Steve Travis

Estate planning services will be a key gateway for driving greater engagement from super fund members in their savings and retirement, says Aware Super, as it expands its online wills service after a successful pilot program.

Aware launched its estate planning pilot in January 2025, in partnership with industry experts SafeWill, and recently made the service available to all members, which includes a simple will at no additional cost to their Aware membership.

Group Executive Member Growth Steven Travis said early take-up of online wills had exceeded expectations.

“The need for a robust and accessible online estate planning solution is immense,” Mr Travis said.

“It’s estimated $5 trillion will be passed down to the following generations over the next two decades¹ and there’s widespread understanding of the importance of having a legal will, yet up to 60 per cent of Australians don’t have one.

“Enabling our members to start their estate planning journey online, in their own time and with no additional fees for a simple will, substantially lowers the barriers to getting started.”

Mr Travis said super funds were in a unique position to reach millions of Australians with a message about the importance of estate planning, drive will uptake, and leverage that to open a broader conversation around savings and retirement.

“We believe estate planning will be an important gateway to encouraging our members to engage with their broader financial plan, including for their super and retirement,” Mr Travis said.

Aware Super has carefully integrated estate planning into the member journey, encouraging members to take other positive financial steps, such as updating the nominated beneficiaries of their super death benefit, consolidating their super, reviewing their insurances or booking an appointment with a financial adviser.

“These behavioural `nudges’ can be effective at motivating members to take other positive financial steps,” Mr Travis said.

Founder and chief executive of Safewill Adam Lubofsky said estate planning was deeply connected to other important decisions people make about their lives and families. ”Integrating it into super helps make those decisions simpler and more connected to their long-term financial future,” he said.

All Aware Super members can create a simple, legal will at no additional cost, with the process typically taking about 20 minutes to complete.

Additional services are available for a small fee, including a customised will for members with more complex estates and the option to create a power of attorney.

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Peter Townsend

Peter Townsend from Townsend Lawyers briefly explains how family provision waivers work. Often the waiver seeks to stop an ex-spouse trying to access more assets or actions. This is an excerpt from an estate planning presentation to financial advisers.

The provision is most often used when divorced couples reach a property settlement in the Family Court and want to ensure that their ex-spouse does not come back for more by making a family provision claim. However it can be used in other contexts as well.

Section 95 of the Succession Act requires that the Supreme Court approve of any release by a person of the person’s rights to apply for a family provision order.

So a person can release their entitlement to make a family provision claim provided the court approves.

Generally the Court will provide approval based on the affidavits of the parties provided the judge in chambers accepts the fundamental fairness of the deal. If in doubt they will ask for the matter to be heard in open court and or for more evidence of the arrangement and the parties’ circumstances to be provided before making a decision.

It would be open to a couple to seek such approval for their mutual wills agreement thereby preventing either of them from making a family provision claim after the death of the first in order to circumvent the agreement.

It would also be open for the surviving spouse to have their second spouse make an application for the approval for the limited amount going to the second spouse. In that case, the court would want to be very sure that the second spouse was not being unfairly treated and knew exactly what they were doing.

By Peter Townsend, Principal

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Peter Townsend

Peter Townsend from Townsend Lawyers briefly explains providing a life interest or life estate to the surviving spouse. It is an increasingly common strategy given growth in blended families. This is an excerpt from an estate planning presentation to financial advisers.

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Matt Lawler

AMP Advice has partnered with leading fintech Yodal to provide financial planning practices with access to a comprehensive Estate Planning Service.

Practices in AMP’s network can now elect to incorporate the service, including Yodal’s practice-branded workflow solution, as part of their tailored package of professional services for their clients.

The innovative, end-to-end service comprises initial and ongoing training, together with an advice toolkit, practice marketing, re-use of Xplan data as well as access to the Yodal solution.

Launched at Advice LIVE, the Estate Planning Service forms a core part of AMP Advice’s client solutions value proposition in assisting more advice practices to grow their business, increase their revenue and respond to burgeoning client demand for estate planning.

Preparing for Australia’s great intergenerational wealth transfer

According to research by The Demographics Group, Australia is one of the richest nations in both absolute and GDP per-capita terms, having grown its GDP per capita from $17,000 to more than $63,000 in the space of 30 years.

Changing attitudes towards wealth means Australian wealth is no longer solely tied up in the family home, with the proportion of dwellings owned or mortgaged in Australia declining from 73% to 63% over the last 60 years.

The annual value of intergenerational wealth transfer has more than doubled since 2002 and could rise four-fold in real terms between now and 2050, as household wealth grows and the population ages.

However, two out of three​ Australian adults still do not have a valid or current will and an estimated 70%​ of household wealth is forecast to be lost in the next generation due to a lack of adequate estate planning and advice​.

Streamlining the estate planning service

By partnering with Yodal, AMP is equipping practices with a market-leading solution that helps practices manage intergenerational wealth transfers with ease and plan for client succession.

The service also provides practices with an ability to get dedicated legal support, ensuring they are prepared, confident, and can provide the best service to their clients when facilitating estate planning.​

The introduction of the Estate Planning Service is part of AMP Advice’s strategic initiative to provide comprehensive and value-added services, enhancing the capabilities of its financial advice network.

Matt Lawler, Group Executive, Advice, AMP said: “We are excited to introduce estate planning as a key component of our services offering for the Advice network, helping more of our advisers nurture and grow their business.

“Estate planning is a top priority for our practices and we are focused on helping our advisers realising their growth ambitions and enriching the services they provide.

“By aligning with the evolving priorities of advisers and clients, AMP continues to drive innovation and growth in its Advice business.

