A major cause for concern, given there is now less than a 5 year window until the bulk of Australia’s baby boomers are in their 70’s, is that 81.1% of baby boomer business owners in Australia have not completed succession plans according to research conducted by Pitcher Partners and Swinburne University. Business owners who don’t have a succession plan are putting a lot at risk if they hope to someday cash out at a fair price and/or ensure their businesses survive them.

Business succession planning is a complex process. It will usually involve consultation between you, your lawyer, your accountant and your financial planner, and takes time to put in place. The amount of time it takes is often dictated by the size of the business and the particular issues involved. It can also be emotionally wrenching, often involving emotionally difficult issues such as deciding whether a relative or long-time employee is most qualified to eventually take over.

Succession planning is even more complicated when you are involved in a partnership, a trust with other people or own a share of a private company. It is imperative that you have an agreement in place with all the parties on what will happen on the death, incapacity or retirement of one of the parties.

A business succession agreement may take one of the following forms:

• Partnership agreement
• Shareholder’s agreement
• Stakeholders agreement
• Buy-sell agreement
• Equity agreement

In the case of death or incapacity of a partner or a shareholder in a business, it is common for the buyout of the deceased or incapacitated partner or shareholder to be funded by insurance. Such agreements need to be carefully drafted to avoid adverse taxation consequences.

More information

For more information relating to succession planning, contact one of our experienced commercial lawyers:

David Whitehill
Phone: 07 32106500
Email: dwhitehill@cp484.ezyreg.com

Glen McCracken
Phone: 07 4639 0307
Email: gmccracken@cp484.ezyreg.com

When can I dispute a Will?

The time limit in which to make a claim is within 9 months of the date of death, but the estate may be distributed 6 months after the date of death if there is no notice of any application or intended application for family provision. Therefore, if you intend to make a claim against an estate, you should give notice of your intention to file an application for provision or further provision within 6 months from the deceased’s date of death.

It is at the Court’s discretion whether to extend the time after 9 months if it is satisfied that sufficient cause can be shown.

Who can dispute a Will?

A deceased person’s spouse, child or dependent, who considers that adequate support has not been made for his or her proper maintenance and support, can contest a Will.  Specifically, this includes:

• The wife or husband of the deceased at the time of death;
• A de-facto partner of deceased at time of death;
• A former legal spouse (must not be remarried and be receiving or entitled to maintenance OR be a parent of minor child of deceased and dependent at date of death);
• A child of the deceased;
• A step-child or adopted child of the deceased;
• A dependent of the deceased who at the time of death was wholly or substantially maintained or supported by the deceased and either a parent of deceased, parent of a child of deceased or person under 18;

On what grounds can I dispute a Will?

The court will consider a wide range of relevant factors when deciding if adequate provision has been made from the estate for your proper maintenance and support including:

• Your financial position, and specifically your financial needs relative to the value of the estate;
• Your health, family responsibilities and general circumstances.
• The size and nature of the deceased’s estate;
• The relationship between yourself and the deceased;
• The financial position, health and family circumstances of other persons who have a legitimate claim on the estate.
• The relationship the deceased had with other persons who have a legitimate claim on the estate.
• The financial position, health and family circumstances of the beneficiaries named in the Will in comparison with your own financial circumstances.

A will can also be challenged on the following grounds:

Undue Influence:  a Will may be set aside if it can be shown that undue influence has been exerted on the person making the Will.

Incapacity:  A person must have sound mind, memory and understanding to make a Will.  If a person lacks capacity to make the Will (i.e., they did not understand the nature and effect of their Will they were signing or were unable to make rational decisions about how their estate is distributed), the Will may be declared invalid.

Contract to make mutual Wills:  sometimes people may choose to enter into a binding contract to make their Wills in a certain way and not to change them. If they enter into such a contract and one of them later changes their Will without the consent of the other, any beneficiaries who miss out on their entitlement under the Will may be able to enforce the agreement and set aside the later Will made in breach of the agreement.

More information

This document contains only a brief summary of the laws about contesting an estate. If you have concerns that you have not been adequately provided for in a Will, and would like further advice please contact one of our experienced wills and estate planning lawyers.

David Whitehill
Phone:  07 3210 6500
Email: dwhitehill@cp484.ezyreg.com

Glen McCracken
Phone: 07 4639 0307
Email: gmccracken@cp484.ezyreg.com

Katie Cameron
Phone:07 4639 0323
Email: kcameron@cp484.ezyreg.com

PDF: Disputing a Will – Q&A

Superannuation Trust Deed

Superannuation balances (which often include significant life insurance) are held by your super fund trustees on your behalf under the terms of a superannuation trust deed. Under the terms of most superannuation trust deeds, when you die, the trustees of your fund decide how your superannuation will be dealt with.

