1 ESTATE PLANNING DETAILS 1. What is Estate Planning? 2 Drafting an effective Will as part of the Estate Planning Process 3. Who will be involved? 4. Who will be in control? 5. Who will lead the process? 6. A Current Estate Plan is Essential 7. Who owns the Family Assets? 8. Joint Ownership of Assets 9. Superannuation General 10. Superannuation - Binding and Non-binding Nominations 11. Partnership interests 12. Trusts 13. Companies 14. Income Protection Insurance 15. Loan Protection Insurance 16. Life Insurance 17. Control of Non-Willable Assets 18. Different Families 19. Marriage 20. Divorce 21. Re-marriage and Re-partnering 22. De facto relationships 23. Providing for Children under Special Disadvantage 1. What is Estate Planning? Effective Estate Planning is an exercise in protecting and maintaining wealth, and ensuring that assets pass in an efficient way into the control, and for the use, of those for whom the assets are intended. The Estate Planning lawyer s role is to give legal advice and to review and prepare Wills and other Estate Planning documents. The process of Estate Planning will depend on your personal circumstances and needs your family s circumstances give rise to. It is the process of documenting in a legal way matters relating to your Will, your superannuation; perhaps an enduring or special Power of Attorney and Enduring Guardianship documents; recording in a Memorandum the Wishes of your family for your trustees in dealing with your family trust or other trusts, business structures and investments (public and private), partnerships trusts and companies. All of these will require special attention by your Estate Planning lawyer at Peter Worrall Lawyers. The process of Estate Planning includes a review of existing arrangements and documents, making recommendations for change, and implementing those changes agreed to by you. 2. Drafting an effective Will as part of the Estate Planning Process An essential part of good Estate Planning is the making of an effective Will. When giving advice to Willmakers, lawyers, accountants, and financial planners must consider a well drawn and effective Will as an essential tool in Estate Planning, taxation planning and asset protection. Unfortunately, there is some evidence that a well drawn Will is not always considered as essential. The importance of effective Wills has declined in the perception of many people. Evidence of this can be seen in advertisements for cheap, free or discounted Wills. Wills and Estate Plans should not be handled by inexperienced, or unqualified staff. An experienced Estate Planning lawyer at Peter Worrall Lawyers may require appropriate input from a Willmaker s accountant and financial planner. The Estate Planning lawyer at Peter Worrall Lawyers will also need to examine Titles, company searches, company constitutions, trust deeds, financial accounts, insurance policies and superannuation deeds where a family has these types of assets and arrangements.
2 Extensive instructions about the financial and personal background of the Willmaker needs to be taken by the Estate Planning lawyer at Peter Worrall Lawyers. Proper research and investigation of the client s assets and circumstances should always be undertaken as well. For further information on Wills look under the topics in our Estate Planning section of our website. 3. Who will be involved? Estate Planning Lawyers. You need these people involved because documents have to be read, checked, advised upon and amended or drafted. You also need to know that what you are doing is lawful. Accountants. You may need these people for additional advice on taxation laws and your present accounting treatment of your investments. Financial Planners. If you have an existing financial planner, you need these people for financial advice, so that the Estate Planning lawyer at Peter Worrall Lawyers is aware of the current state of your investments and the future direction of your financial plans. This will assist in ensuring that your financial planning is running in tandem with your Estate Planning. Insurance Consultants. You need these people if you have existing insurances that affect your Estate Plan, or if additional insurance is required as part of the Estate Planning process. 4. Who will be in control? You should be in control of the process. You should make sure that you understand the advice that has been given to you, and where the advice it includes options where you actively make the best choice for yourself and your family. 5. Who will lead the process? It is usual for the Estate Planning lawyer at Peter Worrall Lawyers to lead the process because they are the principal advisor, however, they will need strong input from you and your other professional advisors. 6. A Current Estate Plan is Essential Times change, assets are bought and sold, and the assumptions and the law on which your existing Estate Planning and Will were prepared, may change completely. You should review your Estate Plan and Will each time there is a major life event, and at least every 4 or 5 years, if not more frequently. Don t imagine things work in a particular way or imagine that thing will work how it did for someone else their circumstances were almost certainly different, the law may have changed, and there is a lot of inaccurate folk-law about how assets change ownership on death, or how the control of investment assets or structures change on death. 7. Who owns the Family Assets? Many people believe that they can leave all of their family s assets to their beneficiaries under the terms of their own Will. Unfortunately they cannot always do this. There is a common misconception that everything that is a family asset is willable. A person can only leave, under the terms of their Will, property that they own in the full sense of beneficial ownership. It is important for everyone to understand the difference between Willable Assets and Non- Willable Assets. Willable Assets. These are assets that you can leave under a Will. They are willable because they are not affected by any rule of law or documents that hold them outside the willable assets of a person. Examples of willable assets are shown below. They must be assets that are fully and beneficially owned by the Willmaker alone.
