The Bank of Mum and Dad Needs A Paper Trail

The Australian Financial Review recently reported (8-9 May 2021) that parents are now among the nations’ top 10 lenders for home loans with data showing more than 60% of first home buyers are receiving assistance from their parents to purchase their first home.

Unsurprisingly with the world in the middle of a pandemic and the economy in recession, now more than ever, children are turning to their parents for financial assistance. It is incredibly important that prior to parents providing financial assistance to children, parents must first be clear on whether the assistance is to take the form of a gift or loan.

The distinction between the financial assistance provided being a gift or loan becomes incredibly important in the following scenarios:

  • the child’s relationship breaks down and their spouse alleges that the financial assistance was a gift rather than a loan;
  • the parents pass away and their Executor is left to determine whether or not the financial assistance is to be repaid to the Estate;
  • a sibling makes a claim for further provision from the parents’ Estate on the basis that the child has already received financial assistance during their lifetime;
  • the child becomes bankrupt and the trustee in bankruptcy classes the financial assistance as an asset as opposed to a liability;
  • the relationship between the parents and child breaks down;
  • the parents are receiving a Centrelink pension which may be affected by providing the financial assistance to the child.

In the above scenarios, it is generally the parents or their Executor who bear the onus of proving that the financial assistance was a loan rather than a gift. Often the only written evidence available is the bank transfer, with the only other evidence being verbal communications resulting in a “he said, she said” argument.

Disputes of this nature can so easily be avoided by first consulting with a Solicitor to create a paper trail and have a properly prepared and executed loan agreement in place.

If you or someone you know of are considering providing financial assistance to a child or any other person, please contact our office to make an appointment to meet with one of our experienced Solicitors. We are also able to advise on any existing arrangements that have not yet been documented. 

Is your Estate Plan COVID Proof?

Man using an umbrella to protect against COVID molecules represents COVID proofing

As the COVID-19 virus continues to spread throughout the world, people can no longer avoid considering their estate plan. The spread of this virus has completely changed the world and the way in which we live here in Australia in an unprecedented way within a matter of weeks. 

With a significant amount of uncertainty ahead of us, it is more important than ever that you ensure that your estate planning documents are up to date. 

If you already have a Will, you should review this to ensure that it reflects your current wishes. In doing so, you should also take into account any recent changes in the value of your assets. 

If you do not already have a Will, it is advisable that you put one in place to ensure that your estate is left to who you wish, rather than being distributed pursuant to the intestacy provisions of the Administration Act 1903 (WA). 

The COVID-19 virus also highlights the importance that an Enduring Power of Attorney, Enduring Power of Guardianship and Advance Health Directive plays in your overall estate plan, particularly if you are classified as a person at increased risk of serious illness should you contract the virus. 

Unlike a Will which takes effect upon your death, these documents operate during your lifetime and allow you to appoint a trusted family member, friend or advisor to make important decisions regarding your finances, health and treatment decisions, at a time where you are unable to do so yourself. 

These are incredibly challenging and unprecedented times that we are experiencing and we encourage you to take the time to ensure that your affairs are in order and to offer peace of mind knowing that if the worst were to happen, your wishes will be carried out and your loved ones looked after. 

As tempting as it may be during these times to complete a DIY Will Kit online or from the local post office, these can be fraught with danger for many reasons, one of which being that they may fail to satisfy the requirements of the Wills Act 1970 (WA) for a valid Will. At BBV we are making it easier than ever to have your estate planning documents prepared. Contact Alana Shaddick by telephone (08 9325 9644) or email ([email protected]) today to get started and schedule a virtual meeting, following which you can leave the rest to us.

Superannuation – Is Your Will Enough?

Manning signing superannuation documents

Superannuation has become a major asset for an increasing number of Australians since the introduction of compulsory payments by employers since 1992 by the Australian Government.

Contrary to popular belief, superannuation is not an estate asset and it does not automatically form part of your estate upon your death. Rather, payment of superannuation upon death is a matter determined by the trustee of the superannuation fund in accordance with the governing rules of the respective fund and relevant law.

Should your fund allow them (there are a few commercial funds that don’t), a binding death benefit nomination (BDBN) is a way in which you can, during your lifetime, override the trustee’s discretion.

