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Advanced Estate Planning | page 1

Advanced Estate Planning

Simple Legal Solutions

phone 02 4952 3901 www.robertslegal.com.au


Get protection for your business and personal assets for you and your loved ones.

Asset Protection Stategies & Tax Planning are crucial considerations

that too often go overlooked.

Simple legal solutions exist.


Sam Roberts

Sam is an Accredited Specialist in Commercial Litigation. As a result he is an expert in identifying business risks and asset protection solutions for business owners.

Sam also has considerable experience in Advanced Estate Planning having first developed a strong interest in the importance of educating clients about asset protection and succession planning in 2009. He has since worked closely with other Solicitors, Accountants and Financial Planners to develop a comprehensive approach to Estate Planning which is now the premises for our firm’s Advanced Estate Planning service.

Anna Roberts

Anna is a Family Law Lawyer having practiced in the Newcastle area since 2005 and currently completing a Masters of Applied Family Law. Anna also has considerable experience in relation to Deceased Estates and Contested Wills Claims.

Because of the significant powers that the Family Court has to deal with property, her wealth of knowledge about family law is instrumental to our comprehensive approach to Estate Planning.

Alana Metcalfe

Alana was admitted as a Solicitor in 2013 and has since developed a keen interest in Advanced Estate Planning. Her contributions to this Guide have been significant.

Alana regularly assists clients with both basic and advanced Estate Planning matters. She also practices in the areas of Family Law, Insolvency Law, Deceased Estates and Property Law.

Who we are


Introduction .............................................................................. 3

What is Advanced Estate Planning? ...................................... 4

Asset Protection ....................................................................... 5

Discretionary Trusts ................................................................. 6

Loans ......................................................................................... 7

Future Inheritances .................................................................. 8

Business Risk ............................................................................ 9

Business Succession Planning .............................................. 10

Wills creating Testamentary Trusts ....................................... 11

Superannuation & Self Managed Super Funds ................... 12

Family Law Property Orders.................................................. 13

Contested Wills ..................................................................... 14

When to Review your Estate Planning ................................. 15

Disclaimer

The provision of this Guide does not create a lawyer-client relationship. Roberts Legal accepts no responsibility for any actions taken or not taken on the basis of the information in this Guide.

The information contained in this Guide is intended as a guide only and in no way constitutes or substitutes legal advice.

Whether a Simple Legal Solution listed herein is appropriate for you or someone you know will depend on your personal circumstances.

You should obtain specific legal advice on any matters of interest arising from this Guide.

Nothing in this Guide constitutes or should be considered financial advice. You should consult a Financial Planner and/or Accountant should you require financial or tax advice.

Contents


Introduction

Over the last 10 years or so there has evolved an increasing responsibility for Solicitors and other advisors to ensure that clients are aware of the legal solutions available to protect their Estates (current and future assets) and give effect to their Estate Planning intentions.

Notwithstanding, many Solicitors and other advisors continue to adopt a basic approach to Estate Planning only and do not offer any service to address Advanced Estate Planning considerations and solutions.

The purpose of this Guide is to provide a brief overview of the considerations and solutions relevant to our Advanced Estate Planning service.

At the conclusion of this Guide you will also find a checklist for when to review your Estate Planning.

Our Approach

At Roberts Legal, we believe that a comprehensive and modern approach to Estate Planning is fundamental to ensuring financial well-being despite life’s inevitable contingencies.

We offer a complete Asset Protection and Wealth Management service tailored to meet the personalised goals of our clients and focused on implementing strategies and solutions for the long term.

Accountants & Financial Planners

Many aspects of Advanced Estate Planning cross over with financial and tax considerations. There is often a balancing act between legal, financial and tax implications of different Estate Planning Solutions that needs to take place before particular strategies and solutions can be implemented.

These days Advanced Estate Planning typically requires a team effort between Solicitors, Accountants and Financial Planners who are able to discuss frankly the pros and cons of different solutions in order to determine what are the best overall strategies for the particular client and their unique objectives.


What is Advanced Estate Planning?

Advanced Estate Planning is planning to:

1. Preserve your wealth during your life time,

2. Generate wealth in a flexible and tax friendly environment, and

3. Meet your loved ones’ financial needs in the event of your untimely death, illness or injury.

Estate Planning is not just about having a Will, Power of Attorney and Appointment of Enduring Guardian. Asset Protection and Tax Planning are vital to a successful Estate Plan.

We specialise in providing an Advanced Estate Planning service. Our approach requires that we get to know your personal circumstances and that of your intended beneficiaries, so that we can determine each individuals’ risk profile and recommend appropriate Estate Planning strategies and solutions.


