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Estate Alert Newsletter September 2006

Author: Cropper Parkhill

The Value of Planning

The recent deaths of Steve Irwin and Peter Brock have shocked many of us. They were heroes, larger than life. If they could be caught out so unexpectedly, what about us? From our point of view, such highly publicised personal disasters serve to strengthen our conviction that estate planning is essential for all of us and is not something which can be safely put off.

We unfortunately see too often the results of less public personal disasters. Kevin was a healthy and mature man who was setting out with vigour on a new stage of life. He had remarried a couple of years before and had been enjoying retired life for six months. On a whim, he and a friend took off on a road trip.

For the past few months, Kevin had been talking on and off with his solicitor about updating his will, but had never got around to making an appointment. His solicitor had told him that his remarriage had revoked his previous will which was in favour of his adult children. Kevin had intended to make a new will balancing his need to provide for his new wife with his desire to provide an inheritance for his children. But he thought he had plenty of time to think about it.

Unfortunately, he and his friend were killed in a head-on collision during their road trip. Because of his remarriage Kevin dies without a valid will. Instead the law of intestacy put in place what is in effect a will written by the Government. This divided his estate between his wife and his children in a way which he may well not have chosen himself.

The result was upsetting both to his new wife and his children, forcing a division of the estate which nobody felt suited their needs. A properly crafted will may have more successfully met their needs and minimised anxiety and conflict.

Passing Control: A Trustee’s Choice

You are trustee of a family trust or superannuation fund. You are concerned about what would happen if you become incapable of administering it. What should you do? The first thing you should do is consult one of our experienced estate and trust solicitors. Traps for the inexperienced or unprepared include:

• assuming that your attorney (appointed by you under a power of attorney) can step into your shoes as trustee: unfortunately they cannot;
• failing to check the terms of the trust deed (or superannuation deed) to see what mechanisms it puts in place (if any) in those circumstances; and if necessary to amend the deed to put in place an appropriate mechanism;
• overlooking the fact that if a company operated by you, rather than you yourself, is trustee then it is the constitution of the company (as well as the trust or superannuation deed) which should be investigated and, if necessary, amended.

The same considerations apply if somebody else is trustee of a trust which you are beneficiary.

There is no substitute for planning well in advance. Otherwise, once the trustee becomes unable to pass control, the only remedy may be a costly application to the Court. A well crafted trustee succession plan provides peace of mind both to the trustee and to the beneficiaries of the trust.

Making Your Gift to a Charity Count

Leaving a gift to a charity in your will may seem the simplest of things. If you want your gift to count however, it is important that it is properly researched and accurately constructed.

Unfortunately, loosely worded gifts to charities too often create problems, costs and delays after the will maker has died. Some questions which should be considered in ensuring that your gift will achieve your goals are:

1. What is the correct entity to receive the gift?
   (a) Does the hospital, school, church or similar institution you have chosen have a foundation or trust which has been set up to receive and manage bequests? For instance, if you wish to support a particular school is it best to leave your bequest to an ex-student association, to the school building fund or to a foundation or trust which the school may have established?
   (b) Several major charities operate through separate State bodies, each of which is a separate legal entity, although all use a very similar name. Unless the will is sufficiently accurate, unnecessary legal costs can be incurred in determining which of the State bodies will benefit.
2. Is the gift appropriate to this organisation?
   (a) Will the organisation be able to utilise the property or specific asset you wish to leave to it in the way which you envisage?
   (b) Is the size of the gift appropriate to the organisation? For instance, would it be appropriate to leave a bequest of a million dollars to an ex-students association which is structured and administered to handle only small amounts of money?
3. Are the specific conditions and directions which you attach to the gift appropriate?
   (a) Do they fit the organisation’s current and planned activities and goals? Will they impose unnecessary management and compliance burdens upon the organisation?
4. What are the taxation implications?
   (a) Might a tax liability be triggered by the specific gift you propose? Is there a more tax-effective way of making the gift?
   (b) Are you able to make some part of the gift to the charity during your lifetime, thereby enjoying a tax deduction (which is not available to a gift through a will), and the satisfaction of making the gift personally?
5. Will your gift fail completely if the charity named in your will changes before you die? Does your will cover this contingency?

Careful consideration of these issues by your legal adviser can ensure that your gift does count. In the case of a substantial or very specific gift, discussions with the charity before finalising the will can ensure that the first three questions are properly answered. If you prefer to remain anonymous, your legal adviser can discuss these matters with the charity on your behalf.

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