Estate Planning

Who gets your Superannuation when you die?

On your death, your superannuation balance will not necessarily be dealt with in accordance with your wishes as stated in your Will. Read that again… slowly, then read on.

Unless you have a valid beneficiary death benefit nomination in place that directs your superannuation fund’s trustee as to who to pay your super balance to, your trustee may have a discretion as to who to pay it to.

The trustees of most retail super funds have a discretion as to who to pay a benefit to. Usually, the fund rules specify the member’s dependents as the class of beneficiaries to be considered first, with the trustee to determine the amounts/proportions but imagine what happens if you are perhaps separated (but not divorced) and you are living with another person (as a de facto) – a dispute could easily arise. What if you have children? What would/should the split be?

To minimise disputes and avoid applications to the Superannuation Complaints Tribunal or the Supreme Court, make a nomination. There are generally 2 types: Non-binding and Binding

NON-BINDING NOMINATIONS

A non-binding nomination is an indication to your trustee of your preferences but it is, as it states – non-binding so the trustee can ignore it. This can be a good idea if there are significant changes in circumstances before your death where you haven’t got around to updating your nomination. The trustee’s discretion could prevent it going to your ex spouse or avoid the situation of you accidentally omitting one of your kids from a benefit.

BINDING NOMINATIONS

A binding nomination is exactly that – binding (provided that it is valid as at the date of death). There are 2 sub-categories of binding nomination: lapsing and non-lapsing.

  • LAPSING – Many funds provide for the lapsing type – and unfortunately these need to be renewed every 3 years or the nominations lapse.
  • NON-LAPSING – Most Self-Managed Super Funds (SMSFs) and some retails funds allow in their deeds for nominations that never lapse (unless you update it). Older SMSF Deeds and their Rules do not allow for the non-lapsing type and may need to be updated.

There are requirements for making any nomination legally valid, witnesses etc.

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

FURTHER INFORMATION

If you would like any further information in relation to Wills, estate planning, superannuation death benefit nominations or updating SMSF deeds , please contact us on (02) 9521 2455 or email help@mckilloplegal.com.au

in Commercial Law / Estate Planning / General / Litigation / Probate / Superannuation / Tax Planning  by 01 Aug 2025 0 comments

How digital assets are dealt with on your death

In the digital world we live in, the majority of our time is spent online, so we build up a substantial base of assets that exist online or in the “cloud”. These assets include:

  • Email accounts
  • Cloud bases storage systems like DropBox, Google Drive, OneDrive and Apple iCloud
  • Cryptocurrency wallets
  • Social media accounts (like FaceBook, Instagram, LinkedIn, TikTok… and the stupid SnapChat
  • Streaming services like Netflix, Prime Video, Paramount Plus and Disney
  • Domain names, websites and blogs… and even gaming accounts
  • Photos/videos and music libraries
  • other intellectual property

The problem with each of these things is that there is no single way to transfer or deal with them on your death, in your Will or otherwise.

The Terms of Services of social media accounts don’t usually allow transfer of ownership but often do have an in memoriam type mode that can be put in place through the platforms on someone’s death but they often need to be pre-arranged by the deceased before their death (for example setting a ‘legacy contact’ or equivalent).

Many, such as the streaming services, operate on a personal license basis and thus do not allow transfers of accounts, so more of a practical matter intaking control of them (login and password) rather than transferring ownership in a legal sense.

Another problem is that many of the organisations that own and control these platforms are in different countries that may not recognise an Australian grant of probate.

Wishes in relation to digital assets can be expressed in a Will in much the same way as other tangible assets like houses and cars, but consideration needs to be given to the relevant terms of use and licensing agreements and the practical matters involved. Often the wish is to have accounts closed or deleted.

One major practical step to take control of these digital assets that executors and administrators should consider is not cancelling the deceased persons mobile phone as this is often used to get reset codes and other authentications.

FURTHER INFORMATION

For further information in relation to Wills and estate planning, contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au.

in Estate Planning / General / Intellectual Property / Online Issues  by 01 Jul 2025 0 comments

Advantages of Testamentary Trusts

WHAT IS A TESTAMENTARY TRUST?

A Testamentary Trust in simple terms is a trust that is established by a person’s Will (and Testament), as opposed to a trust created during someone’s lifetime, like a family trust, discretionary trust, units etc.

Unlike with a “basic” Will – pursuant to which 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 trust for them.