“With nine million Australians heading into retirement over the next forty years, our partnership with Yodal will allow us to empower more advisers with the tools and resources needed to navigate this complex landscape efficiently.

“This initiative aligns seamlessly with our overarching vision to solidify our position as Australia’s leading professional services provider by delivering unparalleled value to our practices and their clients.”

Bernard Salt, Executive Director, The Demographics Group, said: “Often described as the ‘lucky country’, Australians are bound together by a culture of aspiration, by access to opportunity, and by the relentless pursuit of a good quality of life.

“The last 100 years have seen significant changes in our attitudes to wealth.  The current generation of retirees represents the greatest demographic aggregation of Australians in the non-work stage of the lifecycle.

“The scale of these demographic factors today let alone in the decade ahead will shape the way we manage the transfer of wealth from the older to the younger generations.

“Managing wealth later in life requires thoughtful application as well as expertise, prompting the need for a focus on estate planning by retirees (and others) across Australia.”

Brandon Thompson, Chief Executive Officer, Yodal said: “Estate planning represents a significant commercial and client servicing opportunity for financial services professionals.

“We’re delighted to be partnering with AMP and helping more practices ensure that their clients’ wealth is transferred in accordance with their wishes, and their legacy and loved ones are protected.

“With an unwavering commitment to supporting our partners and their customers, Yodal leverages simple, secure, market-leading technology to deliver a full end-to-end estate planning solution including mandatory legal review by your chosen or preferred lawyer on every matter.”

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Peter Townsend

Trusts are most commonly established by a deed. Those deeds contain the terms or rules that control how the trust can be used, and the rights and duties the various parties to the trust have or owe. In our experience, trust deeds are regularly misplaced and lost.

A lost deed poses numerous problems, two of which are particularly worth noting:

First: trustee has responsibility to know terms of trust deed (equitable duty)

The trustee of a trust is under an equitable duty to know the terms of the trust that they manage. This may not sound like an issue for the pragmatic investor who simply uses their trust as an investment mechanism or for concessional tax outcomes. But Courts have shown little reluctance in concluding that a trustee does not know the specific terms of the trust when the deed has been lost.

A fairly recent example can be seen in the case of Jowill Nominees Pty Ltd v Cooper [2021] SASC 76. The Court held that it is very difficult for a trustee to discharge their duty to know and manage the trust when they don’t have a copy of the governing rules of the trust.

Second: can a trustee prove the original trust deed ever existed?

If the original deed is lost, then it may be difficult to prove that the trust exists at all. This was the case in Mantovani v Vanta Pty Ltd (No 2) [2021] VSC 771. In that case, the trust deed had been lost and there was not enough secondary evidence to show that the trust was in existence. By secondary evidence, we mean documents and dealings that clearly showed the identities of the beneficiaries, the property of the trust, and the nature of the trust (i.e. fixed, discretionary, SMSF, etc).

The Court held that the trust failed due to uncertainty, which means that without the trust deed the terms of the trust, and the parties to the trust, were unknown. This was arguably the better outcome for the trustee; had the court found that there was a trust then, pursuant Jowill above, the trustee might have been found to have breached their duty to the trust by not knowing the terms of the trust.

In Vanta, the Court then confirmed that a failed trust automatically gives rise to a resulting trust. A resulting trust means that the trustee holds the property on trust for the settlor. This means that the property of the trust ‘revests’ (effectively returns) to the person who contributed that property (i.e. an equitable interest returns to the settlor), rather than the beneficiaries.

This probably wouldn’t be a problem if the settlor still wanted to establish a trust with that property for the beneficiaries; but if the settlor had passed away, for example, then that property would go into their estate and be dealt with by the executor. There is material risk that the executor would not consider the trust beneficiary’s interest as relevant. And that’s not to mention the catastrophic tax consequences that could flow as a result of such a revesting.

Safety in scanning and holding trust deed in a digital vault

The importance of safely keeping the original establishment deed of a trust cannot be overstated, and yet deeds are lost with surprising regularity. Losing the deed can have deleterious consequences for both the trustee and the beneficiaries.

All deeds should be scanned as those electronic copies may be invaluable if the original is misplaced. Our sister company, SuperCentral, offers advice and services relating to lost deeds and an independent digital vault for scanned copies.

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Couples leaving all of their assets to each other in their wills can create significant legal issues if the couple divorces and they don’t each update their wills.

Divorce at any age is tough. When you’re older at the time of divorce, it’s crucial that you consider how you split your assets and the implications this will have for your estate, especially if you have adult kids or a blended family.

According to the Australian Bureau of Statistics (ABS), the median age at divorce is rising for both men and women with ABS statistics showing the median age at divorce is now 42.8 for women and 45.9 for men, compared to 38.6 and 41.4 in 2000.

If you are facing a divorce or the breakup of a de-facto relationship in later life (including same sex unions) you might wish to consider the following tips to help you prepare for the changes ahead and protect your legacy.

Revisit your will

Many couples chose to leave all of their assets to each other in their wills. This can create significant legal issues if the couple divorces and they don’t each update their wills. In most Australian jurisdictions, a divorce does not automatically revoke a will, but it does revoke any clauses that mention the ex-spouse. For example, if you have appointed your ex-spouse as an Executor or Trustee, those appointments will no longer apply, and new people will need to be appointed to those roles. Similarly, any gifts that you make to an ex-spouse in your will are also revoked and you will need to re-think who you would like to benefit from your estate and update your will accordingly. These automatic revocations may mean that the will is incomplete if it is not reviewed and updated after a divorce.

