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|Medical POAs, Guardianships, Directives & Medical Treatment Decision Maker – lifestyle & healthcare for each State of Australia||$88|
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|Estate Planning Package – 3-Generation Testamentary Trust Wills, Enduring and Medical POA|
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|Contractual Will Agreement – for 2nd marriages||$375|
|Spouse Loan Agreement||$285|
|Loans to Children – override with the Family and Bankruptcy Courts||$285|
|Loans to Parents||$285|
|Forgive a Debt Agreement – also gets rid of Family Trust’s UPEs||$440|
|Deed of Gift||$155|
We were the first lawyers in Australia to prepare Testamentary Trust wills. This was in May 1994. We stopped preparing them in 1997 when we invented the 3-Generation Testamentary Trust. These are the advantages:
For example, you die leaving everything equally to your three children. The first child sets up one 3-Generation Testamentary Trust for herself. The second child sets up none – just takes the money (that is not tax effective but it is their decision). The third child sets up five 3-Generation Testamentary Trusts. Whey did the third child set up five trusts? You would need to ask them that question. Perhaps there were high-risk business assets and their accountant wanted to quarantine them. Perhaps they had a succession plan for their own children. Perhaps some of their inheritance is going to be invested overseas.
In contrast, the Testamentary Trust is mandatory. There is one trust per beneficiary. Each beneficiary must set up the trust. That is not flexible.
It is all about flexibility. As tax and superannuation lawyers we believe the art in preparing Wills comes down to one word: flexibility. You don’t know:
When you build the Wills and POAs you are given advice on where to store your legal documents. You generally store them at home or in the bank, or with the executors (for a Will) or attorney for a POA.
You don’t need to destroy old Wills. You don’t need to tell anyone you made new Wills. It is a private and personal matter. You can if you wish, contact the old lawyers and ask them to destroy the old Wills. The Public Trustee often get upset when you tell them you made new Wills. They stamp their feet and demand that you send them the original Will or at least a copy. Most people tend to ignore the Public Trustee and State Trustee in Victoria’s demands – which is good advice.
If your family home, superannuation, shares and life insurance are over $1m then you should build 3-Generation Testamentary Trust Wills. However, if you can afford it you should always build 3-Generation Testamentary Trust Wills. They 1. reduce the 30% tax on your Superannuation 2. contain a Divorce Protection Trust in case your children, grandchildren or beneficiaries ever get divorced, and 3. generally save tax for up to 80 years from the date of your death.
Sorry, but that is not possible. You can only have one original signed Will. You cannot have two signed Wills. To labour the point: if you sign a Will now, and in 2 minutes time sign another Will then the second signed Will is the only Will in existence. When you sign a Will it automatically renders all older Wills null and void. In contrast, you can have many signed original POAs.
Q: How do I get certified copies of POA’s to store with the POA’s so they have immediate access to the power in the event of an emergency? Is this just getting photocopies of the original document and getting a police officer to certify each page?
A: Certified copies are usually not accepted by a bank. They are never accepted by the local titles office. In the covering letter that you get with each POA, it suggests that you print out two copies of each POA. But you can print out and sign more if you wish. If you want 5 copies of each POA then print out 5 copies and sign all of them. (As you see from above, you can only have one Will, but you can have many POAs.)
Your financial planner and accountant consider your assets and how they are owned. However, this is of little interest in the building of the Will. For example, if you are leaving ‘everything’ to your spouse and then everything to your children once both dead then what assets you own are not relevant. ‘Everything’ is going to your spouse. Also, as you don’t know the time of your death you do not know what assets you own at death.
I assume that you have young children that travel with you. The car could roll over and you and your spouse, together with your children could all die together. When you have young children select ‘yes’ to the Disaster Clause question. Read the hints on this topic as you build the Will.
Normally, you would, in the Disaster Clause, leave 50% of your assets to your side of the family. And the other 50% to your spouse’s side of the family. For example:
As with most Australian Wills, there is a ‘blood giving clause’ in all Legal Consolidated Wills. (The Latin is ‘per stirpes‘ – down the bloodline.) This is where, if a person dies before you then what they would have got goes to their children. So, for example, if your child has died before you and they themselves have children then what your child would have got goes to their children. For example:
Dad and Mum die. They leave everything to their two children: Mary and John. Sadly Mary died many years ago leaving behind Ross and Ken (your grandchildren). What Mary would have got now goes, in your Will, to your grandchildren Ross and Ken.
