Zurich’s recent Intergenerational Advice Masterclasses not only brought to advisers deep research, practical solutions and a process to the challenge of becoming the “family adviser”, but they also created a forum where advisers shared their endeavours, successes and failures in the quest to become the central hub in a clients tribe.

In a four part series the dialogue of these Masterclasses is shared, to deliver an increase in the number of Australians seeking financial advice, by tapping into the most powerful institution an adviser can have a positive influence on: the family.

On average, the number of clients that a financial adviser has a family relationship with is, approximately 5% and this position has often been achieved by default[1] . In contrast, advisers who have designed their intergenerational advice solutions, find that 68% of new clients per annum come via referrals from the family circle.[2] This difference is alarming when you consider that:

• A Canadian study shows 39% of adult age children whose parents have a will have not explicitly reviewed it with their parents, and 61% who have deceased parents stated they never discussed it with their parents before they passed away[3] ;
• Only 2% of adult children keep their inheritances with their parents’ financial adviser;[4]
• With the death of their husbands, only 45% of widows keep their assets with the same financial advisers;[5]
• 70% of families fall apart and lose their assets after the transition.[6]

Of these family breakdowns:[7]

• 60%were caused by an internal breakdown of “trust and communication” within the family;
• 25% were caused by a failure to “prepare their heirs”;
• 10% were due to a lack of an agreed-upon “mission” for the family wealth;
• 5% were due to other causes such as failures to file, signing, incorrect interpretation of tax law, etc.

The opportunity that presents is clear and powerful.

Financial advice businesses that can engage clients and assist them and their heirs to discuss, navigate and resolve succession and estate issues by positioning the adviser as the central hub of the process will pro-actively be able to secure the mantle of the trusted family adviser. What businesses are doing to have success in this space includes the development of estate planning capabilities far beyond the minimum that many advisers provide which at its worst involves a cursory paragraph in a statement of advice or a check box in a financial needs analysis.

In the May 2014 Intergenerational Advice Masterclasses, advisers discussed how they were positioning estate planning solutions with their boomer and senior clients.

What was discovered was that components to the success of the strategy included:[8]

• A pitch used with the client to initiate the estate planning conversation that highlighted the opportunities and dangers to the succession intentions;
• A template or set of estate questionnaires to highlight the potential issues for the will maker;
• A relationship with an estate planning specialist solicitor firm OR the facilitation of in-house solicitor services;
• Positioning the adviser in the role of the central facilitator of the estate discussion;
• The adviser offering assessment services to determine the capabilities of beneficiaries, guardians, executors and POA’s with a report and assessment provided to the will maker;
• Upon execution of the estate plan the adviser engages key players in the process (executor, POA’s, beneficiaries) to reiterate the plans and ownership of the facilitation role by the adviser.

These capabilities are being used by advisers successful in the Intergenerational Advice space and are seeing them take the advice process one step further and leapfrogging their competition by connecting with the next generation through preparing heirs to receive and manage wealth. Historically the industry has focused on preparing assets for heirs; these progressive businesses are now begin to offer the other half of that equation – helping prepare heirs for assets.[9]

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[1] Insights from Intergenerational Masterclasses, May 2014, Zurich Australia.

[2] Zurich Australia study of successful family advice businesses 2012-2014.

[3] Accenture Wealth and Asset Management Services, 2012, The Greater Wealth Transfer.

[4] Doolin, Priesser and Williams, 2011, Engaging and Retaining Families, Investment Management Consultants Association.

[5] Doolin, Priesser and Williams, 2011.

[6] Doolin, Priesser and Williams, 2011.

[7] Doolin, Priesser and Williams, 2011.

[8] Insights from Intergenerational Masterclasses, May 2014, Zurich Australia

[9] Doolin, Priesser and Williams, 2011.

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Click here to view Video: The intergenerational advice challenge and solution – Part 2

Click here to view Video: The intergenerational advice challenge and solution – Part 3

Click here to view Video: The intergenerational advice challenge and solution – Part 4

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Everyone can benefit from estate planning: SUPERCentral

One of the reasons people give for not sorting out their estate planning is that they don’t think they have enough assets to warrant an estate plan.  Most people are dead wrong about that.

There are five documents that make up a basic estate plan:

• Will
• Superannuation Death Benefit Nomination
• Enduring Power of Attorney
• Appointment of Enduring Guardian
• Living Will (Health Directive)

Estate planning is not just for the wealthy. The advent of compulsory superannuation has meant that every worker in Australia now has a significant asset that sits outside the reach of their Will.  Their super benefits are held in a trust controlled by a third party trustee.  As such those benefits do not form part of a person’s estate and cannot be regulated by their Will.

