Fiona Makisi

1. If you are not a resident of NSW and your estate is likely to be challenged when you die, do you need to keep your SMSF member benefits on your death from being part of your estate?
2. If you are a single director and shareholder of the corporate trustee of the SMSF, ensure that operational and management decisions of the SMSF company trustee can continue to be made between the date of your death and before a grant of probate (for example, sell assets of the SMSF such as listed securities or land) – THIS CAN BE VERY IMPORTANT
3. Ensure control of your SMSF is left in the hands of people you trust when you do not have that trust in the other members of the SMSF
4. Manage who controls the SMSF after your death if the members of the SMSF are other than you and your spouse
5. Provide for the ongoing control of your SMSF if you and your spouse are the only members, and you do not trust your spouse to control and manage the SMSF how you would like after your death 
6. ​Provide for who controls your SMSF when you and your spouse are not resident in Australia and when you left Australia, you intended to be absent from Australia for more than 2 years
7. ​Be bound to pay your SMSF member benefits on your death to a nominated person allowed by our superannuation laws, being your surviving spouse, your child or person with whom you are in an interdependency relationship
8. ​Be bound to pay your SMSF member benefits on your death to your estate so it can then be gifted under your will to someone other than those permitted by our superannuation laws, being your surviving spouse, your child or person with whom you are in an interdependency relationship
9. ​Ensure that your direction to the SMSF, about your pension reverting when you die to your spouse (or your children or someone with who you are in an interdependency relationship), is binding on the SMSF
10. ​Ensure that the right to receive your SMSF pension benefits passes to your surviving spouse without your surviving spouse being able to cash all of the pension benefits before they die
11. ​Pay your SMSF member benefits on your death in a tax effective way and your will to otherwise allow for what you want to happen with your assets when you die
12. ​Provide a safety mechanism in your will for what happens if your SMSF member benefits are not paid as you planned
13. ​If you have not made and do not want to make a binding death benefit nomination, allow your surviving spouse to pay all of your SMSF member benefits to themselves without being subject to challenge by your children
14. ​Update its trust deed to ensure maximum flexibility in complying with the taxation and superannuation laws
15. ​Change its trustee
16. ​Comply with the superannuation laws about putting in place or updating an investment strategy
17. ​Comply with the superannuation laws about borrowing money to purchase an asset
18. ​Comply with the superannuation laws about leasing any of its business real property to a related party
19. ​Comply with the superannuation laws about purchasing business real property from a related party including without paying market rates of stamp duty
20. ​Comply with the taxation and superannuation laws when a party with whom the SMSF is making an investment or transacting, in some way, is not dealing with the SMSF at arm’s length

1. A testamentary trust is created where assets are given to a party:
   • on the condition that the party does something in return for the gift made to them; or
   • to control (ie the trustee) on certain terms and conditions for a range of beneficiaries, which can include the trustee.
2. Normally, when speaking of testamentary trusts, people are referring to the latter of those 2.
3. If you use a testamentary trust, instead of making gifts directly to a beneficiary for their personal benefit, you normally make them to a trust controlled by the beneficiary or another party, as trustee, for a class of eligible beneficiaries including the person to whom you made the gift.
4. That trust is normally like a family discretionary trust.
5. By making a gift to a trust, it can be used to:
   • protect against the waste of assets;
   • protect assets and assist a person with a disability or other special need;
   • protect against betrayal by a surviving spouse who does not pass the assets on in the way that was previously agreed;
   • protect assets in the case of bankruptcy and marriage breakdown and challenges to the will of a surviving spouse who remarries or against another beneficiary.
6. The trust can be optional, so a gift can be taken either personally by the beneficiary or through the trust that the beneficiary can control (unless the willmaker wants to force a testamentary trust outcome on the beneficiary).
7. Optional trusts permit flexibility in deciding which assets go into the trust and which do not.
8. In the case of husband and wife wills, it is best to create a trust for each child so that control of a separate trust can eventually be passed on to each child after the death of both parents.  You can even set it up so that a testamentary trust can be created for each child of a child.
9. In the case of a husband and wife, as the trustee, the survivor of them can control the trusts until the later death of both of them, when control can pass to each child for their own trust.
10. Until the death of both the husband and wife, the survivor of them, their children and their families would each be an eligible beneficiary of those trusts (but each child would benefit from separate trusts).
11. The trustee decides which eligible beneficiaries get any income or capital of the trust.
12. After the later death of both the husband and wife, subject to the wording of the trust, each child will control the trust assets that are set aside for each child and the child then decides which beneficiaries of their trust will share in the income and capital of that trust.

