When it comes to Wills and estate planning, there are benefits in putting a testamentary trust in place

The days of the basic three-page Will are gone, replaced with a modern estate planning Will offering beneficiaries the opportunity to hold assets in a Testamentary Trust (which can be managed by them), to ensure asset protection for your beneficiaries from creditors, relationship breakdowns and unnecessary taxes for generations to come.

Central to the modern-day Will is the variety of different Testamentary Trusts you can set up in your Will to deal with the individual needs of each of your family members, as well as increasingly complex family issues.

WHAT IS A TESTAMENTARY TRUST?
A Testamentary Trust is a discretionary trust established in your Will that only comes into effect upon your death. As the Will maker you decide on the rules and terms of the Testamentary Trust and these are included in your Will. After your death your Will becomes the Trust Deed.

The trust can hold estate assets such as investments, real estate, and cash, for the benefit of beneficiaries during their lifetime, or for a specified period. You may set up any number of trusts within the one Testamentary Trust Will, and each trust may vary in size, can be created using specified assets, a portion of your assets, or the whole of your assets, and have different conditions placed upon them.

A trust can:
• be flexible or non-flexible;
• be controlled by the beneficiary or by someone else;
• restrict the ability of any of the beneficiaries to control the activities and investments of the trust or give them complete control;
• continue for a period of up to 80 years if so required or be wound up at any earlier date if the trustee so decides;
• set out the terms; and
• separate the rules and establish more than one testamentary discretionary trust.

The client decides whether they wish to sacrifice the independence of the beneficiary to ensure that the inherited assets are protected and used sensibly for the benefit of the primary beneficiary and their family.

Testamentary Trusts were once viewed as the domain of the extremely wealthy but with the build-up of superannuation assets and the boom in house prices, many more people need to consider these types of Wills.

WHAT ARE THE KEY BENEFITS OF A TESTAMENTARY TRUST?
Testamentary Trust wills are designed to protect inherited assets while providing significant tax benefits through income splitting, and paying income to minors, and can help with the growth of inherited assets to a degree not possible with an ordinary Will.

Testamentary Trusts provide:
• Significant income tax-splitting opportunities.
• An extremely tax-effective future asset-building entity that can be used to maximise the future growth and value of inheritances.
• Flexibility and choice for your beneficiaries - it is possible for each beneficiary to retain control of the inheritance received via a testamentary trust.
• Protection of the inheritance assets against creditors.
• Protection of your assets to ensure that only your descendants receive your assets.
• Protection for your beneficiaries who are unable to manage their own assets, are in a high-risk occupation; or intellectually challenged or a risk of bankruptcy.

WHAT ARE THE TAX IMPLICATIONS FOR MINORS AS BENEFICIARIES?
If minors under the age of 18 receive income outside of a Testamentary Trust, they are taxed at penalty rates of;
• 66% on income between $417.00 and $1,307 and
• 45% thereafter

If minors receive income from a Family Trust, they are taxed at penalty rates.

If minors earn income from a Testamentary Trust established in a Will, they are taxed at the normal adult tax rates.

THREE GENERATION TESTAMENTARY TRUST
The most common Testamentary Trust these days is the three-generational Testamentary Trust.

The flexibility of a three-generational Testamentary Trust means it can cater to the individual needs of each of your beneficiaries and provide not only for your children, but also your grandchildren and great-grandchildren.

HOW ARE TESTAMENTARY TRUSTS STRUCTURED?
A Testamentary Trust has three essential elements: the trust assets, the trustee, and the beneficiary. In some cases, an appointor is also nominated.

The trustee has legal control of the trust and its assets and manages them in accordance with the Will. The trustee also has the authority to determine how trust income (such as rental income from an investment property) is invested, and which (if any) of the nominated beneficiaries receive income and capital distributions each financial year. The trustee (or multiple trustees) is often the deceased’s surviving partner or adult children. It can also be a trustee company.

The beneficiary (sometimes referred to as a ‘class of beneficiaries’) is often one or more family members including, a spouse or partner, children, grandchildren – even extended family members. A trust beneficiary can also be a company or the trustee of another trust – although this may result in taxation disadvantages. The trustee may also be a beneficiary, but not the sole beneficiary unless there is more than one trustee.

The appointor has ultimate control over the trustee, with the authority to appoint and remove the trustee from the trust at any time.

Testamentary Trusts, while largely promoted as a tax saving mechanism have many other advantages. Their inherent flexibility makes them worthy for consideration in your overall estate planning strategies.