So now the Will is not enough; they will also need a death benefit nomination provided to the trustee of their super fund.  With that additional requirement we have estate planning, not simply Will preparation but something more.

“But I haven’t got that much super”, you cry.  Many public offer super funds have life insurance for the member as an associated benefit so it’s not just the amount of the employer contributions that will be at stake but possibly also a substantial amount of life insurance if the member were to die early or unexpectedly.

And it doesn’t stop there.

With more and more people suffering from mental incapacity, either through age-related dementia or while suffering a condition that in an earlier time they would not have survived, the power of attorney has again become important.  Now we can create a power that continues to have effect despite the grantor’s mental incapacity – an enduring power of attorney.  So there’s another part of the estate plan that needs to be implemented for everyone – not just the wealthy.

In some States there is also the capacity for a person to designate who their guardian should be if they become unable to look after themselves.  In most States a separate appointment is necessary of someone to have the right to decide where that person will live and what sort of treatment they should have if they can’t decide for themselves.  Such a guardianship document is particularly necessary if they have no capable next-of-kin.  Another piece of the estate planning puzzle.

And while we’re talking about medical science, most people do not want their loved ones to go through the anguish and cost of keeping them alive artificially.  They want a document that makes clear their wish for such machine-dependent vegetative life to be brought to an end.  Another part of everyone’s estate planning.

These are the five documents that almost every adult in Australia needs – five documents that make up their estate planning.

Are any of these dependent on how much money the person has?  Clearly not.

Would only wealthy people want this level of protection?  Nonsense.

And we haven’t even begun to discuss the additional estate planning needs of the over two million people with a small business in Australia, many of whom will likely have a family trust and/or company to deal with which also sits outside the power of their Will.

SUPERCentral is Australia’s leading online SMSF Services provider to Accountants, Financial Advisers and SMSF Administrators.

SUPERCentral has just launched an estate planning service that assists the will maker in having peace of mind that the estate will be distributed in the way that they want and loved ones are cared for financially.

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• More onerous revenue claims against wills/estates have led to the increasing desire to protect estates from future claims
• ‘Blended families creates potential for unhappy spouses and step children contesting the will

Anecdotal evidence suggests 2/3rds of Australians do not have a will: Townsend lawyers.

The current available survey evidence is that many adults in America do not have a will^[1].  Anecdotal evidence suggests the same in Australia.  Combine this statistic with the estimated two thirds of existing wills likely to be out-of-date owing to an individual’s changed circumstances, this leaves around 85% of adults without any means of adequately allocating assets in the event of death.

This is a tragedy.  Many of these people will let their families down by not having in place the proper arrangements to protect family members and minimise tax on both the estate and the family member.

There have been a number of significant social and regulatory changes which have led to the situation that even if one does have a current will in place, it may no longer suffice to cover all future eventualities.

What has changed?

Previously, the will was used to ensure certainty in the transfer of assets on a person’s death to their family, and to avoid any disputes arising from this process.

Now a number of factors have complicated the process:

• There has been a massive growth in the uptake of financial products such as discretionary and superannuation trusts and funds, that fall outside the parameters of a will.  One of the drivers of this growth has been changes in superannuation law making this vehicle so much more attractive from a tax point of view and as a safe haven from bankruptcy trustees.  A will cannot regulate how these trust assets will be distributed
• There has been substantial growth in litigation disputing the allocation of assets upon death by beneficiaries. Lawyers are even now specializing in estate challenges.  Courts have ruled that solicitors owe a duty of care to the deceased’s beneficiaries so that if the will has not been properly drawn those beneficiaries can sue the solicitor who prepared it
• The growth in the incidence of divorce and partnership breakdowns, leading to what is now called the ‘blended family’, has created the potential for unhappy spouses and step children to contest the will
• More onerous revenue claims against wills and estates have led to the increasing desire to protect estates from future claims
• Growing levels of wealth in baby-boomers sometimes held across different countries, in different structures, and even subject to claims by disparate beneficiaries from different families!

The result is that a significant proportion of ordinary people now need a comprehensive range of documents in an estate planning package to cover all eventualities after their death. A will has become only one of the documents a person needs to have in their portfolio to protect their assets for future generations.

An effectively drawn will and the other estate planning documents need not cost a fortune and will repay the set up costs many times over.

[1] http://west.thomson.com/about/news/2008/06/30/findlaw-survey.aspx

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Ross Higgins

Many things can go wrong when preparing wills and setting out clear instructions for dispersing an estate. Ross Higgins from Austock Life highlights some of the big mistakes that he see in his work with lawyers and financial planners.