(Obviously, if Mary died never having had children, then her brother, John, would inherit everything.)
Yes, all our documents have a sample that you can see before you start building the document.
Yes, all out documents have a checklist which you can download and print.
You may also consider:
Plus when you have a Family Trust:
Plus when you have a Self-Managed Superannuation Fund:
Yes, there are two training courses (which are currently free) you can complete online:
Yes, for free financial planners, dealer groups and accounting houses can build their own Estate Planning Standard Policy here. It sets out best practice when your staff build Wills and Estate Planning documents on our law firm’s website. It also has marketing information you may wish to use.
Sadly, when the Will only contains a standard Testamentary Trust, the beneficiary is forced to set up a Testamentary Trust. This is when the Will maker dies. However, this is not the case with a 3-Generation Testamentary Trust. With a 3-Generation Testamentary Trust Will, each beneficiary can set up one or more Testamentary Trusts – or none.
Say the beneficiary is getting the dead person’s family home. The beneficiary is at liberty to just transfer the home directly into their name. This is without the need to set up the testamentary trust.
The Primary Beneficiary controls the trust for their percentage of your estate. To begin with the trustee is automatically that Beneficiary. Of course, that Beneficiary can change the Trustee as that Beneficiary sees fit.
E.g. You have 4 children. They are getting 25% each after you and your spouse die. One of the children is called Beth. Upon your death, Beth is the trustee of her testamentary Trust which has a 25% interest in the trust. There is a change to the law 20 years after you die, and there are now tax incentives in making a company the trustee. Accordingly, Beth changes the trustee to a company to save tax. Thirty years later Australian tax laws change again and there are tax advances in having Beth’s children the trustee. Beth, therefore, changes the trustee from her company to her children.
Only after you die are your beneficiaries at liberty to activate their 3-Generation Testamentary Trusts which you put in your Will all those years ago. There is no cost for them to set them up. However, your beneficiaries instruct their accountant to do yearly trust tax returns. For example, the accounting fees for my now deceased father, for the yearly tax returns on his Testamentary Trust, is $550 per year. That is what the accountant charges.
There is no cost to set up the Testamentary Trusts when you die – they are already in your 3-Generation Testamentary Trust Will. They sit dormant in your Will. When you die only then do your beneficiaries consider activating the Testamentary Trusts in your Will. That is the decision of each beneficiary. Each beneficiary independently sets up their Testamentary Trust(s) without regard to what the other beneficiaries are doing. For example, if you have 3 children then after you and your spouse die the 3 children get a third each. One child may set up 4 Testamentary Trusts for their third. The second child may activate just one Testamentary Trust. The third child activates no testamentary Trust – that child just takes the money (which would be very sad because the 3-Generation are natural tax havens.)
There is no added expense in getting Probate. Your executors can usually do their Probate online for free. This is on the Probate Office’s website.
However, there is an ongoing yearly expense in maintaining testamentary trusts. This the fee that your accountant charges to do the trust tax return each year. However, the savings in tax is usually worth this accounting cost. They operate for up to 80 years from the date of the Will maker’s death. But a trust can be wound up in any year if it is no longer required.
Mum and Dad only have one 12-year-old child. Their backup Executors are the child, an uncle and an aunt. The child is probably in their 60s when Mum and Dad die. In that instance, the uncle and aunt are likely to renounce their positions as executors (they may be dead themselves). But what happens if mum and dad both die today? In that sad situation, the only Executors are the uncle and aunt. The child cannot be an executor because the child has not yet turned 18.
In a Will, the ‘executor’ and ‘trustee’ are the same thing. The executor/trustee carries out your wishes in your Will. They administer your estate. They set up the appropriate trusts. They lodge tax returns.
However, a guardian is someone that looks after your under 16-year-old children. The executor gives the guardian money to look after your young children. They can be the same persons. You don’t state in the Will how much money. This is because there is a Maintenance Trust. It provides the Executor with the ability to release the correct monies for expenses that are considered to be in the child’s best interest. It is inappropriate for the Will maker to add an extra layer to this and set amounts to be paid to the child. This ‘ruling from the grave’ is not correct and is too rigid.
