lecture 9

Question 1

 Death benefit

Answer 1

o The beneficiary of the account

o Like insurance + remaining super account balance

Question 2

 How to nominate someone for a death benefit

Answer 2

o A binding nomination leaves your super fund trustee with no choice as to who gets your death benefit

o Must carry out the instructions
 To one or more dependents
 Your legal personal representative, who must pay out the money according to your will

o Only valid for 3 years

o Non-binding
 Trustee has the final say
 Guides the trustee
 The trustee is not required to follow instructions in your will

Question 3

 Tax on death benefit – income stream

Answer 3

o It is not possible to pay a super death benefit income stream to a non-dependent for tax purposes
o Limitations on who can receive a death benefit
o Income stream for under 25
o Adult children with a permanent disability can continue to receive an income stream after they turn 25 years old
o Income stream must change to a lump sum before they turn 25 years old

Question 4

 Comparing death benefit lump sums to income streams

Answer 4

o Benefit = any income earned by the fund on the investments used to pay the income stream will be tax free within super
o Death benefit income stream retain funds in super
 If they want it in super, it requires to be within super limits

Question 5

 Making a will

Answer 5

o	A will specifies
	How property is dealt with after death
	Directions who the will maker wants 
to distribute assets to
	Who will be responsible for
•	Finalizing affairs
•	Ensuring assets are distributed in accordance with the will

o Not all estate planning is done via a will

Question 6

 Drawing up a valid will – Estate and non-estate assets

Answer 6

o Non-Estate assets
 Jointly owned or owned and controlled through independent business structure
 E.g. trust of family company assets

o Estate Assets
 Assets that are solely owned by the will maker and are the only assets which can be left in a will

Question 7

 Valid Will

Answer 7

o Testator must be of legal age
o Testator must have testamentary capacity
o Must have the intention of making a will
o Must be in writing
o Signed by the will maker and in the presence of at least two adult witnesses

Question 8

 Testamentary Capacity

Answer 8

o Understand the nature of making a will
o Understand what they own
o Understand the claims of potential beneficiaries (choose who to leave out)

Question 9

 Jointly owned property

Answer 9

o Joint tenancy
 Both parties own the entire asset
 Becomes estate asset of the last surviving co-owner

o Tenancy in common
 Each party owns a separate, defined portion of the asset
 Their own share forms an estate asset

o The difference?
 Joint tenants must contain equal shares with the same trust deed at the same time
 For joint tenants, interest of a deceased owner automatically transfers to the surviving owner

Question 10

 Appointing someone to act on your behalf: Power of attorney

Answer 10

o Authorize someone to act on your behalf while you are alive
o Choice requires careful consideration

o Types of power of attorney
 GOA
• POA ceases when donor becomes mentally incompetent
 EPOA
• Continues even after donor is mentally incompetent

 All powers continue until the death of the donor at which time power is revoked

Question 11

 Enduring power of attorney

Answer 11

o Some states have created different types of EPOA

o Can appoint for Financial, guardianship, health direction

Question 12

 Appointing someone to act on your behalf: Executor

Answer 12

o After and distribute assets you have passed
o Trustee members or a firm of advisers
o Family members
o Must be willing to take on role and be told where the will and other important documents are kept

Question 13

 Role of Executor

Answer 13

o Managing the legal and financial affairs
o Organizing funeral
o Obtaining grant of probate
o Locate and insure estate assets
o Paying outstanding debts
o Distributing assets in accordance with will
o Defending will if there is a challenge

Question 14

 Grant of probate

Answer 14

o On death, the deceased’s will must be proved

o Court confirms appointment executor

Question 15

 Rights of beneficiaries

Answer 15

o No claim while estate is in hands of executor
o But can bring executor to court to apply for probate
o Not entitled to borrow against the assets of the estate until it is settled and title passed
to them

Question 16

 Contesting a will

Answer 16

o Validity of a will can be challenged on the basis of
 Lack of testamentary capacity
 Undue Duress
 Incorrect execution

Question 17

 Need to update a will

Answer 17

o A codicil can amend but not replace a will

o Divorce cancels a will unless made in contemplation in WA

Question 18

 Dying intestate

Answer 18

o Dying without a valid will
o State based guidelines
o Family and children first

Question 19

 Estate planning, taxes and trusts

Answer 19

o Two important estate planning objectives

o Establishing tax effective structure by which estate assets and income can be distributed to intended beneficiaries

o Providing will maker control over how their estate will be distributed and managed after their death

o A testamentary trust through a will is a common way to achieve this
 Trustee has control over the assets, distribute income and capital, personal obligation

Question 20

 Two main trust types in the Estate Planning context

Answer 20

o A living trust, established during a person’s lifetime

o A testamentary trust, established by will after the death of the person, comes into effect upon death of will maker

Question 21

 Types of trusts

Answer 21

o A fixed trust
 Gives beneficiaries a fixed entitlement to distributions and capital proportion to a number of units held

o Discretionary trust
 Gives beneficiaries an entitlement to be considered for distribution from the trust but not the right to receive distributions

Question 22

 Motivation for use of trusts

Answer 22

o Tax minimization

o Asset protection
 Can hold money in trusts against predators
 Conditions, using money for wrong reason

o Succession
 Future generations
 Divorce

o Provision for minor and/or disabled dependants