For this reason, revisiting your will is one of the first and key steps in the divorce process to ensure you pass on your assets to the people you want.  A comprehensive estate planning review will also include updating the beneficiaries of assets outside your estate, such as superannuation and insurance.

A big question is whether a person should update their will before or after their divorce. There are two sides to this debate. While it’s usually a good idea to change your will before you divorce as your spouse will be entitled to your assets until your divorce is official, sometimes it’s better to wait for the official separation of assets and formal property settlement so that each party is clear on the assets that they own post-divorce. If the property settlement is taking some time, then it may be a good idea to put an interim will in place to cover the period between separation and the formal division of assets.

Once a settlement has been reached, it will be important to create or update your own will to deal with the assets that you own after the divorce and any changes to your beneficiaries as a result of the divorce.

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Vincent Stranges, Head of Product at Generation Life, said: “Estate planning will be a significant focus for us in 2023. With the Federal Government signalling its intention to legislate the objective of superannuation and introduce limits on superannuation balances, a shift away from superannuation as an intergenerational wealth transfer vehicle is inevitable.”

“At Generation Life, we recognise that estate planning certainty is important for those that are seeking to or have accumulated wealth. We’re excited with the latest major updates to our estate planning offering, providing the financial adviser network with a sophisticated, but simple way of helping their clients transfer wealth, offering peace of mind without sacrificing flexibility.”

Generation Life’s LifeBuilder EstatePlanner feature helps financial advisers by providing a tax-effective wealth accumulation solution that also provides their clients with the flexibility to structure their investment, as part of – or outside of – their will and legal estate. The Future Event Transfer feature can be used to control when and how their client’s investment will be tax-effectively transferred and accessed by the next generation on the death of the owner, including locking in a regular amount to be paid to the recipient once ownership is transferred. Alternatively, they can use the beneficiary nomination feature, where they can set one or multiple beneficiaries to receive the proceeds of their investment on the death of the nominated life insured.

These new enhancements also offer financial advisers the ability to give their clients peace of mind, knowing that they control when the future transfer of their investment may occur and that they can change it at any time. If they select their death as the transfer event, the tax-free transfer passes outside of their will and legal estate and potentially helps to avoid the challenges and claims that can be associated with a will. They can also avoid possible lengthy delays and legal costs associated with the granting of probate or the administration of their estate.

This enhanced flexibility of Generation Life’s investment bond solutions has been designed with advisers and their clients in mind; offering both parties the ability to curate tailored investment bond portfolios that can flex to their unique personal needs and financial goals.

Vincent Stranges, Head of Product at Generation Life, commented: “The Generation Life LifeBuilder provides a tax-effective wealth accumulation solution with embedded flexible estate planning and intergenerational wealth transfer features solution, particularly in light of the expected changes to superannuation.”

Generation Life’s extensive range of investment solutions means that clients can access personalised investment bond options, while financial advisers benefit from a far easier process to put those options into action. Recognised as an industry leader and creator of innovative financial products and solutions, Generation Life is continuing to build momentum. In late 2022, Generation Life was recognised with four Investment Bond Excellence Awards including the Overall Investment Bond Excellence Award, announced by Plan For Life, Actuaries & Researchers^[1].

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[1] Plan for Life, Investment Bonds Market Report for period ended 30 June 2022.

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Put a will in place to make sure that the loves of your life are protected.

Along with the chocolates, flowers and dinners – all of which are great but fleeting traditions associated with Valentine’s Day – Australia’s leading trustee company is urging all Australians to make a more profound commitment this year – through their Will.

“There is nothing that says commitment and care like showing the people you love that you are thinking of their future and security for when you’re not there,” said Susan Bonnici, Estate Planning Solicitor at Equity Trustees.

“The best place to start is making sure you have a valid will in place which takes into account the ones you care for most – your partner or spouse, your closest friends, your family or even a charity that’s close to your heart.”

So this 14 February, while you do the traditional Valentine’s things, make the time to think about how these special people in your life would get by without you, and as unconventional as it sounds, showing how much you care by organising any provisions you’d like to make for them from your estate.

Considerations include:

1. Making sure your assets (what you own) go to the people you want them to. This includes taking into account provisions for de facto partners where you have been living together for less than two years or have no children.
2. Ensuring sentimental items which may be high in emotional meaning but not dollar value will be distributed as you intend– items such as engagement or wedding rings, war medals, or family photos. By spelling out these items, you can ensure they are not inadvertently lost or disposed of unintentionally by an executor.
3. Describing and including charities you love if you want to leave a bequest – a useful tip is to ensure that the description is inclusive enough to apply even if the charity changes its name or purpose over time.
4. Whether a trust should be created to hold and protect assets for the use of vulnerable family members – or future ones (such as grandchildren).
5. Not giving it ‘to the government’ – while it’s a myth that dying without a Will means your assets and money goes to the government, it can happen after a long and complicated process if there are no beneficiaries identified. In addition, sometimes there are tax consequences associated with some inheritances which need to be thought through.
6. Ensure your ex is out of the picture – If someone dies before a divorce is finalised, then any provisions made for their ex-partner in their Will continue to apply. The same goes for separation and if neither side have a Will in place, it’s possible that in the eyes of the law, they’re still a couple.

“None of the above might make for terribly romantic conversations – but the consequences of not working through each of them is even less so! It’s vital to get individual advice about what estate planning would work best for your circumstances and put a will in place to make sure that the loves of your life are protected, and your wishes are respected. Surely that’s one of the greatest ways to show your love to the ones closest to you this Valentine’s Day,” said Ms Bonnici.

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Spurred on by a global pandemic and the beginnings of the great intergenerational wealth transfer, philanthropy is growing in importance for investors.