Q: My husband and I have appointed my father-in-law as executor. He is nearing his 70’s. For the longevity of our Wills, can we nominate two executors, or change executors? We didn’t appoint our unborn children or our 5 and 8-year-old.
A: You should go back and read the hints on this. As Back-up Executors, you should have appointed your unborn children, and the 5 and 8-year-old. On average your children are in their 60s when you both die. In the unlikely event, you die in the next few years, then you also put in a few additional people – this is in addition to the unborn and current children. This may be your father-in-law, and a few other people, such as your brothers and sisters. When you die, and your children are old enough these people can renounce and let your children do the job of being executors.
You can update your Wills and POAs for free. As often as you wish. But you should assume you can never update your Will again and think ahead.
You are better to start building the Wills. You need to embark on that journey. Read the hints and watch the training videos it answers all of these questions. But, to answer this question, of course, money can be used to protect your children. We are working on a matter at the moment where the Executors and Guardians have decided to put an aunt in the family home until the children all finish high school. But start building the Wills to get the full answer.
Q: The Will states the “executor and trustees exercise such power as to ensure that the persons caring for any of my children suffer a minimal financial burden or loss as a result of caring for them.” What is generally considered a minimal financial burden? How is this determined?
A: Ask the Executors they answer that question. They control the purse strings. They must do so with only one criterion: what is in the best interests of the children. This is more than just toilet paper and Woolworth’s shop. It may be money to get married. It may be a car to get to university. It may be a carer to live with the children until they finish school. Speak to the Executors.
A 3-Generation Testamentary Trust Will contains many trusts. For example, if you die with a child under 18 then the ‘Maintenance Trust’ is automatically activated. When the child turns 18 they take control of the trust. The adult child can, at any time, change the trustee. Whether the trust ‘vests’ (finishes) is a question you need to ask the child – it is their decision. However, the child is likely to continue using the Testamentary Trust because:
You can increase the age of majority to above 18. You can make it 21 years of age – or even 99 years of age if the child is mentally challenged.
Q: What happens if, when we die, there is still a mortgage attached to the properties? If we were to die soon, each house would have a $400k mortgage. Most of this ($300k) could be cancelled out using the equity from our primary residence, but what happens if there is some debt left over? Should we try to make sure there is enough cash/ insurance to wipe it out? Given there would be a lot of equity (the investment property plus half the primary residence) for a small residual debt ($100k), would the banks allow the girls to borrow to cover that debt, paying off the borrowings over time?
A: You should address this question to your beneficiaries – your children. They, themselves, make the decision as to what they do with ‘their’ new assets and debts. Usually, the executor pays out all debts first. And then transfers the properties (or whatever is left) to the beneficiaries. The net value goes to the children. The children can keep on selling assets, perhaps one of the properties to, keep reducing debt. Or a child can seek to take out a loan. I don’t know. Ask your children and they will answer this question.
Death is a default in the loan and the bank can demand payment within (usually) 7 days. This is unless you can rectify the default. But it is hard to come back from the dead!
The children are entitled to seek to borrow money, secured against their new assets if they wish.
I think it is a very good idea to speak to your financial planner and accountant about taking out insurance. You may also be able to do this in your superannuation fund. This often makes insurance premiums more tax effective.
Your question suggests that you have a house for each child. That is all rather nice. But it is often the case the child no longer lives in Australia. Or does not want that particular house. In any event, you will be happy to know that because you have 3-Generation Testamentary Trust Wills your children can move the assets around. Each can have their own property. This is without triggering Capital Gains Tax or transfer (stamp) duty. You also have a Divorce Protection Trust in your Will so your assets are protected when you children, grandchildren and greatgrandchildren divorce.
Q: A client, only beneficiaries are mum and dad currently living overseas. In his Will, he would like his friends to be executors. Do we also add mum and dad as executors so his parents can become trustees of the testamentary trust and existing family trust?
A: The beneficiaries should generally be the executors. It makes no difference that they live overseas. I would not appoint ‘friends’ to be executors. Just appoint your mum and dad. If they need help they can instruct an Australian real estate agent to sell property. They can instruct an Australian accountant to do the tax returns. The job of being an executor is normally over in a few months. So if you went against our advice and appointed your ‘friends’ then after a couple of months, once the estate is administered, then your mum and dad ‘take back control’ and look after the 3-Generation Testamentary Trusts as they wish. Which begs the question why you made the friends suffer the job of being the executors in the first place.
