The advantages of a beneficiary controlled testamentary trust Will

To provide your Primary Beneficiaries with the ability to take their inheritance in whichever way they choose, you might consider incorporating a Beneficiary Controlled Testamentary Trust (BCTT) into your Will. That way, after you die, a Primary Beneficiary can instruct the estate Executor to pay some (or all) of their inheritance, to any one or more of the following:

• themself absolutely;
• a Testamentary Trust that is controlled by them;
• a Testamentary Trust that is not controlled by them;
• any of their children or grandchildren instead of themselves; or
• another trust which they (or their descendants) are beneficiaries of (or control).

The terms set out in the Will give Primary Beneficiaries flexibility and options, including the ability to:

• control the activities and investments of their own trust if they wish;
• minimise tax, and, use the benefit of the concessional tax rates that apply to minors;
• retain their inheritance for their descendants for up to 80 years (or longer in States where there is no rule against perpetuity) or wind the trust up earlier;
• appoint another person or company to be the Trustee of their trust;
• appoint someone other than themselves or a company, to have the power to remove a Trustee and appoint a new Trustee of their trust;
• protect their inheritance from being lost through bankruptcy;
• protect their inheritance in the trust from having an inheritance claim lodged after their death;
• run more than one trust. For example, if a Primary Beneficiary has more than one child, they can run parallel trusts and nominate:
a). which assets go into the trust;
b). who the income beneficiaries will be from those you have nominated in the terms of the trust;
c). who the capital beneficiaries will be from those named in the terms of the trust;
d). who will be the Trustee of each trust;
e). restrict the terms of the original trust or any parallel trusts (however, they can never expand on the terms of the trust set out in the will);
f). specify which of their descendants will have control of the trust (and any parallel trusts), after the death of the Primary Beneficiary; and
g). create a protective trust for any descendants who cannot manage their own affairs.

During the continuance of their trust, the Primary Beneficiary has the power to:

• take some assets out of their trust and keep the remainder in the trust;
• pay assets and income to themself or any other person named as a potential beneficiary of their trust; or
• take all the assets out of their trust and wind up the trust; and
• create separate testamentary trusts.

If the Primary Beneficiary leaves their inheritance in their own trust, then upon their death the assets in their trust do not form part of their estate. Their chosen descendants then inherit the trust and take control of it.

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 Scammell & Co's Wills and 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.

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.

Dying intestate can cause headache and heartache for your grieving loved ones.

High-profile legal proceedings currently before the Supreme Court, demonstrates how important it is to have a valid Will in place.

The matter involves millions of dollars in assets which belonged to businessman Hongtao Liu. Mr Liu died without a Will. This has created conflict between his wife Ms Xianting Kong and his mother Ms Junying Yan, as each party tries to assert control over his $50m estate.

In South Australia, if someone dies without a valid Will, he or she is said to have died “intestate”. In this instance, the Administration and Probate Act 1919 (SA) (“The Act”) sets out the rules for distributing assets. This may conflict with the deceased’s wishes.

The above example has added complexity as the court determines where Mr Liu was “domiciled” - or intended to live “indefinitely”. The deceased had moved to Australia in 2012 with his wife and their children. They bought property in Adelaide and in 2016, became Australian citizens.

Under Chinese law Mr Liu ceased to be a citizen of the People’s Republic of China, and consequently relinquished the right to reside there. Ms Kong’s lawyer argues that this demonstrates the deceased’s clear intent to reside permanently in Australia. If the court agrees, then the estate will be distributed in accordance with the laws of intestacy in South Australia, which stipulate that the wife is entitled to the following:

The remainder of the estate is divided equally between the deceased’s children.

Counsel for Ms Yan on the other hand argue that at some point in the future he intended to return to China. In which case the court would need to determine in accordance with the Chinese law of succession which could see his mother inherit his estate.

Whilst this case involves a large pool of international assets, a more modest intestate estate can still cause disputes. In this instance The Act will dictate the distribution of assets taking into consideration any previous husbands or wives (if not formerly divorced); the nature and extent of any domestic partner’s relationship with the deceased; the size of the estate; whether there are any surviving children or grandchildren; and whether assets are held jointly or solely.

To ensure your wishes are carried out and to reduce the risk of someone contesting your Will, it is important to receive accurate and independent legal advice.

For information on Scammell & Co.'s comprehensive Wills and Estate Planning services click here.

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