3 (i) (ii) (iii) (iv) (v) (vi) (vii) company shares if you own them personally; units in unit trusts if you own them personally; investments if you own them personally; bank accounts if you own them personally; real estate if you own it personally; chattels (such as furniture, cars, boats, paintings, jewellery, tools and household effects) if you own them personally; your interest in any asset to the extent that you own as a tenant in common; (viii) insurance policies, and the proceeds of insurance policies that are paid to your estate; and (ix) a loan account in a discretionary trust or other trust, or a company, will form part of your estate. Non-Willable Assets. These are assets that you cannot leave under a Will. They are nonwillable because they are affected by a rule of law or documents that hold them outside the willable assets of a person. Examples of non-willable assets are shown below: (i) Joint Tenancy Assets. You cannot leave assets that you own as a joint tenant with another person unless you are the last of the joint tenants to die. Joint tenancy assets pass automatically to the surviving joint tenant on the death of the first joint tenant. For further information on jointly owned assets download a copy of our Notes on Ownership from Our Publications. (ii) Superannuation. You cannot leave assets that you have in a superannuation fund unless the superannuation fund pays some or all of those assets into your Estate, and this is not always what happens with superannuation fund monies. For further information on superannuation look under the topic Superannuation. (iii) Life Insurance. You cannot leave the proceeds of an insurance policy that you do not own. For example, if your spouse or a company owns the insurance policy on your life, they will receive the proceeds of the policy direct (because they own the policy of insurance) rather than through your estate. For further information on life insurance look under the topic Insurance. (iv) (v) Assets owned by Others. If you have already given away an asset or, another member of your family owns the asset, it is not willable by you. Assets owned by a Discretionary Trust (often called a family trust). The assets owned by a discretionary trust continue to be owned by that trust after your death. For further information on discretionary trusts look under the topic Trusts. (vi) Assets owned by a Unit Trust. The assets owned by a unit trust continue to be owned by that trust after your death. For further information on unit trusts look under the topic Trusts. (vii) Assets owned by a Company. The assets owned by a company continue to be owned by that company after your death. For further information on companies look under the topic Companies. A person undertaking the Estate Planning process will need to look at who owns which asset amongst all of the family assets, whether the asset can be willed or not, and how the non-willable assets can be controlled in a form that meets the family needs.
