by Katrina Brown | Mar 28, 2016 | Estate Administration and Litigation, Powers of Attorney and Estate Planning, Succession Law, Wills
It is a common phrase heard, particularly from young adults – “I don’t have any assets, so I don’t need a Will”.
Young adults and non-homeowners are often of the opinion that, because they do not have “significant” assets – they do not need a Will. This article considers two of the most basic reasons to have a Will.
Firstly, everyone owns something – and the majority of young people have potentially significant superannuation death benefits.
Remember opening a “Dollarmites Club” account with Commonwealth Bank when you were in early primary school (or opening one for your children)? At a young age you started to accumulate assets.
In addition to many young adults concluding that their assets are not significant enough to necessitate a Will, there is generally one asset that they do not consider – superannuation death benefit proceeds.
Superannuation is held by the Trustee of your superannuation fund(s) on your behalf. Although you are beneficially entitled to the funds, they are not owned by you (but rather held for you). Therefore, the Trustee can pay the superannuation death benefits as the Trustee determines – which may or may not be in keeping with your wishes.
If you die having a superannuation member interest, the Trustee is obligated to pay the death benefit to any one or more of your “dependents” or your legal personal representative – unless you have made a Binding Death Benefit Nomination (and the Nomination names a lawful payment direction).
You may have significant superannuation death benefits, and have no idea! We discover this quite often, when we ask clients to provide copies of their superannuation statements.
For example, one standard cover by Sunsuper provides a combined total and disability cover for a 30 year old in the sum of $250,000, which decreases at age 60 to $25,000. Also, many industry funds have basic insurance coverage that is taken out on joining the superannuation fund.
In a Will, directions can be made in respect to your wishes on the payment of the superannuation death benefits. The Trustee may have regard to your wishes contained in your Will, but is not bound to act in accordance with your Will. However, your Will is an excellent starting point for the Trustee to consider, in assessing how the superannuation death benefits should be paid. Of course, making and maintaining a valid Binding Death Benefit Nomination in the form required of the Trustee is the best approach to ensuring the benefits are paid to the correct beneficiary.
You do need to be aware, however, that the Trustee is limited to who it can pay – including generally your parents, your children, your partner or spouse and your dependents and interdependents (in general terms – people whom you live with or whom rely on you for some level of financial assistance, or vice versa). Excepting in respect to any one or more of these, the Trustee must pay the death benefit to the Legal Personal Representative of your Estate.
Assuming the death benefits are paid to the Legal Personal Representative of your Estate, if you have no Will – the superannuation death benefit will be distributed in accordance with the intestacy rules set out in your state of residency’s intestacy rules (see, for example, the Succession Act 1981 (Qld)). But, you may not want to leave your death benefit to those who would take intestate, so it pays to draw a Will – regardless of the value you believe your Estate to be worth.
Secondly, if you do not have a Will, there is a question over who controls your Estate.
A properly drawn Will appoints an executor, which person (or people) has the authority to administer your Estate.
In the event that you die without a Will, the only way that a person can be granted authority to deal with your estate (in a way that is recognised by financial institutions and asset holders) is for that person to obtain a grant of Letters of Administration from the Supreme Court.
The cost and time involved in obtaining the grant of Letters of Administration is generally greater than that of obtaining Probate of a Will.
If you would like to speak to our estate planning team about drawing a Will, please contact our office on 07 5574 3560 or via email.
by Katrina Brown | Mar 21, 2016 | Succession Law, Tax Advisory, Wills
We often encounter the misconception that when you die, a set percentage of your estate is paid as a “death tax”.
The good news is that “death tax” was abolished in Australia more than 40 years ago.
There are, nonetheless, taxes and charges borne by the executor or administrator of deceased estates, notwithstanding that the “death tax” was abolished. This article considers a number of such examples.
COURT FEES: If the estate obtains a grant of probate, the government imposes registration fees according to Court rates.
ESTATE INCOME TAX: Tax may be payable on certain income or capital transactions which occur as a consequence of a person’s death. Whilst “death” is not a taxable event, the disposal of assets by the estate and the receiving of income during the administration of the estate, gives rise to potential tax assessable circumstances. The tax may be borne by the beneficiaries who become “specifically entitled” to the benefit of the income arising, or the tax may be held by the executor and payable from the estate proceeds.
ADJUSTMENTS FOR SOLE PROPRIETORS: If an estate has a business, and stock or depreciation calculations must be adjusted at death as a consequence of the deceased trading as a sole proprietor or partner, then there may be a “tax” which arises to the extent of the adjusted values.