Often there are simple solutions to complex Estate Planning problems which go unaddressed. This Guide provides a snapshot of some of the common legal solutions to the following Estate Planning considerations:

1. Asset Protection.

2. Discretionary Trusts.

3. Loans.

4. Future Inheritances.

5. Business Risk.

6. Business Succession Planning.

7. Wills creating Testamentary Trusts.

8. Superannuation and Self Managed Super Funds.

9. Family Law Property Orders.

10. Contested Wills Claims.


Asset Protection

Most people work hard to accumulate wealth, but few individuals take adequate steps to protect their wealth from unforseen events or third party claims.

Asset Protection strategies are essential for persons with high risk profiles including: business owners, professionals, property developers and investors. However, all individuals can face significant unplanned expenses and should plan to protect their assets from creditors, bankruptcy or divorce.

Generally, Asset Protection strategies are best implemented before an asset is acquired or before a business venture is commenced. Later transfers of assets and business interests can have Stamp Duty and Capital Gains Tax implications.


1. Get legal advice about asset structuring before buying a property, starting a business venture or making any significant investment.

2. Avoid owning assets in your personal name if you are an “at risk” person.

3. Use Company or Trust structures to isolate assets from risks.

4. Hold security for all Loans to ensure future repayment (see Loans).

5. Ensure you have adequate insurances.

6. Ask your loved ones to gift your future inheritance via a Will creating Testamentary Trusts (see Wills creating Testamentary Trusts).

7. Sever Joint Tenancies.

8. Transfer a half share in a property to a non-at-risk spouse or de facto partner. Stamp Duty and Capital Gains Tax exemptions are generally available.

9. Avoid giving Personal Guarantees.


Discretionary Trusts

Discretionary Trusts should be incorporated into your Estate Plan if you are:

1. An “at risk” person seeking asset protection, or

2. Looking to minimise tax.

Discretionary Trusts allow an asset to be held by one entity, the Trustee, for the benefit of a class of beneficiaries. The Trustee can distribute the income or capital of the Discretionary Trust to one (1) or more of the beneficiaries in their absolute discretion.

While the Trustee has discretion to distribute in the assets of the Discretionary Trust, the Appointer has the power to appoint the Trustee. In the event of bankruptcy a Trustee in Bankruptcy, or on the breakdown of a relationship the Family Court, may “Bust the Trust” allowing another party access to the Trust assets if you are determined to have effective control of the Trust. Careful consideration should therefore be given to a suitable Appointer to reduce the risk of the Family Court or a Trustee in Bankruptcy “busting” the Trust.


1. Use Discretionary Trusts in conjunction with Holding Companies to maximise asset protection and avoid having to receive a distribution which can’t be received tax effectively.

2. Establish a Family Discretionary Trust before an asset or business which is to be held on trust is acquired so as not to inadvertently trigger Stamp Duty and Capital Gains Tax.

3. Review Appointers and powers of appointment to minimise the risk of the Family Court or Trustee in Bankruptcy busting the Trust.

4. Ensure any Trust Deed or Declaration establishing the Discretionary Trust deals with crisis provisions for situations of Bankruptcy or relationship breakdown.

5. Use a secured loan from a Discretionary Trust as an alternative to a capital distribution (see Loans).

6. If you are acting as Appointer of a Discretionary Trust, ensure your Will nominates your successor of that power.

7. If your nominal estate assets include assets in a Discretionary Trust ensure your Will has a suitable adjustment clause, if the Trust assets are not to pass to all the beneficiaries in equal shares.


Loans

The right to repayment of a loan is an asset which forms part of your Estate. The ability to recover loans from creditors is an essential Estate Planning consideration.

Often people make loans to family, friends or related entities without properly considering how they will recover the amount owing should something go wrong. In the event of insolvency of the Borrower (ie. Bankruptcy or Liquidation) there is often no prospects of recovering payment of a loan unless the Lender has a registered security.

At law there is also a presumption that money advanced to a family member will not give rise to a loan and, therefore, any entitlement to repayment. This presumption of advancement means that the money advanced to a family member is at risk of:

1. Not being recoverable, or

2. The money being dealt with by the Family Court and divided with the ex-spouse. In the event of the family member separating from their partner, thereby not benefiting the family member in the manner intended in the long term.

Common Legal Solutions

1. Document all existing and future loans in written Loan Agreements that create security for repayment.

2. Register security for repayment of the Loan. Such securities including; Mortgages, Caveats protecting unregistered Mortgages and Security Interests under the Personal Property Securities Act.

3. Use Discretionary Trusts and Loan Agreements in lieu of gifting money to family members or related entities.


Future Inheritances

Future inheritances will become an asset of your Estate.