4 8. Joint Ownership of Assets When you own property with someone else you need to know how you own it with them. It may be that you own it with them as a joint tenant, or it may be that you own it with them as tenants in common. The different forms of ownership have different consequences on the death of each owner and thus the form of ownership is an important Estate Planning consideration. Ownership as Joint Tenants. This form of ownership means that if either of the joint owners die, the surviving owner automatically owns the property or investment absolutely. Thus the ownership of the first person cannot pass under their Will, no matter what provision is made in the Will of the deceased joint owner about that property or investment The ownership passes by survivorship to the other joint tenant leaving the survivor with ownership of the whole of the property or investment. The asset owned by a joint tenant does not form part of the Estate of the deceased owner. However, on the death of the last surviving joint tenant, the property or investment does form part of that person s estate and pass under either their Will (or intestacy if they have no Will). Ownership as Tenants In Common. This form of ownership means that each owner has a separate interest in the property which is capable of being left by a Will (or intestacy if they have no Will). Thus the ownership of the asset by the first person to die in a tenancy in common ownership does pass under their estate. The share held in the property or investment as a tenant in common does form part of the estate of a deceased owner. If either owner dies, his or her share in the property or investment does not automatically pass to the other owner. Tenants in common can hold in either equal or unequal shares. There is no right or wrong way to hold the title to property or investments as both forms of holding title have both advantages and disadvantages for Estate Planning purposes. More information and advice on the best form of holding jointly owned property is provided to our Estate Planning clients as part of the legal services we provide. The best form for you will depend on your personal circumstances, and the results which you wish to achieve. As part of the Estate Planning process it will be necessary to review how properties and investments are owned; and in order to achieve the results required by a client it may be necessary to alter the form of ownership. 9. Superannuation The superannuation that you have will affect your Estate Plan. Superannuation may be held by you in several different forms. You may be entitled to receive a superannuation benefit through a retirement plan and you may consider it to be a family asset, but do not consider it to be a willable asset unless it is paid to your Estate and payment of superannuation proceeds to your Estate may not be the best result in your family circumstances. If you are a State or federal public servant or have been one at some stage, you may have superannuation in one of their superannuation schemes. You may be a member of a public offer fund or a self managed fund.
5 Some of the issues to consider about superannuations are: (e) Do you have any control over how your superannuation is paid because of restrictive provisions, such as in the state and federal schemes, and most public offer schemes? Does the trustee of the superannuation fund have a discretion about how, and to whom to pay the benefit? Have you completed a request (sometimes called a non-binding nomination) indicating your wishes about how you would like your superannuation to be paid upon your death? If you have made a non-binding nomination, have you reviewed it recently? It should be reviewed regularly, especially as your circumstances change. Do you know that if the trustee of the superannuation fund has full discretion under the deed, they may: (i) (ii) (iii) pay the benefits to someone they consider is your financial dependant at your death (this may not be someone who you wished to benefit) even if this person is not your nominated beneficiary under your non-binding nomination form; pay the benefits to a person you have nominated (but your nomination may be old and not really relevant at the time of your death); and pay the benefit to your estate or an associated trust which may be a acceptable, so long as you have a well drawn Will which has flexible provisions about how you want your superannuation proceeds held, and if required, the capacity to create special post death superannuation trusts to take advantage of concessional tax rates for financially dependant beneficiaries. There are important tax, financial and family considerations that arise out of superannuation arrangements, and as it is often a very considerable proportion of a family s financial assets, great care should be taken to integrate it into your Estate Planning in the best possible way. It is important to understand how your particular superannuation works, and how it fits into your requirements to provide for your family in the way that you want. For further information look under the topic Superannuation on our website. 10. Superannuation - Binding and Non-binding Nominations 10.1 Superannuation Trust Deeds The governing rules of a superannuation fund are found in the Trust Deed. The trustee is bound by these rules and by the law regulating superannuation funds. The relevant law is the Superannuation Industry (Supervision) Act 1993 (CTH)( SIS ) and Regulations made under the SIS Act. If a dispute arises the Superannuation (Resolution of Complaints) Act 1993 (CTH) contains the relevant law unless the superannuation fund is an excluded, or Self Managed Superannuation Fund. Trust Deeds vary from fund to fund. There is no such thing as a standard superannuation trust deed. As part of the Estate Planning process it may be necessary or desirable to update your self management superannuation trust deed Non-binding Nominations Typically however, a clause to the following effect will be found in a Trust Deed: The Trustee in its absolute discretion may pay a death benefit to the one or more of the following: a dependant or dependants of the deceased; a person who is wholly or partly dependant upon the deceased at the time of his or her death; the legal personal representative of the deceased ie the executor of the estate or a person to whom letters of administration have been granted; where none of the above can be identified, an individual.