SUPERANNUATION DEATH BENEFITS PAID TO NON-TAX DEPENDANTS: If superannuation death benefits are paid to non-tax dependants, then a tax case arise in respect to the taxable elements. The theory here is that the concessional tax treatment attaches to the member of the superannuation fund, and not to his/her estate beneficiaries.
CAPITAL GAINS GENERALLY: The taxation of capital gains in a deceased estate is complicated, but it can generally be said that if an asset with a capital gain passes to a beneficiary, the tax on the disposal (whenever that may be) by the beneficiary is borne by the beneficiary. In other words, there is no tax on the capital gain on the distribution of the capital asset to the beneficiary. However, when the beneficiary disposes of the capital asset, the capital gains will then become assessable income to the beneficiary. If the capital asset was acquired by the deceased prior to 20 September 1985, the beneficiary will be assessed on the capital gain between the date of death and the disposal by the beneficiary. If the capital asset was acquired by the deceased after 20 September 1985, and the asset was not a main residence (or a residence qualifying for exceptional treatment), then the beneficiary will be assessed on the capital gain between the cost base of the deceased (the purchase price, plus other allowed costs which have been expended since purchase to maintain and hold the asset) and the proceeds of sale received by the beneficiary. There are tax concessions and exemptions which apply in limited circumstances, depending on the nature and use of the asset; however, “death” is not the triggering event for the tax on such capital assets.
SUMMARY: Whilst there is no “death tax” per se, executors and beneficiaries alike are well advised to seek the advice of a tax lawyer or accountant well versed in taxation of deceased estates. There are appropriate strategies to ensure beneficiaries are not subject to excessive taxation.
We welcome you to contact our Estate Planning Team, on 07 5574 3560 or via email to discuss your questions in respect to probate, estate administration and taxation of deceased estates.
by Katrina Brown | Mar 14, 2016 | Estate Administration and Litigation, Succession Law, Wills
When we meet with clients, we often ask why they have decided to come to see us – often they are looking to clearly define an estate distribution for blended families to make sure that everyone is provided for – other times our client is simply looking to put in place a Will that establishes a level of protection for their beneficiaries’ inheritance. For those who haven’t been through an estate planning exercise before, we often hear that “I want to make my Will because I don’t want everything to go to the government”.
“The government” is a broad term, and the assumption we generally encounter is that, if a person hasn’t left a Will naming a beneficiary of their estate, the residue of the estate (being the balance after the payment of funeral costs, debts and testamentary expenses) will simply be distributed to the government, without consideration of the deceased’s family.
In reality, this is not the case. While there are circumstances under which “the government” can receive payments under a Will, these are generally limited to estate debts and taxes – such as capital gains tax and income tax for gains realised and income received by the deceased during their lifetime and in the course of administering their estate. Aside from this, there are very limited circumstances in which the government will become the beneficiary of your estate.
A person who dies without a Will, or who leaves a Will which does not effectively dispose of their estate, is said to die “intestate”. The Succession Act 1981 (Qld), at Part 3, provides the direction for the distribution of an estate of an intestate person. The rules of intestacy consider the persons relationship to the deceased, and the deceased’s relationship circumstances at their date of death.
For example, as set out at Schedule 2 of the Succession Act, if a married person dies leaving two children, the spouse of the deceased is entitled to receive $150,000 plus the household chattels, with the balance of the estate divided with 1/3 distributed to the spouse and 2/3 distributed equally to the children of the deceased.
If a single person with no children dies, but is survived by one or both of their parents, the parents (or the survivor of them) are entitled to the entire rest and residue of the estate in equal shares.
Only in the circumstance where the deceased is not survived by a spouse, child, parent, brother, sister, grandparent, aunt, uncle, niece, nephew or cousin (defined as next of kin at section 35), does the government become entitled to the residue of the estate.
Whilst the rules of intestacy set out in the Succession Act may allay the concern that the government will take the residue of your estate upon your death, this is not to say that you do not need to make a Will.
Intestacy can create a much more complex estate administration process than administration with a Will. Administration of an estate pursuant to a Will often requires the executor to obtain a grant of Probate; if the Will has been correctly prepared and executed, this application is generally a straightforward process wherein the executors advertise and make application for the grant from the Court. The requirement for the issue of a grant of probate will sometimes be waived by financial institutions and other asset holders, if the value of the asset held by them is a low value asset and therefore the expense and delay of obtaining probate is not justified.