Compile a list of the biggest emerging trends in financial advice, and the growing client interest in philanthropy is likely to figure prominently.

This should come as no surprise, sandwiched as we are between a global pandemic that forced a wholesale resetting of individual values and priorities, and an oncoming intergenerational wealth transfer expected to top $3.5 trillion in Australia alone^[1].

But whilst Coredata research^[2] revealed that heightened interest in philanthropy – along with ESG investing – was especially evident amongst high-net-worth investors, the desire to leave a legacy and make a difference is not limited to the very wealthy or the very old. Financial Advisers will thus increasingly be called upon to help a wide range of clients optimise their approach to charitable giving.

As positive and uplifting as philanthropy can be, for both the giver and the recipient, there are many traps for the unwary. Without expert financial (and other) advice, the best intentions can come undone, spectacularly foundering on a range of hazards, including volatile stock markets, legal action by disaffected family members, ineffective tax planning, and poorly chosen recipients.

In this article, we will explore client philanthropy through a consumer protection lens, identifying the major risks clients face in making their charitable efforts as effective as possible, along with the strategies financial advisers can employ to help clients mitigate these risks and, ultimately, protect their legacies.

Client philanthropy – a snapshot

Between 2014 and 2019, the charity sector in Australia grew by around 60%^[3]. And, whilst most recent growth has been more subdued, courtesy of the global pandemic, Australians are now making donations and bequests to charity to the tune of around $13 billion per annum^[3].

Although we like to think of ourselves as a generous community, on a global basis, Australian individual giving has plenty of upside, with the dollar value of donations and gifts sitting at around 0.38% of GDP^[5], notably lower than the UK (0.54%), New Zealand (0.67%), and the US (over 1%).  On a positive note, the number of Australians who give is high, estimated by research^[6] to be around 81% of the population. Aside from cash donations, around 60% of the population support charities by donating goods (clothing, food, furniture), whilst 30% donate their time, as volunteers.

The causes currently most important to Australians include medical and cancer research, children’s charities, and animal welfare. Table 1, below, ranks the top eight causes.

It is important to note that the importance of causes can change over time, and can also vary by generation, as shown in Figure 1, below.

Protecting the effectiveness of philanthropic efforts

Effective philanthropy means supporting organisations that are likely to meet the social and/or environmental goals those organisations share with their donors. It requires donors to:

• undertake a thoughtful decision-making process
• identify their own philanthropic goals and values
• conduct due diligence before selecting organisations to fund
• ensure that organisations are supported in a way that allows them to thrive.

Values alignment as informed consent

Central to establishing an effective, sustainable philanthropy strategy is identifying what values and objectives are important to your client, and then finding a suitably aligned recipient organisation.

Taking the time upfront to articulate motivations and values allows the development of a proactive, effective philanthropic plan rather than giving reactively to funding requests. Ultimately, these motivations and values provide the anchor for decision-making at each step of the philanthropy process.

The overall result will be a giving strategy that the client understands, is happy with, and will be more committed to over the long term. It’s a type of informed consent.

There are literally hundreds of causes one could support, and thousands of charities willing to accept that support (over 43,000 in fact, just in Australia^[8]).

The comprehensive philanthropy toolkit produced by Perpetual^[9] includes a number of useful worksheets, matrices, palm cards and other resources advisers can use with their clients to help them:

• reflect on motivations and values that will underpin the philanthropy
  • this is a long list that can include high-level values such as accessibility, community, innovation, and peace
• narrow these down to core values
• uncover issues of interest
• select organisations to support.

Examples of issues uncovered might include:

• civil rights and justice
• arts and Culture
• animal welfare
• education
• social services
• conservation and the environment.

Underneath each of these ‘’umbrella issues” is likely to sit a long list of specific issues, for example, under education, it is possible to support organisations focused on adult education, childhood education, and education for indigenous communities, just to name a few.

A focus statement frames a client’s values and motivations and connects them with their philanthropic intentions, as such it can help guide a philanthropic plan.

Do due diligence and select suitable recipients

Proactively identifying organisations to fund, rather than reactively responding to miscellaneous funding requests, helps ensure giving is targeted at organisations aligned with one’s goals and values.

A proper due diligence process involves assessing an organisation’s legal status, overall health, strategic direction, and visible programmatic impact and metrics. Poorly run organisations may have the right intentions but may not survive long enough to make effective use of your support, whilst opaque reporting can make it hard for you to judge whether your donations are being spent wisely. Completing this due diligence process thoroughly will enable funding decisions to be made with more confidence.

There are a number of ways to find suitable organisations, including seeking recommendations from your/client’s networks and researching online. Another option is to approach a third-party ‘charity matching’ service (such as Seedling Giving) where experienced philanthropic advisors learn can tailor a specific giving opportunity based on the client’s focus areas.

Donor networks are another valuable resource, and in Australia, there are networks to support philanthropists to find and solicit recommendations. These include Perpetual’s IMPACT Philanthropy Program, Australians investing in Women, and the Australian Environmental Grantmakers Network.

Relying on expert help and credible resources can also help avoid supporting an organisation that doesn’t have Deductible Gift Register (DGR) status, or worse still, is a fake charity.

Useful online resources to help screen organisations include the DGR (Deductible Gift Recipient) Register, which can be accessed via the ATO website, and the Australian Charities and Not-for-profits Commission (ACNC) website.

Selecting the right vehicle to protect the effectiveness of giving

Two more crucial protections to ensure a sustainable, effective giving strategy are:

1. setting and allocating a philanthropy budget, and
2. selecting the right structure and vehicles for giving.