Scammell & Co have experienced Wills and Estate Planning lawyers who can tailor your Testamentary Trust Will to achieve particular objectives for both your estate and your beneficiaries.

For further information on our Estate Planning services, please follow the link here

*This information is current at the time of publication. For accurate legal advice, please contact Scammell & Co on 08 8440 270.

How to avoid problems with Executors in the administration of deceased estates

An Executor is the person who administers your estate and ensures that your wishes are upheld after your death. Duties include the collection of the deceased’s assets, payment of outstanding debts, management of the deceased’s tax affairs and distribution of the estate to beneficiaries.

The Executor is usually appointed in your Will. If no executor has been appointed, or if your executor is unable or unwilling to act, another person such as your lawyer can step in to administer the estate. To carry out their duties the Executor will need to apply for a Grant of Probate. This is the Court’s official recognition that the Will is legally valid, and the applicant is authorised to deal with the estate.

It may be beneficial to appoint joint executors (unless your Will is very simple) to share the responsibilities of administering your estate. Also, if one of the appointed persons refuses to accept the responsibility or is no longer alive, the other Executor named in the Will is already in place to carry out their duties. When Executors act jointly, it also minimises the risk of an individual Executor making decisions in their own interest. Nevertheless, a potential problem of having joint Executors is in situations where they do not agree on what is best for the estate. If this is the case the estate can endure delays and incur unnecessary legal fees. So be sure to appoint joint Executors that are likely to cooperate with each other.

The Executor is responsible to preserve, protect and administer the estate diligently. Therefore, if the estate suffers a loss resulting from deliberate or negligent actions on the part of the Executor, this will amount to a breach. If this happens, an action can be taken against them in the Supreme Court and if found liable, the Executor must make good, any loss to the estate.

Types of breaches include:

Given the important considerations when appointing the Executor, it is advisable to speak to a Scammell & Co Wills and Estates lawyer, to minimise potential problems, delays and added expense in the administration of your estate.

For further information about our Deceased Estate Administration services please follow the link here

*This information is current at the time of publication. For accurate legal advice, please contact Scammell & Co on 08 8440 270.

Common questions about Wills and other estate planning documents answered

Wills are legal documents that name the people you want to receive property, possessions and assets that you own at the date of your death – these people are known as your beneficiaries. Wills are the only way you can ensure your assets are distributed in the way you intended after you pass away. Therefore, Wills are essential if you are concerned about who will receive your assets and it is particularly important if you have a family, or other dependants.

What are valid Wills?

Wills are only valid and accepted by the court if they are in writing and signed and dated (preferably every page) by the testator (the person making the Will) in the presence of two independent witnesses (aged 18 years or over). The witnesses must also be named on the Will and co-sign and date the Will in the presence of each other and the testator. To avoid a conflict of interest, a witness should not be a beneficiary to the Will. Only then is a Will put into full effect by a grant of probate. If a Will is not drafted and duly executed properly it may be set aside and your property distributed according to the rules of intestacy (the condition of your estate if you do not have a valid Will), which may conflict with your wishes.

Another important consideration for anyone wanting a Will is that it should be drafted and signed by someone of sound mind, memory and understanding – without any undue influence from other people.

Once a Wills is complete it should not be added to, deleted from, pinned, stapled or even have a paper clip attached. It is highly recommended that an experienced Wills and Estate Planning lawyer be consulted if an intended change is to be made to a Will because even the simplest change must be correctly done or it may have adverse results – potentially invalidating the Will.

Should I update my existing Will?

A Will should reflect your current wishes and circumstances. As a guide you should review your Will every few years. Changes to your circumstances can include events such as marriage, separation or divorce; you may have become a parent or grandparent; bought or sold assets; your financial situation may have changed significantly; you may have retired; or either a beneficiary or your appointed Executor may have died.

What is Probate & how does it work?

Probate is the legal process to validate the Wills of deceased persons to fulfil their wishes that are to be carried out by the Executor named in the Will. If awarded, a Grant of Probate is the court’s official recognition of the validity of a Will and who the Executor of Will is.

Probate may be required when a person has passed away and leaves behind certain kinds of assets. For example, if there is a large sum of money in a bank account and the deceased was the sole account holder, a Grant of Probate may be requested by the financial institution in order for the Executor to access the account.

What are the duties of the Executor?

