Week 9 Death and relationship breakdown

Estate Planning: preserving and enhancing value of estate avoidance of unintended and adverse outcomes Wills and Estates Testamentary trusts Powers of Attorney Pre-nuptial agreements Family Law Act and Superannuation 1

Implications for Investments

investments and death or separation ownership - joint tenants or tenants in common debts and death or relationship breakdown Inability to handle ones financial affairs Other considerations: Non estate assets: trusts, superannuation

Wills and Estates

A will is a major source of estate planning Effective on the death of the testator If no will, then deceased dies intestate, and statutory rules of intestacy determine how estate is distributed Partial intestacy if there is no effective residuary clause

Wills (cont)
Wills Act 1997 (Vic) - sets out formal requirements: must be in writing, signed by the testator two or more witnesses and must attest and sign in presence of testator Court can admit to probate a defective will even with informal alterations

Wills (cont)
Marriage revokes a will unless made in contemplation of marriage Divorce revokes a will in Victoria ( 1997), in terms of a disposition to a divorced spouse, or powers of appointment , Wills Act, s 14. Divorce revokes the spouse as an executor or trustee unless children of the marriage Since 1998, beneficiary can witness a will read Hill v van Erp 1997 for a retrospective
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Testamentary Trust
A discretionary or fixed trust made within a will (C/F intervivos trust) the estate assets may include proceeds from life insurance policy and superannuation death benefits or proceeds protects the assets from problem children, solvency issues, litigation Taxation benefits - income tax and capital gains tax (CGT) benefits
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Executors
Executors are legal personal representatives named in the will -may also be appointed trustee- note the grant of probate If no will, or executors unable or unwilling to act then an Administrator appointed when Letters of Administration applied for Fiduciary duty to act in the interests of the estate and beneficiaries Specific duties take control of assets of estate, pay debts, funeral expenses, distribute or hold remainder in accordance with testators instructions in the will
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Contesting a Will
Application to the Supreme Court of Victoria Challenged on the grounds of incorrect execution; testator lacked testamentary capacity; undue influence; or inadequate provision for proper maintenance of dependant - Testators Family Maintenance Note: indicators of testamentary capacity: understanding nature and effect of will; understanding the nature, extent and value of the assets; understanding of potential claimants; mental and other medical conditions.
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Family provisions
Administration and Probate Act 1958 Pt 1V TFM claims are made against a deceased estate when people consider they have been given inadequate consideration or have not received anything from the will in circumstances where they believe that the testator had an obligation to provide for them. The Supreme Court can order that provision be made from that estate for that claimant TFM extends to former spouse, same sex partner Children are equal even if ex-nuptial as long as paternity is proven prior to death of parent
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Family provisions
Power of the Court to make maintenance order 91. Power of the Court to make maintenance order (1) Despite anything in this Act to the contrary, the Court may order that provision be made out of the estate of a deceased person for the proper maintenance and support of a person for whom the deceased had responsibility to make provision. (3) The Court must not make an order under sub-section (1) in favour of a person unless the Court is of the opinion that the distribution of the estate of the deceased person effected by(a) his or her will (if any); or (b) the operation of the provisions of Part I, Division 6; or (c) both the will and the operation of the provisions- does not make adequate provision for the proper maintenance and support of the person.
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Intestacy and administrators

if no will, invalid will then intestacy if no residuary clause then partial intestacy If no will then an administrator will be appointed by the court to administer the deceaseds estate The administrator has similar functions to that of the executor appointed under a will however the distinction is in the distribution of the estate The deceased estate will be distributed according to the rules of intestacy as set out in the Administration and probate Act 1958
Note :grant of letters of administration
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Intestacy (cont)
Distribution according to statutory formula If only a spouse then whole of the estate If spouse and children, then personal chattels and $100,000 and one third of the balance Children the balance of the two thirds in equal shares If no spouse or children, then parents, siblings etc. Bona vacantia to Crown Note: concept of domestic partner discussed in text and effective from 2001 12

Donor authorises another to act on the donors behalf Only need to be registered in some States or some transactions 3 types: General Power of Attorney - terminates when donor becomes mentally or physically incapable Enduring Power of Attorney - does not terminate on donor becoming physically or mentally incapable ( Enduring( Medical Treatment) Act Vic Enduring Power of Attorney( medical) Note: Donor must have capacity, understand the nature of the document P o A must be in an approved form , witnessed*. 13 Relevant legislation Instruments Act (Vic)