6 Dependant is defined to mean: a spouse of the deceased (including a de facto spouse who is residing on a bona fide domestic basis with the deceased at the time of death) but does not include a same sex partner; a child or children of the deceased in all of their shapes and forms children of the relationship, adopted children, step-children and so on; and a person who is wholly or partly dependant upon the deceased at the time of death. A provision like this exists in the context of Section 62 of SIS which sets out the sole purpose of superannuation funds, and SIS Regulation 6.22 which proscribes the circumstance, and to whom, a superannuation benefit may be paid Binding Nominations Some Superannuation Funds take into account Section 59(1A) of SIS which allows for binding death benefit nominations. These are still rare amongst superannuation funds. Many people want certainty about where their superannuation monies go on death and it is only with superannuation funds that have the capacity for members to complete binding nominations who can achieve certainty. If permitted by the fund s trust deed and, if a binding death benefit nomination has been validly completed and not expired, the SIS Regulations make payment to the nominated beneficiary mandatory provided that the requirements in the SIS Regulations are satisfied. If the fund includes a binding death benefit nomination clause, while it is the trustee s duty to do so in annual statements, members usually need to be reminded of the requirement to update their nomination form in accordance with the law. To make a binding death benefit nomination, under the SIS Regulations, the nomination (including a revocation notice): must be in writing; must be signed and dated by the member in the presence of two (2) witnesses who are: (i) (ii) Over the age of 18; and Are not nominated to receive a benefit in the notice (but may be beneficiaries of the person s estate, if a legal personal representative is nominated); and Must contain a declaration signed and dated by the witnesses stating that the notice was signed by the member in their presence. The Trust Deed should be read carefully to see if there are any specific restrictions which, if not adhered to, will invalidate the nomination Acceptance of Binding Nominations The nomination can be accepted by the trustee if: each death benefit nominee is a dependant for taxation or superannuation purposes, or is a legal personal representative of the member; the proportion to be paid to each nominee is certain or readily ascertainable; and the notice is in the approved format (if not, the trustee has an obligation to seek more information under SIS Regulation 6.17B).
7 10.5 What makes the Nomination Binding? Under the SIS Regulations, the nomination will be binding at the date of death if: each death benefit nominee is clear; the notice is in the approved format; and the notice is in effect: (i) (ii) signed within the 3 years prior to the date of death; or a shorter period as defined in the governing rules. If the nomination is invalid and not binding, the trustee may pay in accordance with the default option usually the legal personal representative or payment at the Trustee s discretion. What a Trustee will do if the binding nomination is invalid will depend on the terms of the superannuation trust deed Can Binding Nominations become invalid? Binding death benefit nominations can easily become invalid and open to contest if for example one of the nominated beneficiaries no longer meets the definition of dependant, or if the member was in some way incapacitated at the time they purported to make the binding death benefit nomination. Issues of duress, undue influence and circumstances where a nominated beneficiary causes the death of a member are factors leading to arguments that a nomination may be invalid Information for Members of the Superannuation Fund All members of superannuation funds who have given a binding death benefit nomination to the trustee must receive the following additional information with the annual benefit statement: (e) the name of each person nominated or class of person nominated (eg spouse, children) and the proportion of the benefit to be paid to each (or whom that proportion is to be determined); a statement explaining the effect of a nomination of a beneficiary ie provided that each nominated person is a dependant or the legal personal representative at the time of death and proportions are clear, the trustee must pay the benefit to that person or persons; a statement that the member may confirm, amend or revoke the notice at any time; the date that the notice ceases to have effect (ie 3 years after the nomination was first signed or a shorter period) as determined the governing rules; and a form to enable the member to confirm, amend or revoke the current nomination of beneficiary. (Note that confirmation of a previous nomination must be in writing but does not need to be witnessed. Amendments or revocations must be witnessed in accordance with the same rules as for the original nomination) Superannuation and Adequacy of Wills In order for a binding death benefit nomination to work well, it should be drafted at the same time as a Will is reviewed or when a new Will is prepared. This especially applies where the nominated beneficiary is the deceased s legal personal representative on behalf of the estate. For the whole process to work well, if the estate of a superannuation fund member is to receive the proceeds of the member s superannuation, the member s Will must be in good order, and have proper provisions in it to take account of the superannuation monies. If this is done well, it can be an equitable way of dealing with a person s superannuation death benefit, and a way of respecting appropriately a person s wishes on death. However, many people do not have their Wills in order and, if they do, the Wills sometimes do not directly address the question of exactly how much superannuation monies will come into the estate, or directly address how the superannuation monies will be dealt with once received by the estate.