The importance of setting a budget has taken on heightened importance in recent times, where market volatility and rampant inflation and rising interest rates have eroded the disposable income of many households. Charities frequently fall victim to economic downturns and setting a budget, which can be regularly reviewed, can help ensure your client can continue to achieve their giving goals in good times and bad.

Whilst the tax deductibility of donations is rarely an end in itself, there is no doubt that structuring giving in a tax-optimal way can amplify the ability of the donor to support their chosen causes and can also provide advantages to the recipient organisation(s).

As a financial adviser, you can obviously provide immense value by getting the greatest amount of money to a charity for the least out-of-pocket expense to the donor. Understanding the range of structures and options available is thus crucial.

Direct giving is the more common form of giving in Australia^[10]. Donors participate in direct giving through one-off donations to charities, through workplace giving, street appeals, fundraising dinners, or sponsoring our co-workers and friends for charitable fun runs or even for growing facial hair.

This kind of giving is often spontaneous or a reaction to something (i.e., a natural disaster) or a request from someone. Such contributions qualify for a tax deduction which can be spread over up to 5 years. Donors can also qualify for tax deductions when they donate long-term appreciated non-cash assets (e.g., shares or real estate, etc) directly to charitable organisations or foundations.

Structured giving

More structured, formal, vehicles more suitable for giving larger amounts over a long time period include private and public Philanthropic Trusts.

Since being enabled by legislation over 20 years ago, Private Ancillary Funds (PAFs) have grown in popularity, to the point there are now estimated to be around 2,000 PAFs holding $10 billion in assets and making grants of $500 million annually^[11].

Figure 2 charts the recent growth of PAFs.

A PAF is a fund set up to manage investments and distribute funds to DGR charities. Each year the trust must distribute at least 5% of its funds to DGRs.

A major advantage of PAFs is that donations to the PAF are tax deductible when they are made, as opposed to when funds are allocated to charities. This removes the timing of donations as an issue for tax purposes and means a large deduction can be claimed for funds paid to the PAF upfront, even though the donations subsequently made from the fund may then be spread over many years.

A downside of PAFs is that they can be administratively cumbersome, as they require a board of trustees, and ongoing funds management, and are subject to the ongoing compliance requirements of both the ATO and ACNC.

This administrative burden can be avoided by instead setting up a sub-fund within a Public Ancillary Fund (PuAF). These funds manage the investment and administration of the sub-fund while giving donors full authority over where donations are made. The tax advantages are the same as for private funds, although the annual distribution obligation is slightly lower, at 4% per annum. PuAFs are typically managed by non-profit entities, community foundations, and the charitable arms of for-profit financial service providers, such as

Perpetual. As an example, Perpetual is the trustee of the Perpetual Foundation, a PuAF which allows donors to open an Endowment (sub-fund) with 20,000 or more^[13].

Estate planning

Whilst charitable giving can start during a donor’s lifetime, many individuals choose to give bequests via their estate.

Bequests are gifts from your assets – whether they be a transfer of cash, shares, or real estate – made through your estate plan or will. If the recipient is an existing DGR, they can avoid any Capital Gains Tax that may have been payable if that asset had been given to another beneficiary.

The downsides of this approach include the fact that the donor is not around to see their money put to work, they receive no tax benefits during their lifetime, and they can be open to legal challenges from disaffected family members.

Protecting gifts from legal challenge

Sadly, bequests to charity are frequently and easily contested by disaffected family members. One study^[14] by Australian Centre for Philanthropy and Non-profit Studies (ACPNS) revealed that in 47 cases where wills were contested, 33 charities lost more than half the amount originally designated to them. The lack of legal resources or willingness to engage in lengthy and costly disputes means that many charities will often aim to secure some sort of settlement, usually a fraction of the initially promised amount, rather than legally contest any challenge.

There are a number of steps advisers can take to ensure their client’s wishes will be difficult to dispute:

Help establish a client-charity relationship. Ensure your client is taking steps to give on a regular basis or volunteer with the specific charity they wish to leave a bequest to show they have an interest in that charity’s mission
Encourage your client to ensure their family members are aware of and even involved in, the giving program (this type of family-wide engagement is also recommended as a way of making intergenerational wealth transfers much smoother)
Ensure intentions are made before declines in mental/physical health
Develop paperwork to show there has been a thorough and thoughtful process to decide on the charity and specific bequest value.

In other words, advise your clients to find their preferred charity today. Recommend that they start giving what they can today, even if it is a nominal amount, like $50 per month. After they pass, they will no longer have control.

Undertaking the steps above to solidify their intention and their relationship with the charity will help minimise the contestability of your client’s intentions.

Protection from market downturns

Research^[15] suggests charitable donations can be quite elastic in response to stock market volatility. With the market downturn and inflation/interest rate increases leading some to question the age-old 60/40 approach to portfolio construction, many charities and not-for-profits are understandably nervous about the impact on their revenues.

Regardless of the structure used by your clients for their giving, the following principles can help make their philanthropy more sustainable and more resilient in the face of economic uncertainty:

• basic investment principles – diversify and take a long-term view
• narrowing the focus of philanthropic activities to ‘core issues’ and paring back non-core donations if necessary
• maximising tax effectiveness of giving structures
• designing a budget that can be adhered to even in uncertain times.

The ultimate consumer protection – expert advice and education

As with financial matters more broadly, expert advice can be the ultimate consumer protection for clients seeking to establish an approach to philanthropy.

Philanthropic advisers provide specialised assistance with developing philanthropic strategies, setting up your giving vehicles, and carrying out specific gifts. Advisers trained to give philanthropic advice can also help their clients develop a tax strategy to integrate philanthropy into their overall wealth and estate planning.