1. Not achieving intergenerational wealth transfer objectives
2. Leaving your Will open to legal challenge
3. Not simplifying complex wills and estates
4. Dedicated purposes in estate planning – clear direction of your intent

“So what big mistakes are people making with their wills?

“What can upset the wishes of people when they die and lead to their wills being disputed?

“Is this a growing problem with blended families?

“I believe that contested wills and estate planning bungles are a big problem that some plain thinking and sensible planning can avoid,” said Ross Higgins, MD of Austock Life.

1. Not achieving intergenerational wealth transfer objectives

Testamentary trusts are a common vehicle to pass on wealth and can also establish a level of control beyond one’s death. These are not straightforward structures and are usually created under a person’s will. A testamentary trust not only requires establishing the trust under your will and finding ‘willing’ trustees, but can be impracticable for smaller dollar bequests. As a form of trust they also require annual administration and tax reporting costs and can be inflexible and costly to unwind.

As an alternative, parents (and especially grandparents) can use modern insurance bonds to plan ahead with “peace-of-mind” about how, when and to whom their estate’s wealth (or part of it) will be distributed to the next generation.

Some modern imputation bonds have special design features for passing money cleanly to children and grandchildren – and with the following advantages:

• allow for multiple beneficiaries with different entitlements;
• be tailored for meeting small and large bequests;
• are low cost; and
• operate in a low maintenance “set and forget” and tax-effective environment.

2. Leaving your Will open to legal challenge

Legal challenges can arise due to disgruntled beneficiaries and others left out of the Will, or someone just being unhappy and wanting to overturn elements, such as a charitable bequest. This can cause costly, lengthy (and unhappy) legal disputation.

There is a simple and tested solution though:

“It is better to place the money out of reach of the Will and put it beyond challenge. Modern insurance bonds are increasingly being used for making protected bequests and can even be done as ‘secret/confidential bequests’.  They can also be established for ‘set purposes’, which can be particularly useful to create inheritances for children and grandchildren.

“Because Insurance Bond Nominations can be set up as “excluded assets” from legal estates – therefore bequests made in this fashion can be put beyond Will disputes” said Mr Higgins.

“The other upshot of using Insurance Bond Nominations for non-estate bequests is that these can be made in secret because these types of inheritances are not subject to Probate procedures (and costs) and hence not brought within the public domain.”

3. Not simplifying complex Wills and estates

An Insurance Bond Nomination being outside the deceased’s Will and legal estate (and possibly made in secret) opens strategies to use a Nomination in conjunction with a Will, or as an alternative estate planning arrangement.

For instance you can use a standard Will for certain beneficiaries, but separately establish Insurance Bond Nominations to provide for other beneficiaries.  The Nomination could:

• provide for children of previous marriages or a new spouse’s children;
• solve potential conflicts and inequities between children and grandchildren that might be difficult to handle just under a Will; and
• privately (secretly) meet moral obligations to someone such as a good friend or trusted employee.

4. Dedicated purposes in estate planning – clear direction of your intent

“We are now seeing a significant proportion of our new business (just over 40%) invested into ChildBuilder bonds – and many of these are established with a “stated intended purpose” for the child’s or grandchild’s expected use of the investment’s proceeds.

ChildBuilder’s most common ‘intended purposes’ that Austock Life is seeing include:

• first home deposits and funding the move out of home
• education funding and job qualifications
• or simply starting a family

“A special innovation with ChildBuilder is an extensive menu of ‘intended purposes’ that parents (or grandparents) can choose from when establishing a ChildBuilder Bond” said Mr Higgins.

Specifying an intended purpose for ChildBuilder works in much the same manner as someone expressing non-binding instructions in their Will for the particular use of a bequest.

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What are non-estate assets?

• Jointly owned assets, such as the family home that automatically passes to a surviving spouse as joint owner
• Assets held through a family trust
• Life insurance policies – where a nomination of beneficiary is made
• Superannuation nomination benefits are also normally a non-estate asset

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SUPERCentral’s online Estate Planning Guide designed for advisers.

Trustees must now pay attention to ownership details and their adviser can help guide them through the process with expert estate planning support.

SUPERCentral’s flagship online Estate Planning Guide and Testamentary Manual has been designed specifically to assist advisers in guiding their clients through the intricacies of their testamentary requirements and to gather the information necessary for the formulation of an estate plan suitable for every client, regardless of the size or complexity of their financial affairs.

