planning

Superannuation and your estate planning

Did you know that your superannuation does not necessarily form part of your estate when you die? This can cause problems unless it is properly dealt with as part of your Estate Planning.

Your superannuation will not be dealt with in accordance with your wishes (in your Will) unless you have a valid and binding beneficiary nomination in place. The trustees of most funds have discretion as to who to pay benefits to. If you have no dependants, the trustee will likely pay it to your estate, but why take the risk?

Take control of your superannuation death benefits and put in place a beneficiary nomination today.

To avoid applications to the Superannuation Complaints Tribunal or the Supreme Court, make a nomination – they can be binding or non-binding, lapsing or non-lapsing and require formalities such as 2 witnesses etc.

Speak to us about your estate planning and ensure your wishes are properly documented.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to estate planning, business succession or any other commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

What is a Power of Attorney?

GRANTING A POWER OF ATTORNEY

The Powers of Attorney Act 2003 (NSW) provides for a person to appoint another person as their attorney to make financial and contractual decisions on their behalf. The document granting a power of attorney is a prescribed form under the Act.

general power of attorney does not require a solicitor’s certificate however, it ceases to be of effect if you lose mental capacity (like where you are in a coma or suffer from dementia).

An enduring power of attorney on the other hand continues to be effective if you were to suffer such an incapacity. For this reason, an enduring power of attorney must be explained to you and witnessed by a lawyer who will provide a certificate in the prescribed form. We usually recommend an enduring power of attorney so that if some event happened to you that affected your capacity, your attorney would still be able to assist you.

If you are suffering from any illness, have deteriorating health, are going overseas or interstate or just want peace of mind, appointing an attorney to assist you to manage your affairs is generally a good idea.

HOW DOES IT OPERATE?

The nominated attorney has the ability to decide whether or not to accept that role by signing it.

You can choose when your power of attorney is to take effect. It can be restricted to only take effect if a registered medical practitioner certifies that you are of unsound mind, upon some other event (such as whilst you are overseas), from a date you choose or, it can operate immediately (for convenience).

You can give the power of attorney for specific purpose (for example to assist with the sale or purchase of a specific property or to attend an auction and bid on your behalf), for a specified time (for example, between 2 dates) and you can give directions on how powers are to be exercised (such as not to bid above a certain level or to only sell for a certain reserve price).

You can have a power of attorney for situations of necessity, like where you are ill or absent, or simply for convenience, but you have to appoint someone you trust without reservation.

An attorney may not use the principal’s monies or assets for gifts or benefits to the attorney or third parties unless this is specifically authorised in the document granting the power of attorney

ENDING AN APPOINTMENT

Provided you remain of sound mind, you can revoke a power of attorney at any time by signing a form of revocation and providing the attorney with that revocation.

The New South Wales Civil & Administrative Tribunal can review or revoke a person’s appointment as a power of attorney and can make a financial management order appointing a new attorney (or attorneys) or by appoint a representative of the NSW Trustee & Guardian if it is considered that your attorney not making appropriate decisions on your behalf.

DO I HAVE TO REGISTER THE POWER OF ATTORNEY?

A power of attorney must be registered at the Land & Property Information Division of the New South Wales Department of Lands if it is being used for dealing with land in NSW, such as selling, transferring, mortgaging property and the like.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to estate planning, business succession or any other commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

Wills with testamentary trusts – why you need one

WHAT IS A TESTAMENTARY TRUST?

A Testamentary Trust is simply a trust established by a person’s Will.  As opposed to more “simple” Wills, where beneficiaries receive the benefit of any gift personally, with a Testamentary Trust, the beneficiaries receive the benefit of the gift but rather than having it legally owned by them personally, a trustee holds the relevant asset in trustfor them.

Wills with Testamentary Trusts are recommended by many lawyers, accountants and financial advisors for various reasons, including asset protection and taxation advantages.

ASSET PROTECTION

Because of the legal ownership being different to the beneficial interest, Testamentary Trusts can offer beneficiaries significant and important advantages such as asset protection. As the trustee of the Testamentary Trust owns the asset (not the primary beneficiary personally), creditors and trustees in bankruptcy of the relevant beneficiary cannot gain access to the asset.

Often, beneficiaries are in business for themselves and have implemented asset protection measures so as to keep their assets safe from claims by third parties. The last thing that beneficiary may want is to receive an inheritance in their personal name, effectively undoing all of their efforts to safeguard their assets!

There can be significant tax advantages in taking an inheritance through a testamentary trust, in addition to asset protection.

Testamentary Trusts can be drafted so as to have the beneficiary effectively control the trust and for that control to be relinquished on the occurrence of certain events, such as bankruptcy or divorce/marital separation, with a nominated person to act in the role of trustee whilst that incapacity remains.

TAXATION BENEFITS – INCOME SPLITTING

Rather than taking a gift in a personal capacity as would usually be the case with a more “basic” Will, with a Will that incorporates Testamentary Trusts, beneficiaries have the ability to split income earned among other people in their family such as spouses, children, grandchildren or any other company or trust in which they have an interest.

Where an estate has income producing assets such as an investment property, under a more “simple” will, the person who received that gift would have the income earned from that asset added on top of the income they already receive from their employment or investments. This could mean that they go into the next marginal tax bracket and pay significantly more tax.

A Testamentary Trust allows the income earned to be split amongst the various family members, many of whom are likely to either not be working (so the tax free thresholds become available) or earn lower incomes (and are therefore in lower taxation brackets).

Children that receive income from a Testamentary Trust are taxed at marginal rates as if they are adults (as opposed to the usual discretionary / family trusts, where they are taxed at unearned income penalty tax rates) so for a family with a non-working spouse and several children, significant income can be received whilst very little or no tax may be payable on the testamentary trust income.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to estate planning, business succession or any other commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.