8 11. Partnership interests 12. Trusts In the absence of any agreement to the contrary, the partnership is dissolved on the death of one of the partners in a partnership. If you are in a business partnership there should be a written Partnership Agreement. If there is a written Partnership Agreement it may have special provisions in it, such as an option to purchase given to the surviving partners on the death of one of the partners. Partnership terms like this, or the absence of them, will affect what provisions should be in your Will, and how you provide for your interest in the partnership (or the proceeds of the sale of it if the other partner or partners hold an option over your share which they exercise on your death) to be dealt with on your death. In order to maintain the value of the partnership and its assets, provisions should be made for the continuation of the partnership business after the death of a partner. Commonly partners hold life insurance as part of a business succession plan and these need to be reviewed and taken into account for Estate Planning purposes. The provisions in the Will should be in line with the Partnership Agreement made between the partners. As part of the Estate Planning process a new Partnership Agreement may have to be written, or an existing partnership agreement may have to be varied or amended. There are a number of forms of Trusts that are important for Estate Planning purposes. Testamentary Trusts. These are trusts created within Wills. For an extensive discussions about the importance of Testamentary Trusts in Estate Planning look under the topic Wills with Testamentary Trusts. Discretionary Trusts. These are trusts created by a Deed or Will. Where these are created by a Deed, they are sometimes called inter vivos discretionary trusts, but they are more commonly called family discretionary trusts. The deed creating a discretionary trust is usually quite lengthy, but it will essentially provide for a trustee to hold the property of the trust for the benefit of named beneficiaries. These may be capital beneficiaries; income beneficiaries; or income and capital beneficiaries. The trustee, subject to the terms of the deed has a discretion as to how, and when, to distribute capital and income amongst the beneficiaries, and this is why it is called a discretionary trust. There are usually, in addition to the trustee and the beneficiaries, two other important positions provided for by the trust deed. Appointor or Protector. The first is the Appointor or Protector who amongst other things usually has the power to hire and fire the trustee and thus is in a position of control. Guardian. The second is the Guardian, who amongst other things, usually has the power of veto over some decisions including possibly the veto of a decision by the trustee to distribute capital or income. When undertaking an estate plan, the trust deed must be reviewed and the powers held by the various players taken into account in the estate plan to avoid the assets owned by the trust falling into hands not desired by the family or the present controllers of the trust. The existence of loan accounts, and who owns them, is also important for Estate Planning purposes. It may also be necessary to amend the deed, or to complete supplementary deeds to achieve a particular result required by a client.
9 Unit Trusts. These are trusts created by a Deed and are some times called inter vivos fixed trusts. The deed creating the trust is usually quite lengthy, but will essentially provide for a trustee to hold the property of the trust, for the benefit of named unit holders. These unit holders will usually be entitled to a fixed proportion of both capital and income. It is important to know who owns the units, and whether there are any loan accounts in the unit trust. Every trust provides for a jurisdiction (a State or Territory for example Victoria, Queensland or Tasmania), or proper law that by implication, or direct provision, has the relevant laws for that Trust. With discretionary trusts and unit trusts a Will has little influence over the assets within the trust, other than perhaps providing a new appointor to a discretionary trust by way of exercising control over it for the future; and the disposal of the loan accounts in both discretionary and unit trusts, and with a unit trust the delivery of the units (as opposed to the underlying assets) to a beneficiary if the units are owned beneficially by the Willmaker. There are other Estate Planning techniques for the control of trusts which should be discussed with your Estate Planning lawyer at Peter Worrall Lawyers. 