It is a holistic, cost effective online program that enables the adviser to maintain close contact with their clients, from the initial client briefing through to the signing of their clients’ estate planning documents.

The commentary accompanying the questions in the Estate Planning Guide and Testamentary Manual inform both the adviser and their clients about the important things that need to be considered in respect of each of the topic areas.

“You know your clients need advice on their estate planning. As their trusted adviser, you have helped them to nurture and build their wealth over the years through good times and bad, advised them how to grow and manage the investments in their SMSF, and implemented their retirement strategy.

“They now need to think about the transfer of the ownership and control of their wealth, not just on death but also in the event of physical or mental incapacity,” said Brian Hor, Special Counsel, Superannuation & Estate Planning at SUPERCentral.

Getting the estate planning strategy right is too important to simply refer out to a lawyer who may or may not understand how your client’s overall wealth is structured, who doesn’t have the necessary knowledge of taxation and superannuation, and whose advice and documentation may not reflect the best possible result for the client in terms of protecting the inheritances of their family and accessing valuable taxation concessions.

Plus, there is the loss of control of the whole process – you don’t know what the lawyer will produce for your client, when it will get done, and what it will cost. And if the lawyer gets it wrong, will your client (or their family) end up blaming you instead?

“What an adviser needs is an estate planning offering that seamlessly dovetails in with the way you run your practice. That allows you to take the lead in terms of the design and implementation of an appropriate estate plan for your client. That understands your client’s SMSF and tax effective retirement strategies that you have carefully crafted for your client.

“That allows you to integrate estate planning as both a risk management and client relationship building tool, plus become a profit centre for your practice,” said Mr Hor.

The Townsends / SUPERCentral Estate Planning service is different from any other legal service. Our specialist knowledge and experience as expert superannuation and estate planning lawyers is directly accessible to you as the client’s trusted adviser through the power of modern technology.

In particular, the Estate Planning Guide and Testamentary Manual is designed specifically for advisers to guide their clients through the intricacies of their testamentary documents and gather the right information to formulate an estate plan suitable for every client, regardless of the size or complexity of their financial situation. Some of the important benefits to your practice include:

• providing the means by which you can systematically and methodically guide your clients through their estate affairs, leaving nothing to chance;
• ensuring that you are seen to have pro-actively advised your client in this area and thereby satisfied your professional duties as your client’s adviser;
• giving you access to a streamlined process for referring the pure legal work to expert superannuation and estate planning lawyers who will provide you with an upfront proposal for the preparation of any estate planning documentation, fixed estimate of legal fees, and realistic and reliable turnaround times;
• enabling you to charge an appropriate fee to your client for providing a valuable service; and
• helping you to deepen the relationship with your client and with your client’s next generation.

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For many advisers, the term ‘estate planning‘ conjures up thoughts of complex, highly technical advice solutions such as wills and testamentary trusts. Whilst some aspects of a comprehensive estate planning process can indeed be complicated, advisers are ideally placed to act as a ‘facilitator’ of such a process, bringing in highly qualified specialists as required.

Background

With more than 45% of Australians not having a valid will, an ageing population and the amount of household wealth available for transfer by bequest in 2030 is set to surpass $70billion, there is a clear and significant disconnect between the need for estate planning solutions and the current usage of those solutions.

The 2006-07 Family Characteristics and Transitions Survey (FCTS) highlighted the stark realties facing families in modern Australia with a specific focus on the impact of divorce:

Of the 4.8 million children aged 0 to 17 years in 2006- 07, just over 1 million (22%) had a natural parent living elsewhere.

Indeed, considering that around one third of all marriages end in divorce, and half of all divorces involved children under the age of 18, the increasing prevalence of ‘blended families’ and the resultant complications in estate plans reinforce the need for an advice solution that is accessible.

Add to this the life risks that insurers like Zurich know all too well:

• Over 60,000 Australians will have a stroke this year (that’s one every 10 minutes)
• 684,000 Australians are estimated to have chronic heart disease.
• 1 in 2 men and 1 in 3 women will be diagnosed with cancer before they turn age 85
• More than 110 Australians will die of cancer every day
• There are estimated to be over 800,000 diabetics in Australia. Diabetics are 5 times more likely to have a stroke and 10 times more likely to have a heart attack.

And there are – indeed overwhelming – cultural, social and economic factors driving an increased need for estate planning advice, representing a fantastic opportunity for financial advisers to provide meaningful assistance to their clients and the community at large.

