Skills for Wills Part 1: Estate Planning – More than just a Will - Legalwise Seminars

Adeline Schiralli, Consulting Principal at Keypoint Law and Accredited Specialist in Wills & Estates, shares key tips to estate planning by looking at main documents that form a personal estate plain, superannuation and other important considerations. She highlights that a high level of care must be taken when preparing wills and emphasises that estate planning is more than just a will.

Gone are the days when a Will was added onto the end of a conveyance or a family law matter for no additional charge or when a Will was considered as a “loss leader”. Over the past few years at least, the practice of Wills and Estates law has become highly specialised as more and more solicitors have realised the dangers in “dabbling” in this area of law. There have a been a number of landmark cases[i] which have highlighted the high level of care that must be taken by solicitors when preparing Wills and that a solicitor not only owes a duty of care to the testator but also to third parties, including beneficiaries or intended beneficiaries.

Not only is it important for a solicitor who practices in this area to understand the practice of Wills and Estates in great detail, but it is also crucial that a solicitor understands that estate planning involves more than just a Will. This article will explore the different aspects of estate planning that must be taken into account when advising a client.

Personal Estate Planning

For any personal estate plan, it is not only important to ensure that a client’s wishes are documented in a Will in relation to their death, but also that appropriate person(s) are appointed to act on behalf of the client in the event of the client’s incapacity.

The main documents that would make up a personal estate plan are different for each client but generally include:

• A Will – this needs to be drafted with care to ensure that the client’s objectives are met. A Will needs to appoint an executor to administer the client’s estate when they pass. A Will can leave estate assets directly to a beneficiary (or a number of beneficiaries) or can direct estate assets into one or more testamentary trusts (which are either fixed, discretionary, protective or a combination of these structures). An important point to note is that a Will is only activated on the death of the Will making client and that a client can validly change their Will many times before their death (on the condition that they have the required capacity to do so). Because of this, the role of the appointed executor is only activated once the client has died and Probate has been granted. This is often not understood by clients.
• An Enduring Power of Attorney (EPOA) – this document allows the client to appoint an “attorney” (or a number of attorneys either jointly, severally or in substitution for one another) to deal with their legal and financial affairs. An EPOA can commence operation when the client chooses – generally either as soon as the appointed attorney(s) signs their acceptance to act in the document or only if a medical certificate is produced by the attorney(s) which stipulates that the client has lost capacity to manage their own affairs. If a client loses capacity and does not have an EPOA in place, no one is authorised to make decisions on their behalf and an application to the Guardianship Division of the NSW Civil and Administrative Tribunal (NCATGD) for a Financial Manager to be appointed may be required. It is important that clients are aware of the risks of not only appointing an attorney but also the risks of not appointing one.
• An Appointment of Enduring Guardian (AEG) – this document allows the client to appoint an “enduring guardian” (or a number of enduring guardians either jointly, severally or in substitution for one another) to deal with their medical, personal and lifestyle decisions. An AEG can only commence once the client is classified as a person “in need of a guardian”. Once activated and depending on the conditions and functions allowed by the appointment, an enduring guardian can decide where the client lives, what health care they receive and what kinds of personal services they can receive. An Enduring Guardian may also have the function of consenting to and/or refusing medical or dental treatment on behalf of a client and may also have the authority to access their medical and dental records, to allow them to make informed decisions regarding the client’s health or medical care. If a client loses capacity and does not have an AEG in place, no one is authorised to make decisions on their behalf and an application to the NCATGD for a Guardian to be appointed may be required. It is important that clients are aware of the risks of not only appointing an enduring guardian but also the risks of not appointing one.
• An Advanced Care Directive (ACD) – this document allows the client to document their wishes regarding end of life care. An ACD can be included in the AEG or if more specific details are required by the client, can be included in a standalone document. Some states have a form for an ACD (i.e. QLD) and some do not have a mandated form (i.e. NSW). As an ACD often deals with end of life medical treatment, it is important that the client involves their treating doctor(s) in the process of putting together their ACD, particularly if the client has very specific wishes regarding their end of life care.

Superannuation

Contrary to popular belief, superannuation is an asset that does not automatically form part of a person’s estate. In most circumstances (unless a reversionary pension is allowed or the superannuation is part of a defined benefit scheme), on a member’s death, the member’s superannuation account needs to leave the super environment to be paid to the members super beneficiary as a lump sum. A super beneficiary includes the spouse of the member (including a defacto spouse), a child of the member or the member’s estate. Depending on whether the beneficiary is considered a tax dependant or not, superannuation may pass to a beneficiary either with or without the imposition of death benefits tax. It is important to ensure that a client’s superannuation accounts are reviewed to determine how the superfund distributes the funds on the member’s death. Most superannuation funds deal with death benefits one in four main ways, including via:

