All Topics / Legal & Accounting / Supperannuation and Wills

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  • Profile photo of Istvan051Istvan051
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    @istvan051
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    I have a feq quiries about my current situation regarding my fathers will. My father is 47yo and I am 23yo. My father recently married a new woman from overseas of 36yo. I am on his case in order to create a will in the near future. His total estate is quite significant (approx a million $ in Houses including some dept). Also it includes a number of supperanuation/
    and share investment accounts in which I am named the sole beneficiary in at least one I now but I will investigate the rest.

    My first question-

    Are supperanuation funds included as part of a will or are they a separate entity? (i.e- In the event of death it is up to me to contact the suppernuation/investment companies in order to retrive the funds into a fund named my own). In this case I should make sure that on each the beneficiary is listed as myself in order to be able to retrive them.

    In his intentions to soon (Hopefully) create a will he has also mentioned the intention to leave a small portion of his property portfolio to the new lady in order to prevent her from contesting the will.

     

    Profile photo of Scott No MatesScott No Mates
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    Estate law varies from state to state. Super law is pretty consistent. Generally, the nomination of a beneficiary in super overrides any directives in the will.

    Marriage makes all previous wills void. Your father should get his affairs in order asap – that said he can probably write a new will on his deathbed & revoke the one you’ve seen.

    Profile photo of bjsaustbjsaust
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    Make sure they're binding nominations as beneficiary. You can also make non-binding nominations, which are more along the lines of wishes than directions, the trustee can choose to ignore them if they choose (and the difference could just be a tick-box on a form). Also even binding nominations expire on some regular basis. I think its 3 years off the top of my head, but it would be worth confirming.

    Profile photo of Istvan051Istvan051
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    Bjaust, when you talk about binding/non binding nominations as beneficiary are you talking about assets held in a will or the superannuation/ share investment funds?

    Also I am a little confused who would be the trustee in my case?

    Profile photo of Istvan051Istvan051
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    Oh would the trustee world be like a solicitor or lawyer?

    That would be the person who after death decides how a inheritance is paid to children and/or spouses?

    Profile photo of bjsaustbjsaust
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    Sorry, beneficiaries in the superannuation sense, so the trustees would be the trustees of the superannuation fund, not the executor of the will. So where you stated: " Also it includes a number of supperanuation/ and share investment accounts in which I am named the sole beneficiary in at least one I now but I will investigate the rest."  The fact that you're nominated as the beneficiary in a super fund doesn't mean they MUST pay a death payout to you unless its a binding nomination.

    Profile photo of TerrywTerryw
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    I am doing a masters degree in wills and estates now and am interested in this area.

    firstly what state are you in?

    Secondly, your potential inheritance has dropped dramatically because of your dad marrying!

    Superannuation does not form part of your estate on death. Super is a trust and is not the asset of the individual until they receive it from the fund. You need to speak to your dad about a binding death nomination. These have to be prepared correctly otherwise they are invalid. Without one the trustee of the superfund will decide where to pay any benefits. Usually they would just pay the surviving spouse. The benefit can be paid to an individual or it can be paid into the estate. It may be best to keep it out of the estate as wills can be challenged – but this will depend on which state you are in. There are also tax considerations too. If your dad leaves a tax dependent then the super canbe received by the dependent tax free. it can be a lump sum or a pension. Its a very complex area and I don't know much about super.

    There are also provisions known as Family Provision which enable someone who is not adequately taken care of in a will to apply to the court for an order to basically rewrite part of the will to give them a share or to increase their share. Only an eligible person can apply for a Family Provision order and being a spouse or a child of the deceased would qualify. Even if he leaves her a little bit she can still make a claim, as can you. The court will take into account various factors such as the person's needs, their own resources, and the size of the estate etc.

    Also, if you are in NSW property that does not form part of the estate can be deemed to be part of the estate. This includes property such as superannuation and trust assets, property sold before death without adequate consideration etc. eg. Your dad transfers property to you for 50% of its value 3 years before his death. This could be deemed to be part of his estate and she could make a claim for it.

    Spouses also have rights to acquire property. He may die leaving you half and her half and she may be entitled to say she wants to keep the house she is living in and have it reduce her share of the remainder of the estate.