13. Companies A company is separate from the people who own the shares in it, and from the people who are its directors. The shareholders own the shares; and the company owns the underlying assets of the company and owes whatever debts the company may have to others. You cannot leave anything other than the loans you have made to the company, and the shares that you own in the company under your Will. 14. Income Protection Insurance Income Protection Insurance was originally designed to benefit self-employed people, but is generally available to most people, including salaried earners. It provides a benefit (usually 75% of income over the last 12 months) for policy holders in circumstances of death, disability and trauma. The process of obtaining income protection insurance is usually quite onerous and involves considerable paper work and often medical and other personal checks. Income protection insurance protects the income stream of a person; loan protection insurance protects the outgoing flow of mortgage payments to a lender by either continuing those weekly/fortnightly/monthly payments for the period of disability or trauma or, in some circumstances, paying out the entire mortgage loan in a lump sum payment. As your Estate Planning lawyers, Peter Worrall Lawyers will work with your insurance adviser to obtain income protection insurance if it is necessary to have a policy of this type as part of your estate plan. 15. Loan Protection Insurance Loan Protection Insurance is designed to protect lenders, but also has the consequential benefits of benefiting borrowers, mortgage originators and the specific property it covers, by paying out the loan obligations in the circumstances of a death, disability, trauma and unemployment. Obtaining loan protection insurance is usually a straightforward process, and is easily attached to a new mortgage loan at the time the loan application is made. Usually no out of the ordinary enquiries need to be made. Your Estate Planning lawyer at Peter Worrall Lawyers will work with your insurance advisor, your mortgage originator, or the lending officer at your lending institution to assist in obtaining a loan insurance policy for both your new and existing mortgage loans if it is necessary to have a policy of this type as part of your estate plan.
10 16. Life Insurance Estate planning will often involve the use of life insurance to achieve results which would otherwise not be achievable. Who should own the policy, and whose life the policy will cover are relevant to Estate Planning. Where the person who owns the policy dies, if the policy is on their life, the policy is paid to the estate of that person when they die. This will increase the value of the estate of this person. Alternatively, it may be desirable in some family circumstances for a particular person or other entity to own the policy, thus keeping the asset represented by the proceeds of the insurance policy outside the estate. The particular Estate Planning technique that is adopted will depend on the circumstances of the family, and the result that you wish to achieve in your circumstances. A review of existing policies of life insurance and who owns them should be undertaken as part of the Estate Planning process. 17. Control of Non-Willable Assets The control of non-willable assets is important to a family. How each separate non-willable asset is controlled will depend upon the nature of the asset, and the documents and law that control and impact upon that asset. Special advice about each non-willable asset should be obtained from your Estate Planning lawyers at Peter Worrall Lawyers. 18. Different Families Families take all sorts of forms. Every family is a normal family, but it may be different to other families for Estate Planning purposes. Different Estate Planning considerations arise when there are for example: (e) (f) (g) (h) (i) (j) (k) step children; adopted children; second or subsequent marriages; second or subsequent relationships; same sex partners; some dependant, and some non dependant, children in the same family; children or grandchildren with special needs or with particular disadvantages when compared to their siblings; members of the family who are in matrimonial difficulties; members of the family who have financial difficulties; members of the family who are an at risk professional; and members of the family who have a drug or alcohol dependency, or spend thrift tendencies. 19. Marriage All of these circumstances will require special and careful consideration by the Estate Planning lawyer at Peter Worrall Lawyers. Special Wills can be made that are not revoked (cancelled) when a marriage takes place, because in Tasmania, a marriage revokes the whole Will unless special provision is made to the contrary in the Will. It is only a Will made in contemplation of that particular marriage that is not revoked. A person making a Will prior to marriage who wants his or her intended spouse to benefit under the Will, must clearly state this to the Estate Planning lawyer at Peter Worrall Lawyers who will prepare the Will so that an appropriate clause is included in the Will.
11 20. Divorce The effect of a divorce on a Will (technically called a dissolution of marriage under the Family Law Act) varies from State to State. For example, it used to be in Queensland that the whole of the Will was not revoked, but in Tasmania the whole of the Will is revoked. Divorce is such an important life change that everyone going through this process should attend to completing a new estate plan and Will immediately to ensure their wishes are attended to properly. What they required when married will usually have changed, as a result of their changed circumstances and changed level of assets. If you have already reached a property settlement you will need to show your Estate Planning lawyer at Peter Worrall Lawyers the Family Court Orders that have altered the property rights between you and your spouse, (or former spouse) so any relevant Orders can be taken into account in your Estate Plan and Will. You will also need to disclose any Orders or agreements for spousal maintenance. Divorce has effects on Wills and Estate Planning in a number of ways. These include. unless a Will is specially prepared, a Will is revoked by a dissolution of marriage; either wholly revoked as in Tasmania and some other States or partly revoked as in some other states. if a new Will in contemplation of the divorce; or a new Will after divorce is not made, once the dissolution of marriage happens then the person (under Tasmanian Law) has no Will. If they die then the laws of intestacy will apply. This may not be what the person would want to happen on their death. 21. Re-marriage and Re-partnering If you are contemplating remarriage or re-partnering you should consider the effect this will have on your present Will and estate plan. There will be competing interests that you should consider your existing children (if any), the possible prospect of new children with the new partner, the new partner themselves, and their children. Different considerations will arise depending on whether a new marriage or a new de facto relationship is involved. 22. De facto Relationships If you are living with another person you should make a Will for several reasons: (e) people living in de facto or other relationships often make Wills in each other s favour with no intention of marrying. If marriage between these people occurs, their Wills (unless they contain special provisions) are revoked and new Wills must be made even though their intentions about the distribution of their estate on death have not changed. you may wish to benefit (or not benefit) your de facto partner. you will need to know about the rights of de factos under the Relationships Act 2003 in Tasmania. you will need to know about the rights of de factos under the Administration and Probate Act 1935 so far as rights to inherit and rights to apply for Administration of a deceased de facto partner s estate. you will need to know about your rights under the family provision legislation (Testators Family Maintenance Act) if a person who is your de facto dies and leaves you without adequate provisions from their estate. De facto entitlements under Wills in Tasmania People in de facto relationships in the past have been at a considerable disadvantage in how the law (and, for that matter, various governmental entities) treated them. Much of that inequality has, however, been addressed in the past few years, enabling people who choose to live in a de facto relationship access to some of the benefits and entitlements enjoyed by married couples under the law.
12 One area of legislation where the disparity between married and de facto couples has been significantly reduced is Estate Planning; specifically, the making of Wills. Amendments to existing legislation, such as the Wills Act 2008, the Testators Family Maintenance Act 1912 and the Administration and Probate Act 1935, and the introduction of new legislation, such as the Relationships Act 2003, greatly enhance the legal position of partners in de facto relationships in Estate Planning issues. Examination of the entitlements of partners in de facto relationships under Wills in Tasmania shows that there is now only relatively small detriments to partners in de facto relationships in this area of law. Freedom to make the Will that you want called Freedom of Testation In general, a person who makes a Will is able to dispose of the willable assets in any manner, and to whomever they choose. This freedom of testation does not discriminate against de facto partners. There is usually no fundamental difference between the Wills made by a de facto couple who have lived together for many years and those made by a legally married couple. The amendments to existing legislation affecting de facto couples most benefit de facto couples when a relationship falls outside the scope of an established relationship. A relationship of this type might include one or any combination of the following circumstances: (e) a partner in a de facto relationship is separated but not divorced from a former spouse; the relationship is relatively new; a de facto agreement exists; a de facto spouse is not included as a beneficiary in the partner s Will; or either partner fails to make a Will. De facto Relationships and the Wills Act 2008 In setting out the procedure by which a Will should be made, the Wills Act 2008 ( the Act ) does not make any distinction between married people and those in de facto relationships. However, one provision of the Act does require careful consideration by parties of a de facto relationship where either one or both parties is separated from, but still legally married to, their spouse. Section 20 of the Act stipulates that any Will is automatically revoked by the dissolution of marriage. Therefore, if either party in the de facto relationship subsequently proceeds to divorce their former spouse, this would automatically revoke any Will made previously by the de facto couple, and failure of the de facto couple to make new Wills would result in an intestacy for the estate of the deceased partner. However, that section 21 of the Act provides that when a Will is expressed to be made in contemplation of the dissolution of marriage (or words to that effect), it will not be revoked by the subsequent dissolution of that marriage. In practical terms, if a person enters a de facto relationship with the intention to proceed to divorce their spouse, and signs as a Will which complies with this section, it would more than likely reflect the existence of the new relationship, and negate the need for the Will to be revoked by operation of section 20 of the Act. The provisions in section 21 of the Act also apply to a marriage in much the same way; that is, if a de facto relationship progresses to marriage, any Will made previously is generally revoked. However, if a Will was drawn up in contemplation of that marriage, it would not be revoked when the marriage took place. De facto Relationships and the Testators Family Maintenance Act 1912 The Testators Family Maintenance Act 1912 ( the Act ) gives the Supreme Court of Tasmania discretion to make provision for some categories of people when a deceased person has failed to do so in their Will. The de facto spouse of a deceased person at the date of the Willmaker s death is entitled, under section 3A of the Act, to make a claim for adequate provision for their proper maintenance and support.
