to Guardianship issues, and in relation to Enduring Powers of Attorney and other legal matters associated with substituted decision making

Testamentary Discretionary Trusts

A Testamentary Discretionary Trust is a trust created by a Will, that gives the Trustee  of the Trust discretions to benefit a range of named or defined beneficiaries. Beneficiaries commonly include: the Willmaker’s spouse, children, grandchildren, remoter lineal descendants, other family members, friends, charitable beneficiaries, and related trusts/companies.   The choice of beneficiaries is a personal one for the Willmaker.   Some Willmakers choose a wide range of beneficiaries, others choose a narrow range of beneficiaries.

A Testamentary Discretionary Trust can only be created by a Will, and the terms of the Testamentary Discretionary Trust must be included in the Will, or be referred to in the Will.

The terms of a Testamentary Discretionary Trust are set out in the Will itself.  They can be changed by the Willmaker during their lifetime whilst they retain testamentary capacity.   The exception to this is an application under the law of Statutory Wills to either alter, or include Testamentary Discretionary Trusts in the Will.   The Testamentary Discretionary Trust does not come into effect until the death of the Willmaker.  A Testamentary Discretionary Trust is funded by assets from the Willmaker’s estate.  This can include a dollar amount, particular property, or most commonly a share in the Willmaker’s residuary estate.

There are many forms of Testamentary Discretionary Trusts.  Our aim is to create them in the form that best suits the circumstances of the particular client.

Services offered by Worrall Lawyers

  • drafting Wills that include Testamentary Discretionary Trusts
  • updating Wills that include Testamentary Discretionary Trusts
  • reviewing Wills that include Testamentary Discretionary Trusts prepared by other lawyers, and recommending improvements
  • drafting special provisions for Testamentary Discretionary Trusts, including: capital preservation requirements, special provisions to provide fixed and/or minimum entitlements to certain beneficiaries, special provisions where there is a vulnerable beneficiary, drafting to reduce risks including “family provision claims risk”, and family law claim risk, and special provisions for passing the long term control of the Trusts
  • advising about the benefits of Testamentary Discretionary Trusts following the death of a Willmaker who has provided for them where the trusts are optional
  • advising about, and assisting with the establishment of Testamentary Discretionary Trusts following the death of a Willmaker
  • advising Trustees, Appointors, Guardians, Protectors and other controllers of Testamentary Discretionary Trusts about the operation of those Trusts
  • documenting succession arrangements for controlling roles in Testamentary Discretionary Trusts
  • advice and assistance to Beneficiaries, including seeking documents, information and accounting from Trustees
  • advising about and documenting “post death testamentary trusts” where a Will fails to provide for a Testamentary Discretionary Trust

Statutory Wills

A Statutory Will is one that is made by the Supreme Court on behalf of a person who lacks capacity to make their own Will.  In Tasmania, a Statutory Will may also be made in some circumstances by the Guardianship and Administration Board.

Statutory Wills are also referred to as ‘court-authorised wills’ or ‘court-made wills’.  They are a relatively new development in Australia, since the relevant laws were introduced over the period from 1996 to 2010.

Court applications for Statutory Wills are on the increase, and it is likely that the trend will continue, given the ageing population in Australia and the number of people living with dementia or other forms of incapacity.

There is a wide range of circumstances when a Statutory Will may be needed. For example

  • a person has dementia, and it is clear that their existing Will is out of date and needs to be updated, but they lack the necessary capacity to make their own Will
  • a person suffers an injury at birth, and receives a large compensation award.  If a Statutory Will is not made, their estate will pass according to the laws of intestacy, which might not be appropriate in their particular case.  The child’s parents may have separated, and only one parent has acted as the child’s care-giver for a number of years
  • a person’s existing Will includes a gift of their house to a particular beneficiary, but the person has since moved into a nursing home and the house has been sold.  Depending on the laws in the particular State or Territory, this gift may fail to take effect, and the named beneficiary may not receive any compensation for the loss of the gift
  • a defect in a person’s will is discovered after they lose capacity, and that defect will prevent it operating in the way that it was intended
  • a person has a will, but it could be structured in a more tax-efficient way, to reduce the overall tax burden

These are examples of when Statutory Wills have been made by a Court for the client.  The particular facts of each case require careful review by a legal specialist, in order to determine whether it is worthwhile embarking on the process of applying for a Statutory Will.