A BDBN is effectively a written notice given by a member to the trustee of their fund which directs the trustee to pay the member’s death benefit, often comprising both superannuation and associated death benefits such as life insurance, in accordance with their wishes outlined in the BDBN.

The trustee of the fund is required to follow the instructions outlined in the BDBN, provided that it has been correctly prepared and executed.  A valid BDBN remains in effect for three years from the date it is signed, last amended and confirmed. In some instances, a non-lapsing binding death benefit may also be available and appropriate.

For members that have not made a BDBN with their fund, the trustee of the fund has the authority and discretion to decide whether to pay any benefit payable on your death to one or more of your dependants, or to your estate.

Dependants in this context include a spouse, children of any age, any person financially dependent on the member, any person in an interdependency relationship with the member, and the member’s legal personal representative.

There are a number of advantages to making a BDBN. These include the peace of mind and certainty as to who will receive your death benefit once you die and the ease and speed at which a death benefit can be paid.

Unlike those assets that form part of your estate, a Grant of Probate or Grant of Letters of Administration is not required to be obtained in order for a beneficiary to access your superannuation death benefit. Similarly, a BDBN can protect your superannuation and associated death benefits from any claims made against your estate.

For further advice or guidance on superannuation and the implications for an estate, executor or beneficiary, please contact Alana Stallard on [email protected]  or (08) 9325 9644.

PLEASE CONTACT

Contact Alana Stallard at [email protected] if you wish to discuss this matter or your estate planning objectives further.

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Lacking mental capacity to make a Will – you may get Court!

Arguably one of the most controversial and challenging of the formal legal requirements of a valid Will is whether or not the person making the Will has sufficient testamentary capacity at such time that they make their Will.  A Will is not valid unless the person making it has testamentary capacity. That is, they must:

(a) understand the nature of the act and its effects;

(b) understand the extent of the property of which he or she is disposing; and

(c) be able to comprehend and appreciate the claims on his or her Estate to which he or she ought to give effect.

However, what happens if a person has no Will and no longer has the required testamentary capacity?

One option of course is that no steps are taken. In this case, when that person dies his or her Estate will be distributed in accordance with a prescribed formula set out in the Administration Act (“an Intestacy”). But, what if dividing this person’s Estate or an Intestacy does not adequately provide for certain family members or non-family persons or organisations?  Further, what if the person already has a Will in place but their personal and/or financial circumstances have significantly changed since the time when the earlier Will was made and it is now no longer relevant or appropriate?

This issue arises more and more frequently as our population ages, people’s financial circumstances become more complex, and the family unit continues to disappear.

In this situation, consideration can be given to whether an application should be made to the Court for what is called a Statutory Will.  This is a Will which is made by the Court for the person concerned.   This option first became available in Western Australia in 2008.

Upon such an application being made by any person, the Court, pursuant to section 40(1) of the Wills Act 1970 (WA) has the power to make, alter, or revoke a Will of a person who lacks testamentary capacity provided that the person concerned:

(a) lacks testamentary capacity;

(b) is alive; and

(c) is over 18 years of age.

The power for the Court to make a Statutory Will enables the Court to ensure that there is a valid Will in place which:

  1.  Gives effect to the previously stated or more obvious wishes of a person lacking testamentary capacity;
  2.  Avoids a full or partial intestacy;
  3.  Avoids a future dispute as to the adequacy of provision or interpretation of an existing testamentary document;
  4.  May allow for appropriate structuring to be put in place, such as testamentary trusts, which can have significant benefits for beneficiaries of the Estate; and
  5.  Deals with changes in circumstances that may have occurred since a last Will was made by the Will maker.

However, in the last 10 years there is only one reported case in Western Australia which has addressed this matter.  In that instance the Court declined to make the Will as sought. The lack of applications to the Court for a Statutory Will may reflect a lack of familiarity with such applications, or that the cost and complexity of these Applications can be prohibitive in many instances. Nevertheless, Statutory Wills can be a useful estate planning tool that should, at the very least, be considered in the appropriate circumstances.

Please contact Alana Stallard at [email protected] if you wish to discuss this matter or your estate planning objectives further.

PLEASE CONTACT

Contact Alana Stallard at [email protected] if you wish to discuss this matter or your estate planning objectives further.

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