Estate Planning Guide

I Have a Child with a Disability

There are several options that can be incorporated in an estate plan to make sure that a child with a disability is well looked after from a financial perspective.

These include the establishment of Special Disability Trusts and the use of Testamentary Trusts to take advantage of tax concessions.

Murdoch Lawyers encourage clients are encouraged to provide a letter of wishes setting out their thoughts in relation to the needs of their child. This letter can be updated from time to time as required.

I have a child who has an addiction problem (gambling, drugs, alcohol etc) In any of these situations are of a concern, a standard will is unlikely to be of any use as the child will received the inheritance in their own name and no controls can be put into place.

It is much better to consider the establishment of a Testamentary trust in your will whereby someone can be appointed to manage the inheritance of the child independently or act as a co-trustee (like a mentor) with the child.

These types of Wills needs to be carefully drafted as there is a potential that a child could bring a claim against the estate seeking that funds be paid direct to them without the protection of a trustee or co-trustee.

I Have a Child who Suffers from an Addiction

Often parents will have concerns that if a child with some form of addiction receives a large inheritance, they will waste it or even worse, feed a habit of some nature and cause the death of a child.

Typically the parents wish to help such a child by providing a regular income (perhaps subject to conditions) and a roof over their head, but they do not want the child to have total control of the inheritance.

There are a number of options to address this situation, including establishing a TESTAMENTARY TRUST WILL where the inheritance is managed for the child by a third party (often a family member or close friend).

Income can be distributed to the child on a regular basis to make sure they are looked after financially and capital could also be used to purchase a home for them.

Such a Will needs to be carefully drafted to make sure that the child cannot bring a successful claim against the estate to receive the inheritance in their own name.

I’m Concerned my Child’s Inheritance will be Split with their Spouse if they Divorce.

This is probably the most common concern that parents raise when discussing their estate plans.

Typically there are three ways that an inheritance will be considered in a matrimonial property settlement:-

(a) It is deemed to be an asset of the marriage and therefore part of the property pool to be divided between the parties.

This occurs where the inheritance is left to the child in their name (as occurs in a standard will), or if the child becomes the sole trustee and appointor of a family trust which holds the parents’ wealth.

Whilst the Court is likely to adjust the percentage split of the property pool in the favour of the child because of the extra financial contribution, the inheritance is likely to be split between the two parties.

(b) It is deemed to be a “financial resource” of the child and as such will not form part of the property pool, but it will be taken into account in determining the percentage split of the property pool.

This will occur where the inheritance is left in accordance with an appropriately drafted TESTAMENTARY TRUST WILL and whilst the child might receive a smaller share of the property pool, the inheritance is not split.

This would be a significantly better outcome compared to (a).

(c) It is deemed not to be part of the property pool or a financial resource.

This could occur where the child has no control at all over the inheritance and whilst it the best outcome from a divorce protection point of view, it is not practical as most parents want their child to receive some benefit.

Murdoch Lawyers have developed significant expertise and strategies to offer different levels of protection from divorce to suit clients’ needs and address their concerns.

I am Concerned that My Child may become Bankrupt and as a result they will lose the Inheritance

It is common knowledge that anyone involved in business runs an increasing risk these days of being sued for some reason and as a result potentially becoming bankrupt.

If a child receives their inheritance in their own name and they become bankrupt, the inheritance will form part of their bankruptcy estate and will be lost to creditors.

If the inheritance is held in an appropriately drafted TESTAMENTARY TRUST, the inheritance should be protected from any claim by a trustee in bankruptcy.

Murdoch Lawyers have developed strategies to ensure that inheritances are protected from a child’s personal bankruptcy.

I am concerned that my Child may be Influenced by Third Parties and Waste the Inheritance

On occasions parents may be concerned that a child is in a relationship where the spouse may exert influence on the child and as a result the inheritance is wasted.

Or there could be a concern that a child will be convinced by so called “friends” to waste the money or give it away.

In these situations, it is preferable to establish a TESTAMENTARY TRUST WILL which allows the appointment of someone as a co-trustee with the child to mentor them in investment decisions and how they deal with the capital and income.

I want to ensure the Inheritance does not get Split between my Grandchildren and a Potential New Family, should my Child’s Spouse remarry?

Whilst often a parent in this situation will want to make sure that the child’s surviving spouse is financially secure, it is not unreasonable that parents ultimately want the inheritance to go to their bloodline being their grandchildren.

Murdoch Lawyers have developed appropriate documents, including a Capital Preserved TESTAMENTARY TRUST WILL to ensure that this occurs.

I want to make sure that the Inheritance is ultimately received by our Children rather than a Second Spouse claiming a share.

In some situations a surviving spouse could live for another 30 or 40 years after the death of the first spouse.

It is foreseeable that in such a situation the surviving spouse may re-partner and the new partner over time may become entitled to a share of the estate.

The dilemma is how to make sure that the surviving spouse has sufficient capital and income to life the balance of their lives, but make sure the children receive something.

One way to address this is to give something to the children when the first parent dies, however, often this is not feasible as the survivor requires use of all of the jointly owned assets to survive.

Other options range from trusting the surviving spouse will do what is agreed or completing documents and agreements to make sure the intended result occurs.

Careful and considered estate planning strategies have been developed by Murdoch Lawyers to address these concerns.

I have a Blended Family and wish to make provision for my Children from a Previous Relationship but also look after my Current Spouse

It is quite common to have to deal with blended families and there are a number of strategies that can be implemented to address this concern.

These strategies can range from:-

(1) Obtaining life insurance to pay out the children from the previous relationship so that all of the estate can be left to the surviving partner;

(2) Relying upon the surviving partner to do the “right” thing;

(3) Entering into a contract to not vary wills so that the joint intention will be carried out on the death of the second.

Whilst this may work, often the nature of assets and how they are owned will change so the desired outcome may not be achieved;

(4) Documenting the agreement so that despite what might happen to the surviving spouse, a part of the wealth will go to the children from the previous relationship.

Murdoch Lawyers have developed a number of strategies to ensure that the inheritance does ultimately go back to the first family.

I am concerned about the impact of Taxation on my Estate

With the increasing value of estates these days, it is critical that the issue of taxation is addressed at a number of levels in developing an estate plan.

For instance, life insurance proceeds held in super can be taxed at up to 32% and other superannuation benefits taxed at 17%. There are strategies that can be implemented to lessen this tax.

By establishing a TESTAMENTARY TRUST WILL, a beneficiary could save thousands of dollars each year in income tax.

Murdoch Lawyers has developed the expertise to make sure tax is kept to a minimum during the administration of an estate and ongoing for surviving family.