Sam McCullough, a Director of Worrall Lawyers, is the co-author of the leading text about Statutory Wills in Australia – Statutory Will Applications: A Practical Guide – published by Lexis Nexis.

Statutory Will Applications: A Practical Guide examines the statutory regime that enables the Australian courts to make wills for persons who lack testamentary capacity.

This comprehensive guide written by Sam McCullough and Richard Williams, considers the approach taken to date by the Courts of the various Australian jurisdictions, and explains the process and considerations involved in preparing an application. The steps required and considerations for an interested party to an application are also outlined.

Statutory Wills have the potential to be utilised as a tool in estate-planning and tax-planning.   This text is of practical assistance to lawyers, and also to accountants and financial planners advising private clients.

The book features

  • comprehensive analysis of Court decisions
  • commentary on the legislation in each Australian jurisdiction
  • practical commentary on applying for statutory wills
  • commentary on special issues including using statutory wills as an estate planning tool, and resisting applications

A copy of Sam’s book can be purchased here.

For more information and updates about Statutory Wills, Sam and his co-author have a dedicated website, which can be accessed here.

You can see more about Sam or contact him here.

Superannuation and SMSFs

As the level of wealth within superannuation has increased, two things have become more important: the control of the fund on death; and the tax payable on death.   Superannuation is relevant to estate planning for the following reasons

  • many Australians hold a significant part of their wealth within superannuation.  This is particularly the case for many people of middle age and older.  It is also of significance for young people who are likely to hold significant income within their superannuation
  • there are often compelling taxation reasons for persons to leave their wealth in superannuation
  • the manner in which the superannuation remaining on their death is to be paid can be an important issue in the context of their Estate Planning
  • superannuation is not a personally owned asset and does not automatically form part of a person’s estate on death
  • the payment of superannuation death benefits gives rise to different tax considerations and treatment than the gift of assets by Will

These key issues arise about how the death benefits of a deceased member will be paid

  • who is paid, and in what shares (i.e. the member’s estate, spouse, children, or other persons)
  • how they are paid (ie pension, lump sum, or a combination of both)
  • whether they are paid directly by the superannuation fund or through the estate of the member

In many cases, the member will be able to exercise control over some or all of these things by careful estate planning.

Services offered by Worrall Lawyers

  • creation of Self Managed Superannuation Funds (SMSFs)
  • updating the rules of SMSFs, including specific amendments for Estate Planning purposes
  • advising about and drafting Death Benefit Nominations, including: binding death benefit nominations, non-binding death benefit nominations and non lapsing death benefit nominations
  • drafting special provisions for nominations made by members of SMSFs, including: cascading nominations including default provisions, and specific directions as to percentages, dollar amounts or items of property
  • advising and documenting arrangements for the succession of the Trustee role in SMSFs
  • advising about and assisting clients to complete nominations with “public offer” superannuation funds, including industry funds and retail funds
  • advice and representation when disputes about entitlements to superannuation arise after the death of a superannuation member
  • advising about taxation considerations relating to the payment of superannuation death benefits, both to clients in relation to their own super, and to their Executors, Trustees of their SMSFs, and beneficiaries after the client’s death

This is How Worrall Lawyers can Help You with Your Estate Planning

Services offered by Worrall Lawyers in this area include those outlined above.

Worrall Lawyers has highly trained lawyers with expertise and experience in this area of the law.   You can review their profiles here to choose who would be most suitable for you and your family.

 Make an enquiry or arrange an appointment with us here, to benefit as our client from our expert advice and solutions available to you in this area.

What Worrall Lawyers’ publications are Available About Estate Planning?

Readers are encouraged to save this material for their future reference, or to share it by email or other means with friends or family who may have an interest or need for our expert advice and solutions in Estate Planning.

If you are interested in learning more, publications written or contributed to by members of Worrall Lawyers about this area of the law can be accessed here.   You can access (or, for some materials, purchase) case reviews, newsletters, articles, professional papers, and details about books and professional development material that our lawyers have written or contributed to as part of this practice at Worrall Lawyers.

We encourage you to share in our expertise.