However, in the case of intestacy, letters of administration from the Court must be obtained – otherwise, asset holders are unable to ascertain that the person that they are dealing with has the proper authority to administer the estate. As this process must be completed, and there are various addition documents that must be prepared and executed, the application for letters of administration can be a costly and time consuming exercise.
Whilst the myth that the government will receive your estate if you don’t have a Will on your death is false, that is not to say that you don’t need a Will. A properly drafted Will is the best method of ensuring your estate is administered in accordance with your wishes, that costs are minimised and that beneficiaries receive the gift you intend.
If you have any questions regarding making a Will, or the distribution of an estate where a Will has not been left, please contact Caitlin Bampton on 07 5574 3560 or Caitlin@nautiluslaw.com.au.
by Katrina Brown | Mar 8, 2016 | Business Strategies, Business Structuring, Commercial Agreements, Commercial Law, Testimony Trusts
A complying self-managed superannuation fund (SMSF) is a trust at law, which is subject to the requirements and restrictions of the Superannuation Industry (Supervision) Act (SISA), Superannuation Industry (Supervision) Regulations (SISR), Income Tax Act Assessment Act 1997 (ITAA97), Income Tax Act Assessment Act 1936 (ITAA36), and such further relevant Commonwealth and State based legislation applicable thereto.
Whilst industry practice favours the establishment of a SMSF by “deed”, there is no obligation under Commonwealth or State legislation that a SMSF conform with the obligations of the common law characteristics of a deed. Section 10(1) of the SISA defines a deed to include “an instrument having the effect of a deed”.
Whilst the term “instrument” is not defined under the SISA, nor defined under the Acts Interpretation Act 1901 (Cth), the reference to “governing rules” and “deed” are used interchangeably, with the term “governing rules” defined at Section 10(1) of the SISA to mean, in respect to a “fund, scheme or trust”…“(a) any rules contained in a trust instrument, other document or legislation, or a combination of them, or (b) any unwritten rules, governing the establishment or operation of the fund, scheme or trust”.
Accordingly, setting aside the debate as to whether electronic transactions and digital signatures are allowed in respect to the settlement of a “deed” – a SMSF may be settled by any instrument which has the effect of a deed.
What, therefore, is an “instrument which has the effect of a deed”?
Returning to the nature of a SMSF, we cannot overlook the simplicity of what constitutes a trust. A trust has three necessary elements: the trustee, the trust property and a beneficiary. A trustee can also be the beneficiary, provided the trustee is not the only one (consider Section 17A of the SISA – with its restriction that a single member cannot act as a sole trustee). Whilst a trust may be settled by deed, there is no obligation at common law or statutory law to settle a trust by deed. In fact, a trust can be settled by common intention of parties, and to this end – the definition of “governing rules” at Section 10(1) allows for “unwritten rules.”
Whilst the writer does not suggest a SMSF may be settled on a resulting or implied trust, the writer does not agree with the proposition that the formalities of a deed are necessary for the establishment or maintenance of a “complying” SMSF under the SISA. To the contrary, the SISA accommodates settlement by any instrument which is a deed, or has the effect of a deed. The focus throughout the SISA is on the governing rules, to which there is no formality of implementation.
In particular, Section 8 of the Electronic Transactions Act 1999 (Cth) (ETAC) stipulates that a transaction is not invalid under the laws of the Commonwealth merely because it takes place wholly or partly by means of one or more electronic communications. A “transaction” is defined at Part 1, Section 5 of the ETAC to be “any transaction in the nature of a contract, agreement, or other arrangement”, “any statement, declaration, demand, notice or request” and “any transaction of a non-commercial nature”. Part 2, Section 10 of the ETAC provides that the signature of a person may be given electronically, provided consent is given to the execution and method. Part 2A of the ETAC allows for the application of Parts 1 and 2 of the ETAC to contracts and transactions in the nature of a contract. To the extent an “instrument having the effect of a deed” is in the nature of a contract, Part 2A makes allowances for electronic transactions and digital signatures in respect to such instruments, notwithstanding the exclusions at Item 142 of Schedule 1 of the Electronic Transactions Regulations 2000 (Cth). To read the exclusions at Item 142 to broadly prohibit the applications of the ETAC to the SISA for such purposes is, the writer suggests, against legislative intent.
EXECUTION BY A CORPORATION
Section 127 of the Corporations Act 2001 (CA) does not limit the means by which a corporation can execute a deed. The Electronic Transactions Act Regulations 2000 (Cth) (ETR) exclude the application of the ETAC from applying in respect to “company laws” – but the inclusive nature of Section 127 of the CA does not prevent the company from resolving a means of executing a deed by way of electronic signature.