Assets (including cash) left to you absolutely under a Will:

1. Are available to your creditors even if you are already Bankrupt, and

2. Can be divided by the Family Court in a later family law property settlement (see Family Law Property Orders).

Basic Wills often do not ensure that you will receive the benefit intended for you.

The protection of significant future inheritance is, therefore, an important Estate Planning consideration, however, requires the co-operation of the parent or other person from whom you anticipate receiving the inheritance.


1. Ask your loved ones to bequeath your future inheritance via a Will creating one (1) or more Testamentary Trusts.

2. Implement asset protection strategies to isolate risk of liabilities or claims on your personal assets, including future inheritance (see Asset Protection).

3. Enter a Binding Financial Agreement (Pre-Nuptial Agreement) before getting married or commencing a de facto relationship (See Family Law Property Orders).


Business Risk

Businesses face inherent risks from a range of internal and external factors most of which can not be insured against. The benefits of adequately addressing risks often do not become apparent until there is a dispute or an event which leads to insolvency.

When businesses become insolvent, or face a dispute they can’t afford to fight, bankruptcy or liquidation often follow. The consequences of this can differ significantly depending on how the business owners have addressed business risks. Some business owners continue to trade through a new entity, while others face the loss of their business and personal assets (including the family home) or even bankruptcy.


1. Obtain legal advice about the laws and regulations specific to your industry to ensure compliance.

2. Obtain legal advice in relation to your business structure, utilise holding companies and trusts where appropriate to minimise tax, isolate risks and protect business and personal assets.

3. Avoid holding assets in the name of an “at risk” person associated with the business (see Asset Protection and Discretionary Trusts).

4. Have a written and signed Shareholders Agreement or Partnership Agreement if there is more than one (1) owner of a business.

5. Ensure Loan Agreements creating securities are in place for all monies advanced to or by the business (see Loans).

6. Ensure Employment Contracts are signed and contain appropriate restraints and confidentially clauses.

7. Make effective everyday business contracts, incorporating Terms & Conditions of Trade (see our website for information on our TradeSafe Contracts packages).

8. Implement and follow strict Credit Management and Debtor Management Procedures.


Business Succession Planning

Business Succession Planning relates to the planning for the sale or purchase of a co-owner’s interest in a business in the event of their death, permanent disablement, serious illness/trauma or other circumstances and funding for that sale/purchase.

A Buy/Sell Option Agreement is an agreement entered between co-owners of a business granting each other options to buy or sell their respective interests upon the occurrence of a specified option event. Buy/Sell Option Agreements can prevent disputes in relation to the rights of a co-owner to buy or sell, the valuation of the business, timing of payments and funding.

Funding Agreements are often entered into in connection with Buy/Sell Option Agreements and provide for the funding of the price for a co-owner’s interest in the business in the event that an option to buy or sell is exercised.


1. Have a Buy/Sell Option Agreement.

2. Have a Funding Agreement.

3. Trust Owned Insurance Agreement.

4. Maintain adequate Personal Insurances.


Wills Creating Testamentary Trusts

It is impossible to accurately foresee your beneficiaries’ circumstances at your date of death. A standard Will gifts your assets to your beneficiaries absolutely, leaving your estate assets available to:

1. Creditors in the event of your beneficiary’s bankruptcy, or

2. The spouse or de facto partner of your beneficiary in the event of a relationship breakdown.

A Testamentary Trust is a Trust created by a valid Will and funded by the Estate Assets. The Trust commences when the Executor finishes administering the Estate.

Wills creating Testamentary Trusts allow your Executor(s) flexibility to determine how to distribute estate assets to offer the most effective asset protection and tax minimisation.


1. Make a Will creating a Testamentary Trust containing a broad range of options, to ensure the Trust established for each beneficiary is appropriate to their circumstances at the time of your death.

2. Where suitable, appoint the ultimate beneficiary as Trustee of the Trust granting them absolute discretion.

3. Split the income of the Trust between a class of beneficiaries to minimise the overall tax paid.

4. Include minor beneficiaries to take advantage of the tax free threshold (only available on income received under a Testamentary Trust).

5. Consider an Agreement to Make Mutual Wills. To ensure the joint objectives of you and your partner are met.


Superannuation & Self Managed Super Funds

Superannuation is the compulsory, accumulation of contributions and earnings in a tax friendly environment to fund your retirement. Self Managed Superannuation Funds (“SMSFs”) allow individuals to manage the investment of their own accumulated Superannuation contributions.

Superannuation is also an effective vehicle for investment. Money in Superannuation is protected from Creditors (even in Bankruptcy) and income earned is taxed concessionally .

Funds accumulated in Superannuation can also be used to finance related commercial investments, most commonly the purchase of a commercial property used by a related business.

