Estate planning is more than just a Will. It involves consideration of complex areas of law including superannuation, trusts, taxation and corporate law that need to seamlessly integrate.
A Will deals with only assets that a person holds in their own name. Types of assets that do not ordinarily form part of a deceased estate are:
- assets owned as joint tenants with another person – these automatically pass to the surviving owner;
- superannuation death benefits – these may be paid to a nominated beneficiary;
- life insurance proceeds – these automatically pass to the nominated beneficiary;
- assets held in a private company – these remain in the company after death and care must be taken to gift the shares in the company to the right person; and
- assets held in a family trust – these remain in the trust after death and care must be taken to pass control of the trust to the right person.
Binding Death Benefit Nomination
Upon the death of a member, the trustee of the superannuation fund must distribute the deceased member’s superannuation death benefit. The trustee may choose to distribute those funds to:
- one or more of the member’s dependants (e.g. spouse, children); or
- the member’s legal personal representative (i.e. executor of the estate) to distribute under the terms of the Will.
Rather than leave this decision to the trustee, the member may make a binding death benefit nomination during their lifetime. This nomination will compel the trustee to pay the funds to the beneficiary chosen by the member.
The member’s choice of beneficiary is often driven by potential tax consequences or the risk of a family provision claim (colloquially known as contesting a Will).
A person cannot make someone a director of a company by their Will. All that can be gifted by Will are any shares owned in that company. The person who inherits those shares will then have the ability to appoint a new director.
Depending on the nature of the company and its activities, documents relevant to succession planning may include:
- general powers of attorney;
- shareholders agreements;
- buy-sell agreements; and
- documents amending the company’s constitution.
For family trusts, there should be a plan for succession of the following controlling positions:
- the trustee – who makes day to day decisions for the trust;
- the guardian (if any) – who must consent to certain trustee decisions; and
- the appointor (if any) – who has the power to “hire and fire” the trustee.
The documents required will depend on the terms of the trust deed itself. It may be appropriate to:
- sign a deed of amendment and/or succession; or
- appoint a successor trustee, guardian or appointor by Will.
Enduring Powers of Attorney & Guardianship
For completeness, an estate plan should include Enduring Powers of Attorney and Guardianship. Unlike the other components of an estate plan, which plan for death, these documents are intended for use during a person’s lifetime during periods of incapacity.
An Enduring Power of Attorney appoints a person to make legal and financial decisions on your behalf.
Similarly, an Enduring Power of Guardianship appoints a person to make health and lifestyle decisions on your behalf when you can no longer make those decisions yourself.
Final Piece of the Puzzle
Estate planning should be a tailored and personal experience. It necessarily draws upon the intricacies of a person’s family dynamics, their financial circumstances and the type of legacy they want to leave behind.