Estate planning: Is it time to update your will?

It is important to keep your will and estate plan up to date, especially in light of numerous legislative changes and developments, as well as changes in personal circumstances. This month's ClearLaw outlines some of the more recent developments in this area. Maddocks Private Client Services Team

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You can find out about the following 6 issues in estate planning by reading this ClearLaw:

• A person's will may not cover their super
• Succession planning for companies and trusts
• Changes in circumstances: marriage, divorce etc.
• Testamentary trusts, and tax savings in respect of minors
• Testator's family maintenance claims ('will contests')
• Planning for people without testamentary capacity: Statutory wills

Read on for more.

A person's will may not cover their super

A person's super savings do not automatically become part of the person's estate. So those savings won't be dealt with under the person's will unless the person directs the trustees of their super fund to pay any death benefits to the executors of their estate.

Another way to deal with super is (if the super fund allows) for the member to make a binding death benefit nomination directing the super fund's trustee(s) to pay the super to the people the member wishes to benefit.

Example of the problem

The facts of the 2005 New South Wales case of Katz v Grossman (reported in CleawLaw's January 2006 edition, which you can view here) underline the importance of making a nomination which binds the super fund's trustee(s). In that case, the deceased had made a non-binding death benefit nomination directing that his super death benefit pass to his son and daughter equally. As the daughter had been appointed by the deceased as the co-trustee of the super fund, she gained sole control of the super fund on the father's death. The daughter then appointed her husband as her co-trustee and together they directed that her father's death benefit be paid entirely to themselves, with the result that the brother received nothing.

Succession planning for companies and trusts

The issues that arise in the sort of facts in the Katz case, described above, also arise in relation to assets held in family trusts or companies. A person's succession planning needs to deal with how assets held in these vehicles interact with their will. Like a person's super savings, a person's assets held in a trust or company will not necessarily form part of the person's estate on death.

Orderly succession planning can:

• make sure that all of a person's respective personal, business and investment assets are properly taken into account in their estate & succession plan;
• ensure that their will takes these matters into account; and
• help avoid potential family disputes and ill-feeling.

Changes in circumstances: marriage, divorce etc.

Updating a will may be needed when there is a change to a person's family or business affairs. For example, events such as marriage or divorce are an important time to revisit estate plans, remembering that the rules relating to the impact of these sorts of changes vary in each different Australian jurisdiction.

Testamentary trusts, and tax savings in respect of minors

Testamentary trusts are established under and by operation of a person's will. They only come into existence on the person's death.

Testamentary trusts are valuable planning tools, particularly if the people they intend to benefit are under 18 because they help save tax. For example, if a child received income of $75,000 in one year under a testamentary trust rather than directly, then the tax savings would be about $17,000.

Testator's family maintenance claims ('will contests')

If a person feels that a deceased person had a responsibility to support them then the person can apply to a Court to benefit from (or to further benefit from) the deceased person's estate. For example, in 2007, the Victorian Supreme Court ordered that some of the estate of a woman who died without making a will be used to purchase a home for her step-grandson. If the woman had made a will and structured her affairs on proper legal advice, then the result may have been different.

If you believe someone may make a claim on your estate, there are things you can do to minimise the likelihood of a claim being made — for example, effecting a properly drafted will. Again, the exact measures you can take vary from one Australian jurisdiction to the next.

Planning for people without testamentary capacity: Statutory wills

It is possible to have wills approved by a Court for people without testamentary capacity.

For instance, in Victoria a person (for example, a person's attorney) can apply to the Victorian Supreme Court for a will to be made by the Court on behalf of a person who does not have legal capacity.

Summary

Orderly succession planning is the key to ensuring that your estate is properly distributed on your death.

It is common for families to suffer significant disruption, uncertainty and, where there are disaffected family members, unnecessary angst and cost if people die:

• without a will at all;
• with an out-of-date will; or
• with a will that fails to consider assets (such as super) that do not automatically form part of their estate.

Further information

If you have any questions about this article or would like advice concerning yours or your clients' estate planning, contact Maddocks on (03) 9288 0555 and ask for the Cleardocs Help Desk: they will put you through to the relevant member of our Private Client Services Team.