    So many things to consider, especially with blended families.

    If your dad dies without a will, then the rules of intestacy will prevail. She may end up with a very large chunk if this were the case.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of Istvan051Istvan051
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    Hello Terryw,

    Firstly thanks for your help.

    I am in ACT. Today I made contact with the three different supperanuation companies in order to get the binding nomination forms. Soon I will get him to fill them out and I will put them away in the safe. Perhaps not before I talk to him about preparing a will.

    Do you have any more helpfull advice on the steps I should take to get the will sorted?
    He has told me that he wants me to be the "Primary" beneficiary in the will and that he will leave her enough to survive
    and live a secure life.

    Dad and myself have shared the last 23 years together and she has been in the picture with dad only one year!
    I hardly feel its fair that she should be entitled to anything more than 15%, and dad understands and agrees!

    So really I need to figure out how to get this thing sorted under the radar. I need to get a professional will written and approved and put away in safe never to be talked about again untill it is needed or needs to be updated.
    Also I suppose the lawyers/solicitors would keep a copy.

    Profile photo of TerrywTerryw
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    I don't know much about ACT law, but think you may find there are no notional estate provisions there. However, if he has property in NSW it is still possible for it to be challenged in NSW.

    I think the best strategy may be to get your dad to be open with the wife and everyone else in the family. Often problems arise because beneficiaries feel left out and shocked or disappointed at this. Discussing it now and giving reasons may help later on.

    Watch out for the BDNs as some will have to be renewed every 3 years. This depends on the fund and its size etc.

    Also get your dad to consider a prenup or postnup. This can be done under the Family Law Act (even after marriage) and will help in the event of divorce and death.

    Get him to do a proper will. Cover ever eventuality etc and make sure he makes provision for the wife.

    Then finally you may also want to consider taking mortgages on his property or buying options to purchase his property as added extra protection.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Istvan051Istvan051
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    Just finished reading throuigh the BDNs and yes, in all cases they have to be renewed every three years otherwise it reverts back to a non-binding nomination. We already have a prenuptial agrement in place.

    What do you mean by provision for the wife?

    Also how often do wills need to be updated/renewed?

    We have already talked about the very real possibility that I purcahse some of his property soon. Can you tell me much about that process?

    Cheers :)

    Profile photo of TerrywTerryw
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    Wills should be updated regularly. e.g change in assets – buying, selling, mortgages etc and change in family – births, deaths, marriages etc.

    provision for the wife refers to allowing for her "proper maintenance, education or advancement in life"

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Istvan051Istvan051
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    Thanks, you see it is quite complex as my grandfather is still alive (88yo) and has an inheritance yet to pass to my father. 
    Dads also still interested in property investing and wants to keep building a property porfolio. I suppose I really need to try and keep on top of this.

    Profile photo of TerrywTerryw
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    Sounds like large sums of money are involved. You will surely need professional advice.

    Your grandfather may be able to change his will (if he still has capacity etc) to incorporate a testamentary trust so that his assets don't fall into your father's hands which will make it harder for the new wife to make a claim on these. It will also be great for asset protection generally and tax savings. But you need to carefully consider what assets the grandfather has and consider any general tax, and land tax issues too.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Istvan051Istvan051
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    Finally, what can you tell me about "buying options"?

    Profile photo of TerrywTerryw
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    an option is an agreement which gives you the right to buy something for an amount sometime in the future. It is a right and not an obligation.

    So if your dad's property is worth $1mil and he sells you an option to purchase it for $1,200,000 at any time within the next 10 years then you can buy it for this price no matter what the value is. eg after 9 years it may have doubled to $2mil, but you can get it for $1,200,000.

    An option also gives you the right to lodge a caveat on the property. So it cannot be sold or further mortgaged.

    This may give you some priority over others who also may have a claim on the property. Careful planning is needed as it could be undone in some cases such as if it is an artifical scheme used to defeat creditors.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Istvan051Istvan051
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    Terryw wrote:
    Sounds like large sums of money are involved. You will surely need professional advice.