Self-managed superfunds (SMSF)

In the case of a self-managed super fund, when you die, someone will take your place as trustee of your fund, or if you have a corporate trustee, someone will take control of the corporate trustee. That person may be the legal personal representative of your estate, or may be someone nominated in the trust deed.

As a general rule, the trustee of your SMSF has absolute discretion to decide who among your dependants receives your superannuation benefits upon your death.

Nominating a beneficiary

By keeping your nomination(s) up to date you can make sure that the right people receive your benefit.
There are a number of nomination options. The right one for you will depend on your specific circumstances. Some of these options are:

Binding Death Benefit Nomination (BDBN)
A BDBN allows you to specify who your superannuation is to be paid to when you die, and removes the discretion of the trustee to make that decision. If you don’t have a BDBN, the trustee for your super fund usually has the right to decide who receives your superannuation death benefits.
A BDBN must be executed in the presence of two independent witnesses and should be renewed every 3 years.

Non-Binding Death Benefit Nomination
A non-binding nomination allows you to state your wish as to who should receive tour super, whilst giving the trustee the flexibility to determine the best way of distributing the funds at that time of your death, taking into account issues such as the most tax effective method of dealing with the money.
Non-binding nominations do not expire, but still should be reviewed along with your will on a regular basis.

‘Hard Wired’ Clause
A ‘hard wired’ clause can be written in the trust deed of your SMSF, stating who the superannuation benefits are to be paid to when you die.

A ‘hard wired’ clause is binding, and can be tailored to suit specific requirements, such as covering how the superannuation death benefit must be paid, who is to succeed to the role of trustee and what investments must be maintained within the SMSF.

A ‘hard wired’ clause has many advantages, but it does require the expertise of an experienced wills and estate planning lawyer to ensure it is done properly.

Who can I leave my Super to?

You are restricted as to who you can nominate to receive your super. It may only be paid to your spouse (including a de facto spouse), your children, or someone with whom you have an interdependency relationship*, or your estate. If it is paid to your estate, it will be distributed in accordance with your Will.

*An interdependency relationship applies where two people have a “close personal relationship”, live together even if they are not related by family, one or each of them provides the other with financial support and and domestic support and personal care.

It also applies if the two people have a “close personal relationship” and the only reason they don’t satisfy the remaining conditions above is because either or both of them suffer from a physical, intellectual or psychiatric disability.

More information

For more information relating to superannuation death benefits, wills or estate planning in general, feel free to contact our experienced Wills and Estate Planning lawyers.

David Whitehill
Phone: 07 3210 6500
Email: dwhitehill@cp484.ezyreg.com

Glen McCracken
Phone: 07 4639 0307
Email: gmccracken@cp484.ezyreg.com

PDF: What happens to my super when I die?

Well, what is important? That will depend upon your contract. What is important to your contract may not be so important to mine. What are the most important bits?

The contract needs to be clear and unambiguous about what are the obligations of the parties. What exactly is the supplier required to do? How and when does the supplier do that. What about the buyer? Obviously the buyer will be required to pay but when and how? And is the buyer required to take delivery or collect the goods, even if they are damaged.

Who carries the risk of damage, the seller, the buyer or the freight company? And should there be insurance?

To me, one of the most important parts in any contract is that which sorts out the problems. What happens when one party doesn’t do what they were meant to do? And this will be different depending on the contract. A landlord wants the premises back if the rent is not paid. A customer wants to cancel orders if the goods supplied are not up to scratch or, perhaps, if the caravan is delivered needing repair.

Procedures for terminating or enforcing the contract should be set out in clear and precise language. That is the same for all of the rest of the contract.

A lot of contracts do not need that level of detail but many do. Ultimately it is a matter to think about your transaction and consider what might go wrong and do you need to cover it in the contract.

You might think that having a written contract helps make it enforceable. That’s true, it helps. An oral contract is generally enforceable but often there is differing evidence of what was said. That is why writing is better. In most cases though, the contract does not need to be written at all.

The trick is to get all the terms agreed and the best way to do that is in writing. It doesn’t matter what your deal is, the principles are still the same. A well written contract will help seal the deal and make it watertight, which is more than can be said about my client’s caravan.