Subject to any future tax changes, income on trust assets can be streamed tax effectively.  If you simply gift assets directly to your children for their use, tax effective income streaming is not possible and more tax will probably be paid as a result on the income from the investment of the gift.

1. Appoint a substitute person as your guardian if for any reason the person you appoint cannot fill the role?
2. Allow multiple guardians to act together or alone?
3. Provide a mechanism for resolution if multiple people you appoint as your guardian cannot agree on something?
4. Leave instructions that are binding on your guardian about end of life decisions, like remaining in your home as along as possible, dignity in death being important to you and if your doctor advises that administration of care is not going to do deliver an outcome, withholding care?
5. Allow for organ donation?

1. Appoint a substitute person as your attorney if for any reason the person you appoint cannot fill the role?
2. Provide that the powers of the person you appoint as your attorney only start when you lose your mental capacity?
3. Provide that the powers of the person you appoint as your attorney continue if you lose your mental capacity?  This is often why you are doing a power of attorney document in the first place but if you want this to happen, your power of attorney document must state this.
4. Permit your attorney to use their powers to benefit not just yourself but your spouse and children and possibly other family members and companies and trusts in which you have an interest?
5. Allow multiple people you appoint as your attorney to act together or alone?
6. Provide a mechanism for resolution if multiple people you appoint as your attorney cannot agree on something?
7. Allow your attorney to delegate their authority if that is ever needed?
8. Permit your attorney to manage your superannuation benefits?
9. Permit your attorney to manage your digital assets?

1. Manage assets given to a child where that child is a spend thrift and not good at managing money?
2. Manage assets given to a child where that child suffers a disability and is not able to manage money?
3. Protect assets given to a child where that child has a problem with mental illness, drugs, alcohol or gambling and not able to manage money well?
4. Have a contract in it by which your spouse (also read spouse as a defacto) cannot change their will during your life without reference to you and after your death, without reference to your children?  This protects wealth for your children.
5. Have a contract in it by which your spouse agrees to have a pre-nuptial agreement if 1 of you dies and the survivor has a new relationship?  This protects wealth for your children.
6. Have an optional flexible testamentary trust structure that protects your assets after you die if the assets are given to your spouse and your spouse is a bankrupt when you die or becomes a bankrupt after you die?
7. Have an optional flexible testamentary trust structure that protects your assets after you die if the assets are given to a child and your child is a bankrupt when you die or becomes a bankrupt after you die?
8. Have an optional capital protected testamentary trust structure that protects your assets from Family Court claims after you die if assets are given to your spouse who re-partners after you die and later separates?
9. Have an optional capital protected testamentary trust structure that protects your assets from Family Court claims after you die if assets are given to a child whose relationship breaks down?
10. Have an optional capital protected testamentary trust structure that protects your assets after you die if you give assets to your spouse who re-partners after you die and your surviving spouse’s will is challenged by their new life partner because your surviving spouse’s will does not make adequate provision for the new life partner?
11. Have an optional capital protected testamentary trust structure that protects your assets after you die if the assets are given to a child and the child’s will is challenged after they die because not enough provision is given by your child to their spouse?
12. Give tax advantages to your surviving spouse and/or children in the use of the income from the investment of gifts that you make to them?
13. Give your surviving spouse and/or children the option to access those tax advantages through a tax effective and flexible testamentary trust that comes into existence on your death?
14. Make a gift to get equality between your children that evens things up if before you die you have given more to 1 or more children than you have to another or others of them?
15. Stagger the time at which a child takes control of their gift under your will (eg 15% at 25, 35% at 30 and 50% at 25?  Until then, it can still be used for their benefit.
16. Leave your superannuation entitlements to the person you want to leave them to and possibly tax effectively to your spouse, minor children, financial dependents or inter-dependents?

Note: Normally, this cannot happen until those superannuation entitlements are paid by the superannuation fund trustee to your legal personal representative (ie your executor) when it is only then that they form part of your estate.  A binding death nomination is what is required to force your superannuation entitlements to be paid to your executor and then your will can provide for what happens next with them.

Our Standard service (testamentary trust will) deals with risks 3 to 7 of the 7 risks to the passing of wealth on death. 

Do any of these apply to you?

Risk 3 – SPECIAL NEED of a beneficiary – what if an intended beneficiary develops a drugs, alcohol, gambling or mental illness problem before they take control of their gift?