An Executor is someone nominated in a person’s Will whose responsibility it is to administer the deceased’s estate. Many testators elect a friend or close relative to be the Executor of their Will. This nomination is typically regarded as a mark of respect and reflects a high degree of trust which the testator has in their abilities. However, the Executor’s duties are onerous and can be very time-consuming and often requires professional advice and assistance. If you have been appointed an Executor, you should seek-out the efficient services of a lawyer experienced in the administration of deceased estates.

What is a Power of Attorney?

A Power of Attorney is an important document that allows you to appoint one or more people to make decisions concerning your legal and financial matters while you are alive. A Power of Attorney ceases upon your death, at which time your Will comes into effect.

There are two types of Power of Attorney to consider:

A General Power of Attorney is an authority given to someone to deal with your financial and legal affairs on your behalf from the time you execute the document. For example, it allows you to appoint someone to sell your house while you may be overseas, invest your money or operate your bank accounts.

An Enduring Power of Attorney operates when you become legally incapacitated. For example, if you have lost mental capacity due to a stroke, dementia or brain injury. Both can be combined into a General and Enduring Power of Attorney should you wish to appoint someone now to act on your behalf and continue to act should you lose mental capacity.

While a Power of Attorney deals with your financial and legal issues, it does not cover personal aspects of your life such as health care, accommodation or lifestyle issues. These are covered by an Advance Care Directive.

What is an Advance Care Directive?

Advance Care Directives have replaced Enduring Powers of Guardianship, Medical Powers of Attorney and Anticipatory Directions. While your Enduring Power of Guardianship may still be valid, an Advance Care Directive allows you to set out in detail your wishes regarding future healthcare and lifestyle decisions, such as preferred living arrangements. It also enables you to set out legally binding refusals of healthcare.

An Advance Care Directive enables you to appoint someone (often your loved one) as your Substitute Decision Maker to make these decisions on your behalf when you are unable to make them yourself. Therefore, being able to make legally binding decisions now regarding your healthcare enables you to provide instructions for your loved ones to follow in what often is a traumatic and emotional time for them.

You may for example, include in your Advance Care Directive, to not be kept alive on life support or to be resuscitated in certain circumstances. Should this occur, these directions are then followed through by your Substitute Decision Maker, giving both yourself and them peace of mind.  It may also reduce the possibility of conflict between family members as you have appointed a particular person to carry out your wishes.

Scammell & Co is one of South Australia’s leading providers of Wills & Estates services. We have established an enviable reputation for quality and thoroughness. No matter how simple or complex your estate planning needs are, our lawyers have the expertise to provide customised Wills and Estate Planning documents. Call our team today on (08) 8447 4466 or contact us via the enquiry form to discuss how we can assist you.

*This information is current at the time of publication. For accurate legal advice, please contact Scammell & Co on 08 8440 270.

Obtaining a Grant of Probate for the administration of a deceased estate explained

When a loved one dies their estate needs to be attended to. Locating the deceased person’s Will and obtaining a Grant of Probate is the first step in this process. The appointed executor of the Will is required to make an application in the Supreme Court for the Grant. A Grant of Probate is a certificate from the Court verifying that the deceased left a valid Will and that the Executor is entitled to administer the estate.

Generally, a Grant of Probate application includes:

The original Will is lodged at the Court where it remains permanently.

Not every estate will require a Grant of Probate before being able to be administered. For example, estates with low value assets can usually be dealt with informally. A Grant is also not required in instances where all assets are held by the deceased jointly with another person(s) who has survived.  However, a formal Grant is required in instances where a third party such as Land Services SA, nursing homes, banks and company share registries stipulate the need for a Grant to release an asset. A Grant may also need to be obtained in instances where the estate could be contested by an eligible applicant under the Inheritance (Family Provision) Act 1972.

The time it takes to obtain a Grant depends on the complexity of the estate. For example, it can take several months to identify all the assets and liabilities. Once an application has been filed with the Court it can take between one to two months (longer if the court is busy) for the court to review it and issue the Grant. The speed of this process also depends on whether or not the court requires further information from the executor.

Making an application for a Grant is often a complex and onerous process. Moreover, it requires an understanding of the technical aspects of the law and an appreciation of court procedures. A Scammell & Co. solicitor has the skills and experience to apply for a Grant and administer a deceased estate on behalf of executors.

More information on Wills and Deceased Estate Administration can be found here.

*This information is current at the time of publication. For accurate legal advice, please contact Scammell & Co on 08 8440 270.