Wills with Testamentary Trusts are recommended by many lawyers, accountants and financial advisers for various reasons but the advantages of Testamentary Trusts include asset protection and taxation advantages.

ASSET PROTECTION POSSIBILITY

Because of the legal ownership differs from 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, so it can remain for the benefit of the intended beneficiary and their family etc.

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

Testamentary trusts can offer beneficiaries significant taxation advantages and a level of 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 or persons to act in the role of trustee whilst such incapacity remains.

POTENTIAL TAXATION BENEFITS

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

Where a deceased estate has income producing assets (such as an investment property or a share portfolio), under a more simplistic will, the beneficiary personally receiving that gift would have the income earned from such asset/s added on top of the income they receive from their employment or their own 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 in the trust 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 under 18 years of age that receive income from a Testamentary Trust are taxed at marginal rates as if they are adults (as opposed to the how income from standard discretionary / family trusts, where can be taxed at unearned income penalty tax rates) so for a family with a non-working spouse and several children, significant income can be received by the family whilst very little or no tax may be payable on the testamentary trust income.

FURTHER INFORMATION

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

in Asset Protection / Business / Estate Planning / General / Insolvency & Bankruptcy / Probate / Risk management / Tax Planning / Trusts  by 05 Jan 2025 0 comments

Statement of Testamentary Intention

Section 100(2) of the Succession Act 2006 (NSW) provides that a written statement made by a deceased person during their lifetime which may explain or justify the provisions of a will is admissible in evidence.

This means that a Court can have regard to the Deceased’s wishes and intentions as expressed in such statements, often called a “Statement of Testamentary Intention“, in making a decision regarding the distribution of their estates such as where a Family Provision Order has been sought (an order which effectively alters the division and distribution of a deceased person’s estate, deviating from that stated in their Will to which Probate has been granted).

Where a person makes a Will that they think may ultimately be contested (such as where an estranged child is left out of the Will), then a Statement of Testamentary Intention can be executed at the same time, whereby the person making the Will sets out their reasons for excluding that person as a beneficiary.  A Statement of Testamentary Intention is often made in the form of an Affidavit or Statutory Declaration, but it can even include an audio-visual recording of the person making the Will made with their consent, statements made orally to another person or even a contemporaneous email, but a written and sworn statement is usually the best if time permits.

The risk in making a Statement of Testamentary Intention is that if for example:

  • it is not documented properly;
  • was not made contemporaneously with the Will; or
  • where a significant period had elapsed between the making of the s.100 Statement and the time of the Deceased’s passing (that is, it is not up to date – as the reasons may have been eroded by later interactions and events etc, such as where a relationship has been repaired)

then it can lack evidentiary weight and can even act to benefit the excluded person, such as:

  • if it notes matters that would ordinarily be considered ‘hearsay’ (such that it can be objected to being admitted into evidence);
  • where unsubstantiated opinions or slurs are used; or
  • where there are factual statements or reasons given that can be shown to be incorrect

as they can undermine the basis of the will-maker’s decision to exclude a person and bolster the plaintiff’s case against the estate.

Usually the reasons for excluding a beneficiary from a Will should not be stated in the Will itself, but if they are to be documented, should be set out separately in the s.100 Statement so that the Executor can decide whether or not to use it in evidence.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Dispute Resolution / Estate Planning / General / Litigation / Probate / Risk management  by 01 Nov 2024 0 comments

Caveat on Probate

If you have an interest in the estate of a deceased person, and:

  • wish to challenge the validity of a Will, for example:
    • as it is informal (in that it doesn’t comply with the usual requirements for execution); or
    • because you genuinely believe it to be a forgery;
  • have serious doubts as to the testamentary capacity of the person that made the Will at the time it was made;
  • have evidence of a later document purporting to be the deceased person’s Will; or perhaps
  • claim that a Will was executed under undue influence or pressure,

then there is a process by which you can put the Court and the person propounding that Will in an Application for Probate or Letters of Administration with the Will Annexed on notice.

That process is basically, before the Court makes a grant, to:

  • formally file with the Court; and
  • serve on the known or potential applicant

a document called a “Caveat on Probate“.

The effect of a Caveat on Probate is that the Court will not make a grant of Probate in the estate without notice to the person who lodged it.

An executor that wants to proceed with an application for a grant of Probate can apply to the Court for a Caveat to be removed if they believe that the caveator has no standing or that there is no real dispute as to the validity of the Will. In such contested proceedings for probate, they are to be commenced by Statement of Claim seeking the grant in solemn form and the other parties may file Cross Claims as appropriate.