More Information

If you need assistance in putting your agreement together, please give us a call.

Glen McCracken
Phone: 07 4639 0307
Email: gmccracken@cp484.ezyreg.com

When it comes to estate planning, so much needs to be considered to avoid the pitfalls and traps that may lead to a dispute after you die. Here are 7 top tips and traps to be aware of when it comes to estate planning:

1. Make sure you have a will

By taking the time to write a will, you can save your next of kin uncertainty and stress. You will also save the extra legal costs that might have to be paid to finalise your estate. Even if you don’t think your estate is worth much, you should make a will. You may have superannuation, or your death may result in an insurance payout, and these funds could form part of your estate.

2. Make sure your will is up to date

Review your will every time you review your financial plan or if your circumstances change. Events such as the birth of a child or grandchild, death of a spouse, marriage and divorce are obvious triggers to review your will. Other triggers are around financial, home or property changes.

Any time you restructure your financial affairs, take out a major loan, buy or sell assets or change your superannuation arrangements, you should review your will. You may not need to change it but it is a good idea to check whether your will covers your wishes.

3. Cover off your dependants

Dependants not adequately provided for (relative to the size of your estate) from your estate may contest your will by seeking a greater share of your estate. If you want to leave someone out of your will, this should be made clear in your will or in a separate document. Whilst this won’t necessarily stop that person from lodging a claim, it does mean they cannot argue they have been simply forgotten. If you intend to leave a dependant out of your will (including an ex-spouse), you should obtain legal advice.

You should also nominate guardians for your children (if they haven’t turned 18), as well as any adult children or spouse who needs to be cared for because they are incapacitated. If you do not nominate a guardian, it may be left to others, possibly the courts, to make this decision on your behalf.

4. Consider debts & tax liabilities

You must specify that debts are to be paid out before the distribution of your assets. Otherwise, certain beneficiaries might be unintentionally liable for your debt. Similarly, tax liabilities such as capital gains tax on an investment property need to be taken into account.

5. Don’t assume what is in your estate

Most people assume that everything they own is automatically part of their estate regardless of how (or where) those assets are owned. However, specific provision may need to be made for assets held in companies, trusts and their superannuation funds.

Many people own their own home with their spouse “as joint tenants”. This means that on the death of one of them, the property automatically passes to the survivor. It does not automatically form part of the assets of their estate. This also occurs with joint bank accounts.

Similarly with superannuation, unless a binding death benefit nomination has been put in place, distribution of a superannuation death benefit is at the discretion of the trustee of the fund. If this is an industry or retail fund, you will be relying on someone you don’t know to make a decision about payment of your death benefit. The situation can be particularly messy where second marriages and step children are involved.

For business owners this is exacerbated if their businesses and other assets are held in a company or trust. If they are held in a trust (particularly a family trust), then just as with a super fund, it doesn’t form part of your estate and you need to ensure that control of the trust assets passes to the intended beneficiary.

6. Don’t take the easy way out

Don’t blindly default to the “him to her and her to him will” option. Depending on the size of the estate and the family situation it may be worth considering the use of a testamentary discretionary trust (a trust established as a result of someone’s death). Two examples where this may be relevant:

If, after you have died, your spouse re-marries or enters into a long term de facto relationship. Any wealth left directly to your spouse can potentially be the subject of a matrimonial settlement between your spouse and their second partner should that relationship end in divorce. This could mean that money intended ultimately for your children is dissipated to the second partner.
If your children’s marriage or de facto relationship ends. In those circumstances, some of the wealth intended to benefit your children or grandchildren can be lost to the ex-spouse.

7. Follow the proper procedures

Don’t use beneficiaries to witness your will. Make sure your executor has the capacity and time to carry out the duties imposed by this role, and of course, ensure they know where your will is stored. There area number of rules to follow when making a will, including how it is prepared, signed and witnessed. Make sure you have it prepared professionally. The cost is far less than the potential legal fees for sorting out any problems later on.

More information

Thorough planning can maximise the value of the estate to those who it was intended to benefit, and avoid disputes. The key to effective estate planning is to obtain professional advice.

Contact our experienced Wills and Estate Planning lawyers for a review of your existing will:

David Whitehill
Phone: 07 3210 6500
Email:  dwhitehill@cp484.ezyreg.com

Glen McCracken
Phone: 07 4639 0307
Email: gmccracken@cp484.ezyreg.com

Katie Cameron
Phone: 07 4639 0323
Email: kcameron@cp484.ezyreg.com