Financial Advisers are clearly well-placed to operate in this space, and the number of financial advisory firms offering formal philanthropic advice and services is increasing.

Client education in this area can help make their giving more effective, and is available from formal education providers, affinity groups and peer networks.

Education providers and affinity groups offer educational support for high capacity donors, such as events, workshops, conferences, research, online courses, and programs.

Affinity group examples in Australia include groups focusing on the Arts, Homelessness, and Aboriginal and Torres Strait Islander communities. Education providers include the Australian International Development Network along with those mentioned earlier in this article. Peer networks are organisations that manage networks of high-capacity donors.

In summary

As community interest in philanthropy and charitable giving continues to increase, financial advisers are ideally placed to help clients develop sustainable, effective, giving strategies. The right advice can help your client optimise the tax position of their strategy and avoid many of the risks and hazards that can bring a strategy undone.

As well as enabling advisers to deepen their relationships with existing clients, helping clients with their giving efforts can also help advisers engage younger family members, which in turn can be instrumental in protecting intergenerational wealth.

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References:
[1] https://www.afr.com/policy/economy/baby-boomers-to-pass-on-224b-a-year-by-2050-20211206-p59f7d
[2] https://coredatainsights.com/client-insights/crestone-2021-state-of-wealth-report/
[3] https://www.philanthropy.org.au/wp-content/uploads/2022/11/Giving_Trends_and_Opportunities_-_Philanthropy_Australia_Report_2022.pdf
[4] Ibid.
[5] Ibid.
[6] https://mccrindle.com.au/app/uploads/reports/Australian-Communities-Report-2021.pdf
[7] Ibid.
[8] Ibid.
[9]  https://www.perpetual.com.au/financial-advice/stanford-philanthropy-toolkit
[10]  https://www.philanthropy.org.au/wp-content/uploads/2022/11/Giving_Trends_and_Opportunities_-_Philanthropy_Australia_Report_2022.pdf
[11] https://www.fpmagazine.com.au/how-pafs-reshaped-philanthropy-379495/
[12] https://www.askright.com/a-closer-look-at-pafs-in-2020-part-1/
[13] https://www.perpetual.com.au/financial-advice/stanford-philanthropy-toolkit
[14] https://probonoaustralia.com.au/news/2008/11/family-challenges-to-charitable-bequests/
[15] https://www.philanthropy.com/article/how-stock-volatility-could-take-a-swipe-at-charitable-giving-and-grant-making/

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Advisers are ideally placed to act as the facilitator of estate plans for their clients.

If there were a prize for the financial advice topic with the most associated myths and misunderstandings, estate planning would have to be in with a strong chance.

“It’s all about what happens after death”, “it’s mainly about Wills and life insurance”, and “only a lawyer can do estate planning” are just some of the misconceptions that are preventing many advisers from getting more actively involved in the discipline of estate planning. Which is a great shame and a missed opportunity, not just because estate planning has long been one of the top advice needs of consumers^[1], but because the evolving social, cultural, and technological landscape is making the complexity of estate planning considerations, and thus the need for expert advice, greater than ever before. And arguably, no one is better placed to help everyday Australians navigate these complexities and optimise their decision making than financial advisers.

In this article, we will examine 5 macro trends shaping the estate planning landscape, and why these trends in turn present 6 key reasons for advisers to strengthen their estate planning offering now.

The key objectives of estate planning

Before we explore the 5 trends, it is worth briefly revisiting some common objectives in estate planning (many of which don’t involve an ‘estate’ as such):

• ensuring that wealth is passed on to intended beneficiaries, and not unintended beneficiaries
• optimising the taxation of wealth transferred
• allowing for any special future needs of beneficiaries and protecting them in the event of their own challenges (divorce, bankruptcy, health issues)
• providing for situations where decision making capacity becomes limited (for example due to dementia) through the use of ‘living estate planning’ mechanisms
• optimising the provision of aged care
• giving special consideration to a family-owned business, in terms of the ability/desire of family members to carry on the business, and any complexities relating to multiple owners.

As can be seen, there are a great many issues, many of them complex, that make effective estate planning beyond the realms of ‘do it yourself’ for the vast majority of people.

1. The great wealth transfer is underway, but it may go astray

Around the world, the great intergenerational wealth transfer will shift trillions of dollars in wealth from older to younger generations.

In the US, the quantum of this transfer is projected^[2] to be between USD $30 and $68 trillion over the next two or so years, whereas in Australia around AUD $3.5 trillion is expected to be handed down over the same period^[3]. By 2050, Australian Baby Boomers will be passing on an estimated $224 billion each year^[4].

While the majority of that $3.5 trillion may be a decade or more from changing hands, researchers from Queensland’s Griffith University have calculated that around half a trillion dollars is currently sitting with individuals aged 80 or older, the transfer of which is therefore likely to be imminent^[5].

Unfortunately, without proper estate planning, these transfers are unlikely to go smoothly, with the real risk of assets ending up with unintended recipients, tax reduction opportunities being lost, and the irreversible breakdown of family relationships.

Some of your clients may be the ones about to transfer, or receive, these inheritances, making their estate planning arrangements directly relevant to you.

Research conducted on over 3,250 families who transferred wealth found that 70% of intergenerational wealth transfers fail because no preparation of the successors was taking place.^[6]

And yet despite this, it is estimated^[7] that up to 70% of Australians don’t have a legally binding will.

2. Changing family structures make disputes more likely

As society and cultural norms evolve, so too are family and household structures changing.

According to 2020 Census data^[8], around 3.5% of families are ‘blended’, meaning families with two or more children, at least one of whom is the natural or adopted child of both partners, and at least one other child is the stepchild of one of them.