Whilst parties referring to a deed executed by a corporation, other than a prescribed manner at Section 127 of the CA, may require additional evidence of the corporation’s execution of the deed – the provision of the evidence does not invalidate the execution made by the corporation in accordance with its own mechanisms.
EXECUTION BY AN INDIVIDUAL
The following States either allow for, or are likely to be deemed to allow for, the execution of a deed by electronic means by an individual:
The following States do not allow deeds to be executed by electronic means by an individual, and it is therefore in these States that consideration must be given to what constitutes the execution of an “instrument having the effect of a deed”:
Therefore, returning to the question of what is an “instrument having the effect of a deed”? The formalities of the common law execution of a deed in respect to the signing and delivery on “parchment, vellum or paper” are not obligated by the SISA. Notwithstanding, four of the Australian States allow deeds to be issued electronically. It follows that an “instrument having the effect of a deed” is an instrument, transacted with consent of the parties, by way of electronic mechanisms suitably qualified in accordance with the relevant Electronic Transactions Acts of the Commonwealth and States.
The Queensland Court of Appeal, in 400 George Street (Qld) Pty Ltd v BG International Ltd [2010] QCA 245, considered the question of what constitutes a deed, and in doing so considered 12 Halsbury’s Laws of England, 4th ed, para 1301, which defines a deed as “an instrument” which:
“…must express that the person or corporation so named makes, confirms, concurs in or consents to some assurance (otherwise than by way of testamentary disposition) of some interest in property or of some legal or equitable right, title, or claim, or undertakes or enters into some obligation, duty, or agreement enforceable at law or in equity, or does or concurs in some other act affecting the legal relations or positions of a party to the instrument or of some other people or corporation.”
The term “instrument” is not defined under the SISA or the Acts Interpretation Act 1901 (Cth) (AIA); however the Acts Interpretation Act 1954 (QLD) (AIA), Schedule 1 defines a “document” as “any paper or other material on which there is writing…and any disc, tape or other article or any material from which sounds, images, writings or messages are capable of being produced or reproduced (with or without the aid of the device)”. An “instrument” is defined in the AIA as any “document.”
Section 44 of the Property Law Act 1974 (QLD) (PLA) entitled “Description and form of deeds”, does not require a deed to be on parchment, vellum or paper. Notwithstanding, Part 2 of the Electronic Transactions Act (QLD) (ETAQ) allows for an electronic instrument to be effective, provided the execution standards are satisfied and the transaction is not excluded.
Specifically, an electronic instrument is taken to be effective by Sections 16 and 17, of Part 2 of ETAQ, where: a) the electronic form of the document is provided by a reliable mechanism which maintains the integrity of the information contained in the document, b) it is reasonable to expect the information contained in the electronic form will be readily accessible for subsequent reference and c) the parties to the communication consent to the provision of an electronic form. Part 4 of the ETAQ reads Part 2, to apply to any “transaction” in the nature of a contract.
Therefore, deducing from 400 George Street, “an instrument which has the effect of a deed” is an instrument in which parties thereto express a consent, undertaking, obligation, duty or agreement which affects an interest in property, or some legal or equitable right, title or claim. The formalities of execution are not necessarily dispositive, provided the intention of the parties is demonstrated.
Is an “instrument having the effect of a deed” not, therefore, for purposes of establishing a complying SMSF, in the “nature of a contract”, such that Part 2 of the ETAQ allows for the execution of SMSF deeds (which are, notwithstanding the name, an “instrument having the effect of a deed”)?
There is no case law to answer this question; however, reading the statutory provisions above cited as inclusive, rather than exclusive, it would follow, the writer suggests, that a SMSF may be validly settled by a quasi-deed (for example, a self-managed superannuation fund deed of establishment, settled without compliance to the PLA and/or common law execution standards), electronically by not only corporations – but individual trustees. Electronic transactions are not foreign to the SISA (see Section 11D) or CA (see Chapter 2P), and the modern business practice of electronic dealings would reasonably lead to a conclusion that it is unlikely that a SMSF would be found to be non-complying merely because a deed was executed electronically and by way of digital signatures of company officers and/or individuals and their respective witnesses – as a SMSF can be established by an “instrument having the effect of a deed” (Section 10(1) of the SISA).