13 Under the Act, a de facto spouse who wishes to make a claim against the estate of a partner must meet the definition of a de facto spouse. Under the Act, a de facto spouse is defined as being a person who falls within the meaning of a significant relationship under the Relationships Act Under Section 4 of the Relationships Act, the Court will look at: (e) (f) (g) (h) (i) duration of relationship; common residence; sexual relationship; financial interdependence; property ownership and use; commitment to a shared life; care of children; performance of household duties; and public reputation. If an application under the Testators Family Maintenance Act is successful, the Court has the power to alter the terms of the Will to make adequate provision for the proper maintenance and support of the de facto partner. This generally is done by reducing the gifts to other beneficiaries under the Will in proportionate amounts until the Order of the court about the de facto partner who has made the successful application is satisfied. As you can see, the Act does not cover same sex de facto relationships, and for this reason people in same sex relationships should take special care in completing estate plans and Wills. Relationships Act 2003 The Relationships Act 2003 relates primarily to the financial arrangements between partners in de facto relationships. Specifically, the Act empowers the Magistrates Court to make Orders as to property interests and payment of maintenance. The Act also governs the making, existence and alteration of Personal Relationship Agreement. A Personal Relationship Agreement is an agreement between the partners in a de facto relationship on the terms under which the financial aspects of the relationship will proceed. The terms of a Personal Relationship Agreement cannot be enforced against the Estate of a deceased partner, unless the provision to do so is expressly included in the terms of that agreement. De facto Relationships and the Administration and Probate Act 1935 When a person dies without leaving a Will, or leaves a Will that is invalid for some reason, the person is said to have died intestate. Under the provisions of the Administration and Probate Act 1935, there are strict provisions as to how the Estate of a person is to be administered in these circumstances. Amendments to the Act enable de facto partners to benefit from a distribution under an intestacy provided they meet the definitional criteria of de facto spouse, which in this Act is defined according to the definition of a significant relationship in the Relationships Act The relationship must have been in existence for at least two (2) years immediately prior to the death of one of the partners in that relationship. The basic operation of the rules of intestacy leaves the first $50,000 to the surviving partner and then the residue of the estate: as to one-third, on trust for the surviving partner; and as to the remaining two-thirds, on trust in equal shares for the surviving children. When a deceased person in a de facto relationship leaves no children, the entire residue of the estate is held in trust for the surviving partner provided the two (2) year limitation noted above is met.
14 23. Providing for Children under Special Disadvantage There are always difficult decisions for parents who want to properly provide for any child who is under a special disadvantage because of a disability. There are a wide range of Estate Planning techniques that can assist in the proper protection of a disabled child s interest. These include: protective trusts established during life; protective trusts established under a Will; a special form discretionary testamentary trust; and special disability trust. If you wish to make a provision under a trust for a disabled child you will need to think about (for example) some of the following: the best trustees who will have the interests of the disabled child foremost in their consideration. the trust will need to be well drafted to cover a wide range of future circumstances and problems. arrangements will need to set out those circumstances such as variations in social security entitlements and assist in possible provision for accommodation and other needs of the child. the trust will need to cope with changing Centerlink and tax requirements and be efficient and relatively inexpensive to administer. Caution This material is for general educational purposes and is not designed to be advice to any particular person in relation to their own affairs as it does not take into account the circumstances of you as an individual.
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