A further 6.5% of families are stepfamilies, where there is at least one resident stepchild but no child who is the natural or adopted child of both partners.

Collectively that means around one in eight families are step or blended, an increase of around 20% since the 2016 Census. Additionally, we are seeing a significant increase in grandparent led families, as well as the emergence of ‘rainbow’ families, parented by LGBTI couples.

Divorce rates are also on the rise, with nearly 200,000 Australians filing for divorce in the past two years, the highest number in more than a decade^[9].

This evolving complexity in family structures makes the recalibration of estate planning strategies even more crucial, with one expert believing it to be the main driver of an 80% increase in family disputes about wills and estates in the past decade^[10].

Critically, the application of the law in this area is also evolving, with a ground-breaking ruling by the Victorian Supreme Court in early 2022 putting parents of blended families on notice that their Wills must consider their stepchildren and not only biological offspring^[11].
The court ruled parents are under a “moral duty” to consider the financial well-being of children who come from another relationship, even when the offspring contesting the inheritance did not live with them.

3. The growth of SMSFs and associated estate planning complexities

The growth of self-directed investing, underscored by the surge in new, mainly younger, retail investors since the start of Covid, has also been mirrored in SMSF establishments, with ATO figures showing that FY21 saw the largest increase in the number of SMSF being established since FY18, with 25,312 new funds^[12].

Much of the growth has come from the 35 to 44 age group, which represented around one-third of all new establishments. SMSFs now account for around one quarter of all superannuation assets in Australia.

Aside from the complexities in managing compliant funds – which can often take new SMSF members by surprise – the rules around death benefits are different to those applying to APRA regulated funds, bringing different, more nuanced, estate planning considerations into play.

Some of the challenge lies in the ‘mum and dad’, nature of SMSFs.

According to the ATO, around 69% of SMSFs comprise two members^[13] (around one quarter are one member funds), with these members typically being life partners. It is also common for these members to be trustees of the SMSF, as well as executors as each other’s estate, creating the potential for conflicts of interest, and associated legal action, if the appropriate estate planning instruments are not in place.

One of these instruments is a binding death benefit nomination. An advantage of an SMSF is the flexibility for members to have binding death benefit nominations which do not expire or lapse, and which are not subject to the prescriptiveness of Regulation 6.17a of the SIS Act in relation to signatures and witnessing^[14].

A recent court case provided clarity around this and is highly relevant to SMSFs and financial advisers.

In Hill v Zuda [2022], the High Court dismissed an appeal by the daughter of an SMSF trustee, who had earlier tried to stop a death benefit being paid to that trustee’s widowed de facto partner, on the basis that the Binding Death Benefit Nomination didn’t comply with regulation 6.17a and was therefore of no effect^[15].

In dismissing this appeal, the High Court reinforced that regulation 6.17a does not ordinarily apply to SMSFs. It should be noted, however, that the regulation does apply to an SMSF where its trust deed refers to or imports the application of the regulation.

Another common scenario in SMSFs is choosing to make superannuation pensions reversionary on death. What on the surface can seem a sensible idea can actually remove a great deal of flexibility from the surviving spouse/member, and may create an unwanted tax burden, especially if transfer balance caps are breached.

These are just two of a myriad of evolving estate planning considerations applying to SMSFs around which most people would need up to date expert advice.

4. As our longevity increases so does the incidence of dementia

Robust estate planning isn’t just about what happens after death, it’s also about putting mechanisms in place should accident or illness rob us of the ability to make current decisions ourselves. This is becoming particularly important in the context of our ageing population; whilst we are living longer, the prevalence of dementia is also increasing (see Figure 2).

The essence of ‘living estate planning’ is the ability of spouses and children to easily – legally – make decisions on behalf of a person who has lost their capacity to do so themselves. Those decisions could relate to financial affairs, accommodation arrangements, and health care.

Health care and medical treatment can be a particularly sensitive issue. Each individual has their own personal philosophy on living and dying, and whilst the default objective of health care professionals may be to save a life at any cost, this may not align with the wishes of the individual themselves, for whom quality of life is more important.

It is for these increasingly common circumstances that the variety of ‘living estate planning’ instruments – such as Powers of Attorney, Guardianship and Advanced Care Directives are designed, and with which people need expert help.

5. Digital assets and digital wealth

A few years ago, a survey by the NSW Trustee and Guardian found that only 3% of Australians with a Will had decided what to do with social media accounts after their death^[17]. At the time, this finding was probably dismissed as amusing trivia.

Now, however, in our highly digitalised world, the concept of digital assets and digital wealth is becoming increasingly accepted, as is the recognition that – as with traditional wealth – digital wealth will form part of an individual’s estate. Digital wealth can include digital stores of value such as cryptocurrency, PayPal accounts, and even flight credits. Along with non-financial digital assets (including social media accounts which can have valuable connections and followers, and online photographs), digital wealth needs to be considered as part of a comprehensive estate and succession planning strategy, so that on their death or incapacity, their digital wealth together with their other wealth is dealt with tax effectively and in an asset protective manner.

6. The majority of estate planning work doesn’t require legal advice

Notwithstanding the obligations imposed by ASIC via RG 175, sections 354 and 403, many financial advisers perceive estate planning to be solely about the preparation and execution of formal legal documents, and as such, beyond their expertise and the legal boundaries of their advice licence. As a result, some tend to only give cursory attention to such discussions, generally recommending the client discusses their testamentary wishes with their lawyer.

In actual fact, neither assertion is true. Not all aspects of estate planning require the involvement of a legal professional.