    Your grandfather may be able to change his will (if he still has capacity etc) to incorporate a testamentary trust so that his assets don't fall into your father's hands which will make it harder for the new wife to make a claim on these. It will also be great for asset protection generally and tax savings. But you need to carefully consider what assets the grandfather has and consider any general tax, and land tax issues too.

    Yes, ive tried explaining this trust stuff to him previously and he finds it hard to understand the ethics of the trust structure. The main problem has always been my grandmother who is in oposition of me becomming part of the family trust. There is a family trust in existance already. They never quite understood the concept of distributing income via the family trust. I really want to learn more about the testamentary trust as I soon may propose that to my grandfather. I think my fathers inheritance will be passed to him via the family trust, I however am not aware of the type of trust it is.

    Profile photo of TerrywTerryw
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    Assets of a trust don't form part of a person's estate. So they cannot form part of the will. They will need to pass control of the trust on by having back up appointors to the trust and also making sure the shares of the trustee (if a company) are passed on via their will. But it is the appointor that controls the trust by hiring and firing the trustee so this is the important bit.

    Any personal assets they hold can be left in the will to a testamentary trust (a post death trust). Under the tax act ITAA 1936 any income received by a minor from a will or a testamentary trust is taxed at adult rates. That means a 2 year old kid could receive $16,000 pa tax from from a testamentary trust. This is a huge sum. Imagine an extended family with 10 kids!

    Income from normal trusts set up during lifetime (inter vivos)are taxed at normal rates. For kids this means $3333 pa tax free for this year and this drops to $416pa from next year. over that they pay tax at penalty rates.

    So you need to get your grandfather to produce his trust deed and then see what is in there concerning the appointors. it may need to be amended. If it hasn't been amended for a while you should get them to fix it up as there have been a lot of changes and the definition of income etc used in the deed will probably need to be changed too

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Istvan051Istvan051
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    Terryw wrote:
    an option is an agreement which gives you the right to buy something for an amount sometime in the future. It is a right and not an obligation.

    So if your dad's property is worth $1mil and he sells you an option to purchase it for $1,200,000 at any time within the next 10 years then you can buy it for this price no matter what the value is. eg after 9 years it may have doubled to $2mil, but you can get it for $1,200,000.

    An option also gives you the right to lodge a caveat on the property. So it cannot be sold or further mortgaged.

    This may give you some priority over others who also may have a claim on the property. Careful planning is needed as it could be undone in some cases such as if it is an artifical scheme used to defeat creditors.
    [/quote

    Interesting, are options free to create or do they cost? I dont fully see the value in them, I however am interested in purchasing some of his properties in the future. But im not sure options would be nessasary as I may just buy it then.

    Profile photo of TerrywTerryw
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    Stephen

    you will need an option contract and some legal advise would be handy.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Istvan051Istvan051
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    @istvan051
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    Terryw wrote:
    Assets of a trust don't form part of a person's estate. So they cannot form part of the will. They will need to pass control of the trust on by having back up appointors to the trust and also making sure the shares of the trustee (if a company) are passed on via their will. But it is the appointor that controls the trust by hiring and firing the trustee so this is the important bit.

    Any personal assets they hold can be left in the will to a testamentary trust (a post death trust). Under the tax act ITAA 1936 any income received by a minor from a will or a testamentary trust is taxed at adult rates. That means a 2 year old kid could receive $16,000 pa tax from from a testamentary trust. This is a huge sum. Imagine an extended family with 10 kids!

    Income from normal trusts set up during lifetime (inter vivos)are taxed at normal rates. For kids this means $3333 pa tax free for this year and this drops to $416pa from next year. over that they pay tax at penalty rates.

    So you need to get your grandfather to produce his trust deed and then see what is in there concerning the appointors. it may need to be amended. If it hasn't been amended for a while you should get them to fix it up as there have been a lot of changes and the definition of income etc used in the deed will probably need to be changed too

     

    Would the solicitor be able to produce a trust deed? I could make an appointment with the solicitor, I however am not sure how much information they are able to give me without my grandfathers presence. If i can get enough information to determine whether or not I require a change in order to prevent my grandfathers assets falling into the actual hands of my father as opposed to a family trust. I do know that the trust setup involves a company as I have heard them talking about that in the past.

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