When talking estate planning with our clients, we often encounter scenarios where simply drafting a will on its own is not enough to deal with their affairs. This is usually in circumstances where the client has: a family trust, self-managed superannuation fund or a business.
If you fall into these categories, then your affairs may need some extra attention.
If you have a family trust, then you should know that the trust’s assets are not considered part of your estate when you pass away. The key point to cover in estate planning where a trust is involved, is to ensure that control of the trust is passed to the right person so that they can continue to manage it after you are gone.
To do this properly involves a review of the deed of the trust to ensure the correct process is followed- it will not be the same for every trust and certain steps need to be followed.
Some other estate planning issues for clients with trusts include checking the detail of the trust deed to confirm whether:
- there are appropriate dispute resolution provisions in place to cover where there are multiple trustees or appointors (the person who hires and fires the trustees) acting in the trust;
- an attorney acting under an enduring power of attorney can act for a trustee or appointor in case they lose capacity (and if so is this desirable in your estate plan); and
- the trustee has the proper powers needed to operate the trust and deal with its assets.
Upon a review, we often discover that the trust deed will need to be varied or amended to update provisions that are inadequate or simply out of date.
The process to pass control of the trust or to make a variation is often very simple and can save a whole lot of future headaches if appropriate advice is sought.
Self-managed superannuation funds (SMSF)
Similar to a family trust, your SMSF and its assets are not part of your estate when you pass away.
You also cannot generally dispose of the assets of your SMSF by your will. Clients with SMSFs need to ensure they have executed a death benefit nomination or agreement to direct the trustee of their fund where to pay their accumulated balance and any entitlements. Care needs to be taken to ensure the correct beneficiary is chose to maximise taxation advantages here.
Without such a direction the trustee often has discretion about where to pay the entitlements and this can result in unintended consequences, depending who ends up in charge of the fund.
We find the general issues in estate planning involving an SMSF include:
- a review of the deed to ensure that the provisions are compliant with the latest regulations;
- whether the correct mechanism to pass control is followed;
- if there is a corporate trustee of the SMSF, have provisions been made for the appointment of a successor director?
- whether the appropriate provisions exist to allow a death benefit nomination /agreement to be made and whether they can be made non-lapsing (so they do not expire); and
- whether the above provisions have been followed correctly in making a nomination or agreement (clients would be surprised at how often these provisions are not properly followed and invalid nominations/agreements are made).
We often come across SMSF deeds which contain outdated provisions and nominations/agreements which are not made strictly in accordance with the terms of the deed. Simple amendments can often remove future bother, ensure your SMSF balance is paid to the correct beneficiaries in the most tax effective manner and ultimately safeguard your wider estate planning strategy.
If you own or are involved in a business then there is a range of specific, commercial advice to be considered around how the business will be managed in case you fall ill, become incapacitated or pass away.
This advice will be guided by:
- the structure of the business (partnership, sole trader, Pty Ltd, etc);
- the type of business you are in;
- whether there is a business partner and whether you are related to them;
- whether you owed the business money (or the other way around);
- whether the business could survive as a going concern in your absence due to death or illness; and
- whether there are any pre-existing agreements in place (formal or informal) to guide what happens when one party can no longer operate.
The unintended consequences of not attending to such planning in advance is that the business can be unduly affected by delays caused by your absence, issues with cashflow and completing the work of the business and finally a business partner may end up in business with the surviving spouse or family of the deceased!
Documents such as a ‘buy-sell’ agreement, partnership and shareholders agreements and loan agreements can help avoid the headaches that can flow from the above issues.
Lynn & Brown Lawyers have a dedicated estate planning team with specialist commercial experience who can assist you if any of the above questions make you stop and think.
About the author: After completing a double degree Bachelor of Arts (Politics and International Relations) and a Bachelor of Law, Matthew was admitted into the Supreme Court of Western Australia in 2016.