Power of Attorney

Power of Attorney (cont)

Joint/ joint and several attorneys Protection for person acting on a power of attorney certified copy or search register Revocation by way of prescribed form, or on death of donor. All copies should be collected once revoked

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Enduring Power of Attorney

Serious consequences for the donor therefore specific provisions relating to its creation must be in the approved form and signed in the presence of a Legal Practitioner and a witness* Two witness - must be over 18, not the attorney and only one a relation of the donor Witnesses must sign a certificate refering to voluntary signing and capacity of donor Attorney(s) must sign form that indicates acceptance of the enduring power, this is usually attached to the enduring power of attorney Instruments ( Enduring power of Attorney) Act 2003 15

Pre-nuptial Agreements
From 27 December 2000, Family Law Act recognises such agreements made in contemplation of marriage or during the marriage Must be in writing, signed by both parties and the parties must have independent legal advice Agreement must deal with maintenance and division of property If agreement complies with pt V111A then generally binding on the parties and the Family Court
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Pre-nuptial agreements (cont)

Agreement may be terminated by a termination agreement but independent legal advice must be obtained Court may set aside an agreement if : fraud, conduct of one of the parties unconscionable, agreement is void, voidable or unenforceable; circumstances have changed such as children and their welfare; or superannuation is unsplittable
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Pre-nuptial agreements FAMILY LAW ACT

When financial agreements are binding (1) A financial agreement is binding on the parties to the agreement if, and only if: (a) the agreement is signed by both parties; and (b) the agreement contains, in relation to each party to the agreement, a statement to the effect that the party to whom the statement relates has been provided, before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters: (i) the effect of the agreement on the rights of that party; (ii) the advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement; and (c) the annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided; and (d) the agreement has not been terminated and has not been set aside by a court; and (e) after the agreement is signed, the original agreement is given to one of the parties and a copy is given to the other.
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1975 - SECT 90G

Pre-nuptial agreements FAMILY LAW ACT

Circumstances in which court may set aside a financial agreement or termination agreement (1) A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that: (a) the agreement was obtained by fraud (including non-disclosure of a material matter); or (aa) either party to the agreement entered into the agreement: (i) for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or (ii) with reckless disregard of the interests of a creditor or creditors of the party; or (b) the agreement is void, voidable or unenforceable; or (c) in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; or (d) since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside; or
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1975 - SECT 90K

Family Law Act - Superannuation

29 December 2002, superannuation now can be divided presumption of equal share Family Court can deal with superannuation in three ways: A splitting order or agreement Flagging order or agreement the trustee advises the court or parties when the fund will vest the interest in the member and it can then be split An order offsetting the superannuation against other assets Part VIIIA may include an agreement as to split of superannuation,
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Superannuation (cont)
Trustee must provide information on the super contributions if an application made in the prescribed way, s 90MZB The order of the Family Court binds the trustee

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Superannuation (cont) FAMILY LAW ACT

1975 - SECT 90MA

The object of this Part is to allow certain payments (splittable payments) in respect of a superannuation interest to be allocated between the parties to a marriage, either by agreement or by court order.

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Superannuation - SECT 90MH

(1) A financial agreement under Part VIIIA may include an agreement that deals with superannuation interests of either or both of the parties to the agreement as if those interests were property. It does not matter whether or not the superannuation interests are in existence at the time the agreement is made. (2) The part of the financial agreement that deals with superannuation interests is a superannuation agreement for the purposes of this Part. (3) A superannuation agreement has effect only in accordance with this Part. In particular, it cannot be enforced under Part VIIIA. ..
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FAMILY LAW ACT 1975 - SECT 90MB

This Part overrides other laws, trust deeds etc. (1) Subject to subsection (3), this Part has effect despite anything to the contrary in any of the following instruments (whether made before or after the commencement of this Part): (a) any other law of the Commonwealth; (b) any law of a State or Territory; (c) anything in a trust deed or other instrument. (2) Without limiting subsection (1), nothing done in compliance with this Part by the trustee of an eligible superannuation plan is to be treated as resulting in a contravention of a law or instrument referred to in subsection (1).
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