Obviously, there can be costs consequences that flow from improperly taking this step so advice ought to be taken before doing so.

Note that the Caveat on Probate is not the appropriate step to take if you do not challenge the validity of the Will but want to seek a family provision order.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Dispute Resolution / Estate Planning / Litigation / Probate  by 01 Sep 2024 0 comments

What is the role of an executor?

An executor is the person appointed by a Will to administer a person’s estate when they die.

The role of an executor is basically to ensure the deceased person’s debts are paid and that their assets are dealt with as is stated in the Will.

The first task for an executor, after tending to any funeral arrangements, is to secure the assets of the estate such as cash and jewellery. The next task is to obtain a grant of Probate.

To apply for Probate, the executor needs to determine what the assets of the estate are (so that your lawyer can prepare an Inventory of the estate property) and what liabilities the deceased person may have. This often involves searching the deceased’s person’s records and liaising with their accountant and financial advisors.

Following that, steps such as making life insurance claims, notifying banks, superannuation funds and checking the insurance status of large assets are taken. Some assets may need to be sold and tax returns may also need to be lodged.

The specific steps that need to be taken will to a large extent depend on the terms of the Will and the deceased person’s assets and liabilities.

Usually an estate is administered within 12 or so months of the date of death however things such as claims for family provision orders under the Succession Act and other matters adding complexity can delay this.

What if the named executor has passed away?

If a named executor has passed away, then depending on whether they obtained probate before their death, either that executor’s executor or any substitute executor named in the Will takes over.

If there is a Will but there is no person named as executor or no named executor or alternate executor that is alive, then Letters of Administration with the Will annexed can be applied for and the Court appoints an administrator (in place of an executor) to administer the estate as set out in the Will.

What if there is no Will?

If a person dies without leaving a Will, they have died intestate and the relevant legislation details how their estate is distributed.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

Stay up to date – LinkedIn | Facebook | Instagram

in Estate Planning / Probate / Superannuation / Tax Planning / Trusts  by 01 Jul 2024 0 comments

Renouncing probate

Once a person has died, the executors named in their Will generally need to apply for Probate

Often the person making a Will has appointed all of their children as executors however, as many people relocate interstate or overseas for work, it may not be practical for one or more of them to act in the role of an executor of an estate.

Being out of the jurisdiction is not a problem in relation to being an executor, but it can slow down matters as getting documents signed and in dealing with institutions and things like verification of identity can be cumbersome. There is no requirement for a named executor to act as such.

There is a process that allows one or more of the named executors to leave it to  the other/s to deal with the estate – this is known as “renunciation“. So what is renouncing probate?

Renouncing probate simply means that you are renouncing the rights, powers and responsibilities of being an executor of a Will. Once you have renounced your role as executor, you may not later seek to be, or act as, executor of the estate unless the Supreme Court allows it.

To renounce your role, you must not have intermeddled (dealt with estate property) or undertaken any significant steps in relation to the estate.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Estate Planning / Probate / Trusts  by 01 Apr 2024 0 comments

What is a Deed Poll?

In a previous article, we explained the difference between Deeds and Agreements however, there is a special type of Deed that does not require more than one party to sign it to make it legally binding (although it can also be made by more than one party, jointly).

That document is the Deed Poll. As soon as it is signed by the party that executes it, it becomes immediately operative and binding.

Deed Polls are solemn declarations, so they are commonly witnessed by lawyers, Justices of the Peace and notaries (but they requirements as to who can be witnesses and whether you need one can differ between States and Territories).

Deed Polls are used for various purposes such as:

  • part of the process of changing your name or gender
  • affirming your identity (such as where you may use more than one name)
  • declaring:
    • a promise to do not not to do something (including keeping information confidential)
    • the validity of a document or right
    • a fact or intention
  • releasing rights

The unilateral obligation/s created by a Deed Poll can be enforced by any person with whom the covenant in the document was made as against the party making it, so they ought not to be entered into lightly.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Dispute Resolution / Estate Planning / General / Litigation / Risk management / Uncategorized  by 01 Dec 2023 0 comments

Non-contestable Will

We often get asked “can you draft a non-contestable Will ?”

You can draft a Will to state who you want to be your executor and how to divide and distribute your assets once you pass away. Even with a valid Will stating your wishes and even if it has been admitted to Probate (or even if you die intestate), the distribution of your estate can be altered by the Court order under the Succession Act 2006 (NSW) (Act).