Risk 4 – BANKRUPTCY of a beneficiary – what if your intended beneficiary is bankrupt when you die or becomes a bankrupt after you die having inherited assets from you?

Risk 5 – BETRAYAL by surviving partner – will your surviving partner change their will after your death and disinherit your children or other intended beneficiary?  Will they give the wealth away?

Risk 6 – DIVORCE of a beneficiary – what if a relationship of a beneficiary breaks down (including a new relationship of your surviving partner after you die or a new relationship of a child)? Will the assets that you leave them be exposed in a claim by their partner?

Risk 7 – DEATH of a beneficiary – What if a beneficiary dies and their partner or children challenges their will as the deceased has not made adequate provision for their surviving partner or children?

Will the assets that you intend to leave your surviving partner or children be exposed in a claim by their partner or children?

If you need a solution for risks 1 and 2, you will need to discuss that with us separately.

Risk 1 – SPENDTHRIFT – what if an intended beneficiary is not good at managing money and you want to protect them against that?

Risk 2 – SPECIAL NEED of a beneficiary – what if an intended beneficiary has a physical and/or intellectual disability that means they are not able to manage the wealth themselves?

TAXATION

Our testamentary trust will service does the following things for you:

1. Gives your surviving spouse and children or other intended beneficiary tax advantages after you die in the using of the personal wealth that you want to leave to them.
2. Gives your surviving spouse and each child or other intended beneficiary the option after you die to access those tax advantages through a tax effective and flexible trust that can come into existence on your death.
3. Gives your surviving spouse and each child or other intended beneficiary the option after you die to access those tax advantages through a tax effective and capital protected trust that can come into existence on your death.

ADDITIONAL BENEFITS

Our testamentary trust will service also does these further things for you:

1. Makes an allowance after you die that may be required to get equality between your children because during your life you have given more to one or more of them than to the others.
2. Transfers control of your companies and trusts after you die to your surviving spouse and eventually to your children but so that a majority of your children cannot do the wrong thing by a minority of them, where decisions need to be made by unanimous resolutions.
3. Staggers the timing for the passing of control after you die of the gifts you intend for your beneficiaries so that the beneficiaries do not get control of too much wealth too soon.
4. Gives you the knowledge of what housekeeping needs to be done so that you can make sure that assets pass as you want and you can maximise the risk and taxation benefits of using testamentary trusts after you die.

If you don’t want the above things from your estate planning, our non testamentary trust will service and more cost effective estate planning solution will do what you need.

If you are undecided about which of our services to use, as a guide, if you have between $1,000,000 and $2,000,000 of personal wealth, the risk management and taxation benefits that form part of our testamentary trust will service provide a very powerful estate planning solution.  That is a guide only, as amounts of up to $1,000,000 can also do that.  Those amounts include wealth that may arise from superannuation, including life insurance inside superannuation and they include wealth that may arise from life insurance from outside of superannuation.

Instead of getting worked up about the 7 risks of passing wealth on death and spending a lot of time talking about things that don’t matter to you, we find the ICADI acronym a useful tool.  It goes like this:

• IDENTIFY it – what is the risk.
• CARE – do you care about it?  If not, forget about it and move on. If yes, does it concern you enough to want to do something about it?
• ANALYSE – if you do care enough to do something about it, you need to analyse the solutions to deal with it.
• DECISION – after knowing what the solution is and what you can do about it, are you prepared to restrict your intended beneficiaries as is required to protect against the risk?
• IMPLEMENT – if you are, the solution can be put in place.

Effective estate planning is simply:

• effectively preparing for your loss of mental capacity before you die by setting out:
  • who is to manage your assets; and
  • what is to happen with your personal care; and
• effectively preparing for what is to happen when you die, particularly with your wealth.

Effective estate planning is about much more than preparing a simple document from the post office or newsagent.

Effectively preparing for your loss of capacity and death is about much more than purchasing and signing an online document or a $100 document kit from the newsagent.

Every day you protect and care for yourself and your family.  If you want to protect and care for your family, their assets and their future if you lose your capacity or die, you need an effective estate plan.

Apart from signing a carefully considered will, power of attorney and guardianship appointment, an effective estate plan minimises the risks to your family’s wealth and/or maximises the taxation benefits for your family if you lose your capacity or die.  That is what our effective estate planning service will do for you.

You will not be able to do those things by purchasing and signing an online will, power of attorney and guardianship appointment or a $100 document kit from the newsagent.