A Superannuation Death Benefit is the balance of a person’s Superannuation funds remaining on their death and are not automatically distributed in accordance with your Will. As money held is Superannuation and is often a substantial part of a person’s Estate, one of the biggest Estate Planning considerations is what will happen to your Superannuation on your death. This is particularly important if a SMSF owns a commercial property used by a related business.


1. Have a current Binding Death Benefit Nomination (“BDBN”) .

2. Carefully consider your intended beneficiaries’ circumstances (see Future Inheritances and Asset Protection),

3. If your intended beneficiary is a Death Benefit Dependent, such as a spouse or minor child, consider directing that the benefit be paid into a Trust exclusively for the benefit of that Beneficiary.

4. If not all of your intended beneficiaries are Death Benefit Dependents include an adjustment provision in your Will.

5. If you are about to start receiving a pension and your beneficiary is a Death Benefit Dependent consider making your pension reversionary to keep your wealth in the protected superannuation environment.

6. If you are a Trustee of a SMSF ensure you have appointed an Enduring Power of Attorney.


Family Law Property Orders

Whether or not you are married, the Family Court has broad powers under the Family Law Act to make Property Orders to alter your interest in assets in the event of a relationship breakdown.

If you are bringing substantial assets to the relationship, expect to receive substantial inheritance or generate significant wealth during the relationship proper Estate Planning is needed to, as far as possible, prevent the Family Court from adjusting your interests in property should your relationship breakdown.

The Family Court considers a range of factors in making Property Orders, not just your financial contributions.


1. Don’t accept monetary gifts from your parents (see Loans).

2. Ask your loved ones to gift your future inheritance via a Will creating Testamentary Trusts.

3. Ensure business interests are ultimately held by a Trust (see Discretionary Trusts).

4. Enter a Binding Financial Agreement (Pre-Nuptial Agreement) before getting married or commencing a de facto relationship.

5. Encourage your children to enter a Binding Financial Agreement before commencing a de facto relationship to ensure their inheritance is not diluted in the event of their separation.

6. If your child is in a relationship that you do not think will last ensure their inheritance is gifted via a Will creating Testamentary Trusts.

7. Finalise your Property Orders promptly after separation.

8. Get a divorce once Property Orders are finalised.


Contested Wills

The Supreme Court of NSW has powers under the Succession Act 2006 (NSW) to effectively rewrite a Will, altering your interest in Estate assets if a Will is contested.

A Will may be contested by an “eligible person” (eg. a spouse, former spouse or child) if they feel they have not been adequately provided for under the Will.

In NSW certain circumstances exist where assets which are not held by the deceased at their death can be included as part of the deceased’s “notional estate” and redistributed by the Court.

To determine what can be done to minimise the consequences for any beneficiary proper Estate Planning, therefore, requires an assessment of:

1. Who might contest your Will, and

2. What assets are capable of being dealt with by the Court.


1. If you intended to leave an eligible person out of your Will, prepare a Statement to be kept with your Will, setting out the reasons why an eligible person has received a particular bequest or not been included in the Will, to assist your Executor(s) to defend a Contested Wills Claim.

2. Have a potential eligible person execute a Release if provision is being made for them during your lifetime and see that the Release is approved by the Court.

3. Devolve yourself of your assets during your lifetime to limit the assets available for the Court to redistribute to an eligible person as part of your notional estate.


When to Review your Estate Planning

It is important that you keep your Estate Planning up-to-date as your circumstances change and that you are confident that nothing has been overlooked.

You should speak to an experienced Estate Planning Lawyer about the need to review your Estate Planning if:

You consider that any matters addressed in this Guide apply to you and have not previously been addressed.

You or any of your intended beneficiaries are an ‘at risk’ person.

You are about to acquire an additional asset or investment.

You are planning to start a new business or other enterprise.

You are a co-owner of an existing business, property or investment.

You are an owner of a business that you would not be prepared to walk away from.

You carry on a business as a sole trader or in partnership personally.

You wish to establish or wind up a Family Discretionary Trust.

You have made loans to, or are owed money from, a related entity or family member.

You are about to get married or start a de-facto relationship.

You have separated from your spouse or de-factor partner.

You have children to a previous relationship.

You want to ensure that your future beneficiaries are able to maximise the benefit of their inheritances and minimise tax.

Your circumstances have otherwise changed since you last reviewed your Estate Planning.

If you have any questions or would like to discuss any matters of interest arising from this Guide call and speak to one of our Estate Planning Lawyers.


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Notes


274 Brunker Road Adamstown NSW 2289

T 02 4952 3901 F 02 4952 1083

www.robertslegal.com.au

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