Family Trusts have nothing to do with Wills. And Wills have nothing to do with Family Trusts. They have separate laws and tax rules. A Will gives away what you own. In contrast, you don’t ‘own’ the assets in your Family Trust you merely control the assets. To put in place a succession plan for a Family Trust build a “Deed of Variation to update the Appointor“.
Does it really matter? All Australian trusts vest after 80 years. See here. But for trusts in Wills, the 80 year period only starts on the date of your death. So your spouse and children are all dead by the time the 80 year period comes about. Probably your grandchildren have died of natural causes as well.
No one knows what is going to happen to Australia. We have no idea of the tax laws that will apply. It is likely that the 80-year law of perpetuity will be abolished. That is why if you narrow estate planning and Wills to one word it is ‘flexibility’. The 3-Generation Testamentary Trust is the most flexible structure you can put in a Will.
But to answer your question: under the current Australian CGT laws when a trust vests CGT is payable on those assets as if they were ‘disposed’ of. However, during the 80 year period, the beneficiaries can sell and manipulate your estate assets as they see fit. They have 80 years to plot and plan. However, generally with a 3-Generation Testamentary Trust, your beneficiaries have the highest chance of reducing CGT and stamp duty to zero. And obviously, cash can be distributed from a 3-Generation Testamentary Trust for free at any time.
Yes, we are a national law firm. You, Will, is drafted to operate in all States and Territories of Australia. Also, the Will is drafted under the Hague Convention and works in most other countries as well.
An advantage of Legal Consolidated Wills, POAs and all our legal documents is that if:
then you do not need to update your Wills, 3-Generation Testamentary Trust Wills, Enduring POA or Medical Lifestyle POAs. Your estate planning documents remain valid even if addresses change.
Your address, your attorneys, your beneficiaries and your executors’ addresses must be correct at the date of signing.
What if an address changes before you get a chance to sign the Estate Planning document? Don’t waste your time signing out of date Wills and POAs. Update the Will or POA before you sign. You can update your Wills and POAs as often as you wish. This is for any reason for the rest of your life. Just email us your Tax Invoice. We email you a voucher to update your Wills and POAs.
A Trustee of a 3-Generation Testamentary Trust prepared by Legal Consolidated can lend money to anyone. The Trustee can lend money to him or herself. They can lend money to their children or strangers. They can do whatever they want. (They can just transfer the wealth out of the 3-Generation Testamentary Trust and give it away if they wish).
The money can be lent with or without a Loan Agreement. Obviously, you should prepare a Loan Agreement if you want the money back, or to protect the assets from the family court and bankruptcy court. You can lend the money at zero interest. You can lend the money at any interest rate you want. You can have the loan repayable on demand etc…
This is how we draft our 3-Generation Testamentary Trust Wills. As to non-Legal Consolidated Wills, the answer may be different.
Obviously, if a company lent money you would need a Division 7A Loan Deed. But a 3-Generation Testamentary Trust in your Will is a “Trust”. It is not a company. Even if you had a corporate trustee company holding the trust money, it is still a trust.
Q: When is a good time to renew the Will? When the client separates? Or after one year but is not legally separated yet and is still sorting out their financial separation and children etc?
A: Catch your spouse in bed with someone else? That night you update your Will. You do not wait for the property settlement. You don’t wait for the divorce. You do not wait for 12 months to pass since you separated.
Yes, divorce invalidates the Will. But just put a Contemplation of Divorce clause in your Will.
As you build your new Will on our website one of the questions we ask is “Are you contemplating Divorce”. If you are separating you tick yes to that question. You put in your spouse’s name. Now if you divorce your Will remains valid. And if you never actually get a divorce, then your Will is still valid.
Q: My autistic child is on invalid support from Centrelink. He is set to inherit under my 3-Generation Testamentary Trust Will. How does it affect his Centrelink pension?
A: Best to watch the Vulnerable Children in Wills course for the full answer. The short answer is that the 3-Generation Testamentary Trust is designed to allow the Centrelink pension to be drip feed just the right amount of income to continue to get Centrelink disability support. But let your Accountant and Financial Planner help you with how much that is. See also: