Coronavirus – A note from the Directors

Given the spread of the coronavirus (“Covid-19” ) and the public health emergency that it has
created, like many other organisations, Bowen Buchbinder Vilensky (BBV) is taking active steps to
help ensure the safety, health and wellbeing of our people and clients.

To support the health and wellbeing of our people, clients and the community around us, our
professional and support staff are currently working remotely from home.

While we are working remotely, to the fullest extent possible it will be business as usual in terms of
our professional services and our client service. We are still ready, willing and able to take on new
clients. While we cannot meet you in person, we are still able to conduct consultations with video
conferencing technology. Our current platform of choice is Zoom.

We have taken steps to ensure we have the training, technology, and support in place to assist our
staff working from home for an extended period.

Our office at Level 14, 251 Adelaide Terrace, Perth is currently closed. However, please continue to
call us on (08) 9325 9644 and you will be directed to whichever member of our team you wish to
speak to in the usual way.

These are indeed challenging and uncertain times but for us at BBV it is business as usual, and we
will be doing our best to continue to provide our range of legal services.

Some Super Changes

Here we go again….!

Several significant changes to the superannuation rules became effective from 1 July 2017.Do you really need to know about them?  Yes, you do!

Not only will the changes impact on your plans for your superannuation and retirement, but they will very likely also impact on your estate planning objectives and arrangements.

Ok, So What Has Changed?

In summary, the new rules after 30 June 2017 in relation to pensions include the following:

1. A person cannot start a pension with an account balance supporting a pension of over $1.6m (or continue such a pension after 30 June 2017).

2. This limit is called a person’s “transfer balance cap”.

3. When a person starts a pension after 30 June 2017, they will have a “transfer balance account”. This will track key events in relation to the person’s pension, to see if the person exceeds their transfer balance cap (either on starting the pension or at a date on starting an additional pension).

4. If someone exceeds their transfer balance cap, they will need to take action to rectify the problem (that is, by commuting part of their pension).

5. If the person does not take action, the Commissioner of Taxation can force the fund to rectify the problem (by issuing a “commutation authority”).

6. The rectification action that can be taken will involve commuting some or all of the pension to a lump sum.

7. Except in relation to pensions resulting from the death of a member, such a commutation can generally be retained in the superannuation system.

What Does This Mean For Me?

What this means in practical terms is that where the death benefit exceeds the recipient’s transfer balance cap (currently set at $1.6 m), then any excess must be cashed out as a lump sum. This will impact in particular on those wishing to keep benefits in superannuation by reverting or paying a pension to their dependants upon their death.

How Will This Affect My Estate Planning Decisions?

There are a number of ways in which these changes may impact on estate planning decisions. For example:

1. It will be necessary to review and possibly update death benefit nominations and Wills;

2. It may be necessary to review and update Self Managed Superannuation Fund Deeds to bring them up to date with the new legislation and to allow estate planning objectives to be achieved. For example, often older Deeds do not allow for non lapsing Binding Death Benefit Nominations;

3. Where members of a superannuation fund have balances exceeding the transfer balance cap, they may need to consider setting up a  Self Managed Superannuation Fund for their pension interest and retaining their remaining accumulation interest in their existing fund. However, care will need to be taken as this could trigger tax issues and accordingly appropriate tax advice should be sought to determine the tax implications of each strategy. A good estate planning strategy can sometimes be a disaster from a tax planning perspective; and

4. Where a death benefit is required to be paid as a lump sum this may force the sale of non-liquid assets where there are insufficient liquid assets to satisfy the lump sum. In such a situation a strategy needs to be developed to prevent this occurring.

These are examples of some of the impacts the new superannuation rules will have on estate planning strategies, but in individual circumstances there are likely to be other impacts as well.

Conclusion

Estate planning is not a set-and-forget process. Rather it is an ongoing evolving process, which must necessarily respond to changes in individual personal, financial and other circumstances, as well as to changes in the law.

The changes to the superannuation rules will have far reaching effects for those who hold, or who anticipate holding, significant funds in superannuation. Therefore, for those who are, or might soon be, affected by these changes it becomes critically important to respond and carefully review your estate planning arrangements and strategies. This review may necessarily extend to reviewing business structures and business succession arrangements.