Furthermore, whilst only qualified legal professionals may be able to execute certain documents, financial advisers are generally far better qualified to help clients make the actual decisions that are being codified in those documents.

This is because the financial adviser generally has a far more holistic understanding of the client’s family and financial situation, and also because most lawyers are not qualified nor experienced to deal with the vast range of estate planning issues that planners often see within their clients’ affairs.

One example might be the navigation of superannuation death benefits post the 2017 reforms^[18], particularly with SMSFs with pension and accumulation balances. Other areas where many lawyers lack experience and expertise include Centrelink, aged care, and taxation issues arising on death. 

Arguably the most time-consuming parts of the estate planning process revolves around fact finding and decision making, based on discussions that require a familiarity with a client’s circumstances, and which do not constitute legal advice. As such these are discussions a financial adviser is well placed to facilitate:

• appointment, selection, and remuneration of an executor
• choice and selection of guardians and trust appointors
• identification of beneficiaries and their special needs or circumstances
• the identification of the client’s assets, ownership structures and the entities that control those assets
• the distribution and control of assets to beneficiaries
• superannuation interests and binding nominations
• life insurance claims
• relationship issues, including family conflicts and marital breakdowns
• financial insolvency, and
• asset protection issues.

Advisers are often the best placed to facilitate the estate planning process

Financial advisers are often in the best position to assist clients with estate planning issues because much of this information is usually within their files as part of their “know your client” duty, and because they already have the client’s trust.  As such, advisers are well placed to project-manage and co-ordinate an estate planning process directly with their client.

In this process, the financial adviser is working with the client to identify estate planning issues and motivating the client to solve those issues with appropriate legal mechanisms, provided either by the client’s lawyer, or the adviser’s own legal services provider.

It is a model where the financial adviser is very much at the centre, allowing them much more control over the quality and integration of the process, minimising any disconnect between client intentions and outcomes, and allowing the adviser to deepen their relationship with the client and the client’s family.

A major benefit of moving into estate planning facilitation is that it needn’t carry any ongoing administration or compliance burden, involves minimal upfront costs to introduce within a practice, and no legal responsibility if managed correctly in conjunction with a competent estate planning lawyer.

It is also an opportunity for the adviser to demonstrate value and charge appropriate upfront fees (commensurate with what other professionals would charge in this area).

Of course, whilst estate planning advice is not in itself a financial service, it may give rise to the provision of a financial service or product, and the usual compliance guidelines will still apply to these circumstances. Plus, there are other boxes advisers still need to tick before such a move is made, including issues around your licensee, the limitations of your Professional Indemnity cover, and your ability to give tax advice.

In conclusion

Whilst many advisers believe estate planning to be the exclusive domain of legal professionals, in reality financial advisers are often far better placed than other professionals to facilitate the estate planning process, due to their holistic and more up to date understanding of the client’s financial and family circumstances. Whilst some estate planning documents should be left to qualified legal professionals, this generally represents the very end of a process of fact finding and decision making which is not classed as legal advice, and as such is a process which financial advisers are generally more than capable of managing for, and with, their clients.

Understanding this reality is increasingly important given there is an evolving context for estate planning which makes the need for advice – and therefore the adviser opportunity – in this area greater than ever before.

———–

References:
[1] https://asic.gov.au/regulatory-resources/find-a-document/reports/rep-627-financial-advice-what-consumers-really-think/
[2] https://www.forbes.com/sites/josephcoughlin/2021/11/16/millennials-are-banking-on-the-great-wealth-transfer-4-words-why-you-shouldnt-cash-that-check-yet/?sh=5b4a3f402dde
[3] https://www.afr.com/wealth/personal-finance/how-to-get-the-great-wealth-transfer-right-20191205-p53h7b
[4] https://www.afr.com/policy/economy/baby-boomers-to-pass-on-224b-a-year-by-2050-20211206-p59f7d
[5] https://www.afr.com/wealth/personal-finance/how-to-get-the-great-wealth-transfer-right-20191205-p53h7b
[6] https://www.forbes.com/sites/carolynrosenblatt/2011/12/09/wealth-transfers-how-to-reverse-the-70-failure-rate/?sh=544f8ed82879
[7] https://www.abc.net.au/news/2021-03-05/up-to-70-percent-of-australians-dont-have-a/13219682
[8] https://profile.id.com.au/australia/family-blending?BMID=20
[9] https://www.smh.com.au/national/divorce-20220628-p5axco.html
[10] https://www.afr.com/wealth/personal-finance/big-increase-in-inheritance-feuds-among-blended-families-20191212-p53jbs
[11] https://www.afr.com/wealth/personal-finance/court-enforces-rights-of-stepchildren-in-blended-families-20220311-p5a3u5
[12] https://insideadviser.com.au/smsf-numbers-jump-top-industry-fund-growth-in-2022/
[13] https://data.gov.au/data/dataset/self-managed-superannuation-funds
[14] https://www.holdingredlich.com/high-court-ruling-clears-up-smsf-binding-death-benefit-nomination-question
[15] Ibid.
[16] https://www.afr.com/property/residential/3-for-3-million-property-highlights-elder-abuse-risk-20200716-p55cmc#:~:text=Duncan%20HughesReporter&text=Specialist%20estate%20and%20family%20lawyers,they%20are%20not%20properly%20prepared
[17] https://hallandwilcox.com.au/thinking/what-happens-to-your-digital-wealth-on-death-and-incapacity/
[18] https://www.ato.gov.au/law/view/document?DocID=COG/LCG20173/NAT/ATO/00001#:~:text=This%20Ruling%20provides%20guidance%20on,the%20transfer%20balance%20cap%20provisions

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