Put simply, there is no way to draft a Will prevent such a claim on your estate (and no, you can’t make a gift dependent on not making a claim), but there are things that can be done to help prevent (or minimise) a claim, including:

  • not having an estate at all
  • carefully drafting your Will and drafting evidence to help oppose a likely claim
  • obtaining a release under the Act

A Will can only deal with assets that you have as at the date of your death. One of the best ways of preventing a claim on your estate is therefore to not have any estate in the first place!  This is easier said than done and often means that benefits such as the principal place of residence exemption for capital gains tax (CGT) may not be available and other benefits cannot be accessed, but with the use of trusts and other structures, you can avoid having any personal assets to be distributed on your death. This is an extreme option that not many opt for given the many downsides and potential benefits that need to be forgone.

Where people have not set up their affairs so as to have no actual estate, but later seek to do so (such as by gifting assets, severing a joint tenancy or selling assets to others for less than full valuable consideration), they need to be aware of the provisions in the Act relating to “notional estate“. Notional estate rules in NSW effectively operate such that any assets disposed of in the period of 3 years prior to your death may be notionally brought back into your estate and available for division by the making of a family provision order in favour of an eligible person under the Act. As with most decisions, there are also potential negative consequences such as stamp duty, CGT and loss of social security entitlements from gifting rules.

Most people do not consider it advantageous to them during their life or their intended beneficiaries to have no estate at all for reasons such as those relating to CGT etc. For those, one way to help prevent or minimise the risk of a claim for a family provision order is to ensure that they have a carefully prepared Will and accompany that Will by a (usually contemporaneous) Statement explaining why a person did not get a benefit in the Will or is to receive less than they may have expected. This is known as a Statement of Wishes or a Statement of Testamentary Intention and is often prepared in for formal form of an Affidavit so it can be use in evidence. Such documents may be updated as required and care must be taken to ensure that they are factually correct as defects can undermine their force, particularly as you won’t be around to give evidence to correct any errors.

One way to prevent a claim for a family provision order is to apply to the Court for an order under s.95 of the Act releasing an estate from claims under the Act. This can be done either before or after your death, such as part of a family settlement of another dispute or claim on an estate and aims at achieving finality regarding family disputes. The Court may only approve such a release and make an order after considering all of the relevant circumstances, so this will involve preparation of appropriate initialing proceedings and affidavit evidence.

As with any estate, each person’s circumstances, assets and relationships with potential beneficiaries and claimants are different and care needs to be taken to consider all information available so as to make the right decisions regarding your estate. This will involve weighing up the pros and the cons of each decision and bearing the consequences and risks of doing so.

FURTHER INFORMATION

For further information please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

Stay up to date – LinkedIn | Facebook | Twitter | Instagram

in Asset Protection / Dispute Resolution / Estate Planning / Litigation / Probate  by 01 Nov 2023 0 comments

Leasing business premises from a SMSF

Many business owners own the commercial or industrial premises that they use to operate their business from.  Often that property is owned by a Self-Managed Superannuation Fund (SMSF).

Leasing business premises from a SMSF is becoming commonplace. SMSFs can be a tax-effective way to create wealth and provide for your retirement, in addition to providing some asset protection benefits however, they come with a requirement to comply with the Superannuation Investments (Supervision) Act 1993 (Cth) (SIS Act) and its Regulations.

Additional obligations apply when the SMSF is using a limited recourse borrowing arrangement and bare trust when borrowing to acquire the premises and consideration ought to be given to who the members of the fund are and what happens if they were to pass away.

One of the leasing obligations on SMSF trustees in the SIS Act is that there be a written Lease in place. Not only does there need to be a Lease in place, but it must be at ‘arms length‘ and on commercial terms.  This effectively means that it must have all of the usual or typical terms that would be expected to be in place if the property was being rented to a third party, for example with market rent being required to be paid in full and on time, with no discounts.

Practically, there are other benefits of having a proper Lease in place and one of them is that on the sale of the business, the Lease can be assigned to the purchaser so that the SMSF continues to get the benefit of the Lease and its protections after you cease to run the business. It also can assist your SMSF to maintain the value of the premises as any purchaser of the land is bound by it, so having a good yield is important.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

Stay up to date – LinkedIn | Facebook | Twitter | Instagram

in Business / Commercial Law / Dispute Resolution / Estate Planning / General / Property / Risk management / Superannuation  by 01 Oct 2023 0 comments