Those who choose to ignore the new superannuation rules and/or who choose not to regularly review their estate planning and business succession arrangements do so at their own peril. They also do so at the peril of their families and loved ones with potentially significant detrimental financial consequences.

PLEASE CONTACT

For more information or to discuss any particular concerns contact Les Buchbinder at [email protected].

Share on facebook
Share on linkedin
Share on email

Contested Wills

– The West Australian

Contested wills are among the most rapidly growing form of litigation in Western Australia.  Booming property values over the past ten years, along with enforced superannuation contributions, means that many older people are leaving behind life-changing amounts of money.  And the rise of divorce, de facto relationships and blended families makes for many more potential claimants than in the past. 

In my experience, as soon as the value of an estate exceeds $500,000, the likelihood of someone challenging a Will becomes very much higher, although I also see challenges to estates that are more modest.  And with the average family home in Perth worth over $500,000, many estates present high value targets.

The law provides that, so long as you are mentally competent, you may leave your assets to whoever you chose.  But this seemingly unfettered discretion is tempered by what the Courts have described as a “moral responsibility” to make provision for certain family members.  

The Family Provision Act, formerly known as the Inheritance Act, opens your will to challenge if you do not make “adequate provision” for the “proper maintenance, support, education or advancement in life” of certain family members. These family members include spouses – current, former and de-facto  – children, step-children, grandchildren and parents, to name the main groups.

 

The Supreme Court can, and often does, over-ride the wishes expressed in a will that fails to make adequate provision for these family members.  By allowing a successful challenge, the court can effectively rewrite your will after your death.

How do you avoid such a challenge?

Obviously every individual is different, and specific legal advice on your own situation should be taken.  The greatest complexity is that adequate and proper provision is different not just for every family, but for different members of the same family and at different times in their lives:  what is adequate and proper for the a young child of a multi-millionaire is different to that for an adult child with their own means with a more modest upbringing. But by way of a few general guidelines:

·        Make sure you leave adequate and proper provision for family members who could prove that they are even partially dependent on you materially.  For example, even though you may have a very difficult relationship with a step-son, if he lives rent-free in your granny flat and you don’t make provision for him in your Will, he may have a good case for making a successful challenge after you die.

·        Be a ‘wise and just testator’ as opposed to a ‘fond and foolish’ one.  Leaving $50,000 for the continued care of your beloved cat while making no provision for your defacto’s irksome daughter, who still lives at home, is an example of a Will that is open to challenge.

·        Explain your decisions in your Will or in another document clearly.  Such explanations can strengthen it against challenge.

·        Update your Will every three years.  Life moves on, relationships change, and what was once a sound plan of action may be overtaken by events. 

·        Be as open as possible with your children and beneficiaries about your plans for your estate and how much wealth you have.

This last point – conversations about inheritance – is worth emphasising.  Many parents avoid it, not wishing their kids to feel entitled, uncertain about their own intentions, feeling uncomfortable talking about their own death, or for various other reasons.  Children, similarly, may feel awkward, not wanting to appear greedy, believing ‘it’s Mum and Dad’s money after all,’ and so on.  A recent study by UBS Bank Investor Watch in USA revealed that only 54% of people had discussed estate plans with their children, and only 34% told their heirs how much money they had.

From a legal perspective, the fewer unresolved issues there are, the less likely a legal challenge.  Discussion not only clears the air, but by identifying potential problems down the line, a parent can make a plan that’s legally more robust.  All of which enables the smooth transfer of assets in accordance with your wishes.

As always, sound legal advice at the outset is the best possible step you can take.  A properly drafted Will can prevent disputes, whereas a poorly drafted or inadequately thought out Will is fertile ground for protracted, expensive and acrimonious litigation.  Legal advice, and open conversations with your family, are the key.

PLEASE CONTACT

Bowen Buchbinder Vilensky Lawyers: (08) 9325 9644 or bbvlegal.com.au

Share on facebook
Share on linkedin
Share on email