• a Binding Death Benefit Nomination (BDBN) – This allows the member to nominate a beneficiary to receive their superannuation death benefit on their death. As long as the form is validly executed and approved by the Trustee of the fund, the Trustee must distribute the Superannuation to the nominated beneficiary(s). Depending on the type of fund, a BDBN can be lapsing (most public offer funds lapse after 3 years) or non-lapsing (most Self-Managed Superannuation Funds (SMSF) do not require a nomination to be updated);
• a Non-Binding Death Benefit Nomination (NBDBN) – This a similar to a BDBN but is not binding on the Trustee of the superannuation fund. Rather, it is more like a “wish list” but can be overridden by the Trustee’s discretion;
• the discretion of the Trustee – Some funds do not allow a nomination of any type and provide the Trustee of the superannuation fund with complete discretion to pay the members death benefit to the member’s super beneficiary(s) as they see fit; or
• a provision that is built into the superannuation fund’s deed – Some fund deeds provide that a member’s superannuation death benefit must be paid to a particular super beneficiary (e.g. the estate).

Other Estate Planning considerations

There are also a number of assets that do not form part of a person’s estate. They include:

• Trust assets;
• Company assets;
• Assets held as joint tenants; and
• Assets subject to any contractual arrangement (e.g. shareholder’s agreement) or pre-existing option (e.g. buy back arrangement or option to purchase).

These arrangements need to be carefully reviewed to ensure that “control” of these entities passes to the appropriate person(s) in the event of the client’s death and/or incapacity.

It is also important to advise clients in relation to whom can bring a family provision or other claim against their estate. In NSW, section 57 of the Succession Act[ii] provides a list of “eligible persons” that can bring a claim against a person’s estate. Eligible persons in NSW include:

• a person who was the client’s spouse at the time of their death;
• a person who was living in a defacto relationship with the client at the time of their death;
• any of the client’s children;
• the client’s former spouse;
• any person who wholly or partly dependant on the client and was a grandchild of the client or was a member of the client’s household, or
• any person living in a close personal relationship with the client at the time of their death.

Whilst it is almost impossible to prevent an eligible person from making a claim against a person’s estate, there are a number of ways in which a client can put in place hurdles to attempt to prevent a successful claim including by executing a section 100 statement/affidavit explaining why a particular beneficiary has been left out or provided for in a limited way, a Supreme Court approved deed of release (either as a standalone document or as part of a Binding Financial Agreement) or a Deed of Family Arrangement. None of these options are claim-proof but are quite often better than not having anything in place as they at the very least show the client’s intentions.

With the increasing number of high net worth clients and the prevalence of blended families in our society, a proper estate planning review and advice is crucial at any time a client presents to their solicitor to make or update their Will.  It is important that solicitors take the time to properly assess their client’s circumstances prior to drafting a will or estate plan for the client and that the estate plan is tailored to the client’s particular circumstances. It is crucial that solicitors are not “order takers” and provide wholistic advice to their clients and work with their client’s other professional advisors to ensure that the estate plan they are providing to their client is worth the paper it is written on and doesn’t land the solicitor in the hot water of a negligence claim.

[i] Cases include but are not limited to: Hill v Van Erp [1997] HCA 9; Fisher v Howe [2013] NSWSC 462; Howe v Fisher [2014] NSWSCA 286; Badenach v Calvert [2016] HCA 18

[ii] Succession Act 2006 (NSW); s 57

Adeline Schiralli is an accomplished estate planning and elder law solicitor with extensive experience developing comprehensive and practical estate plans that suit the individual circumstances of her clients. Prior to joining Keypoint Law as a Consulting Principal, Adeline was a Senior Associate in the Wills and Estates team of a large prominent suburban firm. Adeline is adept at advising clients on matters including the implementation of wills (particularly sophisticated testamentary trust wills), powers of attorney and enduring guardianships, superannuation death benefit nominations and properly gifting the control of entities (including private companies and/or trusts) to the appropriate person(s) in the event of death and/or incapacity. Adeline can also assist clients in relation to the administration of a deceased persons’ estate and regularly advises clients in relation to retirement village contracts and aged care agreements. Adeline is passionate about obtaining peace of mind for her clients in relation to their estate planning and elder law needs, and regularly presents seminars to other solicitors, professionals and to members of the public in the area of wills, estates and elder law. Her approach is underpinned by her commitment to achieving peace of mind for her clients in relation to their wills, estate planning and elder law needs. She has a “no-nonsense” style to advising clients in all aspects of wills, estates and elder law and her attention to detail is exemplary. Adeline takes a holistic approach to estate planning and works closely with her client’s other advisors (accountants, financial planners etc.) to best achieve her client’s objectives. You may connect with Adeline by email adeline.schiralli@keypointlaw.com.au or via LinkedIn