It may be that third parties may require a company to execute more traditionally for their internal requirements; however, this requirement does not negate the effect of the “instrument having the effect of a deed,” given the consent and intentions of the parties to be bound therein. Further, given the inflexibility of banks and other relevant institutions, it is best practice to adopt a means of execution by individuals likely to be universally accepted; however, given a SMSF does not have to be settled in common law deed form, there is no express prohibition to adopting digital signatures for the execution of a deed (notwithstanding in absence of the formality, it would be “an instrument having the effect of a deed) of the individual and his/her witness.
by Katrina Brown | Mar 7, 2016 | Estate Administration and Litigation, Estate Litigation, Powers of Attorney and Estate Planning, Succession Law, Wills
“If I leave someone $1 under my Will, then they can’t make a claim against my Estate”. This is a common misconception that is often encountered in the estate planning process for clients who wish to take all possible steps to ensure that a claim won’t be made against their deceased estate.
The Succession Act 1981 (Qld) provides, at Part 4, that the Court may consider an application made by a spouse, child (including stepchild or adopted child) or dependent where the deceased has not made adequate provision from the Estate for the claimant. The Court will consider factors such as:-
- The extent to which the claimant was being maintained and/or supported by the deceased;
- The need for the continuance of such maintenance and/or support; and
- The circumstances of the claimant and the Estate.
It is therefore not sufficient to leave a nominal gift for a potential beneficiary under your Will. The Court’s consideration is not based on whether you have made any provision for the beneficiary, but rather that you have made adequate provision for the beneficiary.
If you are anticipating an Estate claim following your death, you should advise your lawyer of your concerns so that all necessary steps can be undertaken in the preparation of your Will and estate planning documents. It may be appropriate to leave supporting estate planning documents setting out the circumstances under which you made your Will, and why you made provision for your beneficiaries (including, where appropriate, excluding beneficiaries).
The unfortunate reality is that there is no fail-safe method to prevent a claim against your Estate. If you have concerns about a claim against your Estate, we strongly recommend discussing your concerns with our Estate Planning team to make sure that all appropriate steps are undertaken to ensure that your Estate Planning instruments are appropriately drafted to address and possibly pre-empt a potential claim.
Our Estate Planning team can be contacted on 07 5574 3560 or via email to caitlin@nautiluslaw.com.au.
by Katrina Brown | Feb 29, 2016 | Estate Administration and Litigation, Estate Litigation, Guardianship, Powers of Attorney and Estate Planning, Succession Law, Wills
When meeting with new clients for Estate Planning matters, we often encounter some interesting myths and misconceptions about the law and processes involved with Estate Planning.
Estate Planning and administration in Queensland is governed by the Succession Act 1981. Documents drafted during estate planning can include a Will, a Power of Attorney for Finance and/or Personal/Health matters, and an Advance Health Directive (plus any other supporting documentation recommended by your lawyer).
Estate Planning can be a complex process, and the advice given to each client is individually tailored to their circumstances – the advice we give one client will often be entirely different to that given to another (as the clients may have different priorities in their Estate Plan, or the law applies to their individual circumstances in a different way).
Due to the misconception that Estate Planning is a “one size fits all” exercise, there are many myths (which often stem from tailored advice being misunderstood as general advice) which are becoming more widely known.
We are pleased to announce the launch of our “Estate Planning Myths” Series of articles on 7 March 2016, through which the lawyers of our Estate Planning team will address the truth behind some of the most common myths and misconceptions we hear.
What myths and misconceptions are you talking about?
While there are many Estate Planning myths, we will be addressing those that we most commonly hear. These include:-
- “Making a $1 gift to a person in my Will prevents them from making a claim against my Estate”
- “If I don’t make a Will, everything goes to the government”
- “What’s the point of a Will? My Estate will get eaten up by death duties anyway!”
- “I don’t have any assets, so I don’t need a Will”
- “Anyone can challenge a Will – it’s not worth the paper it’s written on”
- “I don’t need to make a Will because my spouse will automatically receive everything”
- “I made my Will years ago and nothing has changed, so I don’t need to do a new one”
- “I don’t need a Power of Attorney because my spouse can automatically act”
- “My Executor won’t get any compensation for acting as Executor”
- “My Executor has to pay for the costs of administration of my Estate”.
Have you been told something about a Will, Power of Attorney, or Estate Planning generally, that you are not sure about?
The above indicated topics are those heard most often by our lawyers – but it is not an exhaustive list of the myths that circulate.
Is there something you think we have missed and would like us to reveal the truth of? If so, please email Caitlin Bampton with your query. Alternatively, if you would prefer to submit an anonymous query of an Estate Planning myth you have heard, please click here to complete our survey, and we will address the topic in future articles.