Aside from the significant demographic trends which are driving growth in demand for estate planning solutions, there are 4 major benefits of applying an estate planning methodology across your business (rather than thinking of it as a service relevant only to your older clients):

• It can uncover new opportunities for advice with your active clients
• Insurance
• Business succession
• SMSF advice
• Intergenerational advice
• It can be a cost effective way of re-engaging with inactive clients
• It can be an easy to articulate, high value-add proposition to take to your referral partners
• It can add significant flesh to your proposition and can be reflected in your Fee Disclosure Statement

Why build capabilities around estate planning advice

To succeed in reatining and capturing assets during the coming intergenerational wealth transfer, advisers should develop end-to-end strategies rather than disconnected solutions, focusing on the following key areas:

Estate Planning

Family estate planning is critical during the wealth transfer period and will be an effective tool in attracting and retaining clients. The more an adviser knows about the Boomers’ and their heirs’ plans, the more they can do to proactively retain their assets. Advisers have been investing in advancing their wealth planning tools and customer relationship management (CRM) systems. While the primary focus of these systems is to support the proposal process and improve the depth of current relationships, some of the same information can be leveraged to increase client engagement on topics related to estate planning.

Make deliberate plans to help clients navigate their inheritances

A Canadian study[1] shows 39 percent of Canadians whose parents have a will have not explicitly reviewed it with their parents, and 61 percent who have deceased parents stated they never discussed it with their parents before they passed away.

By supporting the heirs during the difficult experience of a death in the family and making the process less stressful, advisers can solidify existing relationships or establish new ones with the heirs.

Advisers may consider establishing client-facing operational groups that specialize in the transfer process and support their clients in navigating this unfamiliar and unpleasant exercise.

The richness of the client interactions can be improved by investing in capabilities that increase the convenience to the client.

Whether it is led by an adviser or a specialized service, the experience should be a high-touch, branded, and personalized service that wows the clients, generates trust and makes them want to continue a relationship with the firm – regardless of the value proposition they prefer.

Establish go-to-market strategies to “catch” heirs now

Matching the heirs with their offerings of choice and “wowing” them is an important step towards retaining assets transferred across generations. According to research[2] done by Phoenix Marketing International and Cerulli Associates, dissatisfaction with current and previous provider relationships is the main reason investors left their providers, and only one out of every two wealth management clients in the 30-49 age group, which stands to inherit from the Boomers, is satisfied with their primary wealth provider. This suggests many advisers are at risk of losing these clients right at the point where their value is about to increase significantly.

To strengthen the relationships with the heirs, advisers can consider multiple approaches in tailoring their offerings including creating collective allocation models that enable managing self-directed assets alongside managed assets, bundling products around life stages, and expanding the product set to include cash management, debt management, and insurance.

Typical estate planning instruments

• Wills
• Advanced Care Directives (sometimes called ‘living wills’)
• Testamentary trusts
• Business Succession Plans
• Insurance solutions
• Power of Attorney
• Superannuation beneficiary nominations

Be prepared to ask the difficult questions

As with most aspects of the advice process, doing the job properly often involves questions which can be uncomfortable for the adviser and confronting for the client:

• What is the state of your marriage?
• Do you have any other descendants?
• Do you have any health issues?
• Who will bring up your children if you and your partner died
• Are your adult children in stable relationships?
• Do you have any children with financial, health or legal issues?

Increasingly advisers are able to access a variety of online tools that can make the discovery process more comfortable for both parties, thus encouraging more honest and comprehensive answers. These tools range from simple online self assessments to comprehensive report producing tools.

Be the facilitator, rather than the subject matter expert

The most successful advisers recognise their strengths, and which services are more suitable for outsourcing. Just like a surgeon needing a specialist anaesthetist, outsourcing a service does not have to mean ceding control or oversight of that process, and estate planning solutions are a perfect example of how a financial adviser can still facilitate the components of the process and co-ordinate them into a cohesive all-encompassing solution.

Being seen as an expert willing to bring in external specialists can also strengthen your own brand and elevate your standing as a professional.

Every adviser should aim to have a network of lawyers and accountants they work with, not just as referral sources but as true members of a virtual team, all focussed on same end goal for your clients.

When seeking a partner – for example a lawyer – to work in a field such as estate planning, remember that just like surgeons, they too tend to specialise, so make sure you find one who is genuinely experience in testamentary trusts, or wills, or buy sell agreements.

Resources to get you started

The following process is a good starting point, and involves working with Centres of Influence to identify clients who may benefit from estate planning advice and solutions.

One of the key tools in this process is a self assessment questionnaire. It’s’ designed to get someone thinking about issues they may have overlooked in terms of estate planning and their personal, financial and business situation. It allows them to consider sensitive questions in their own environment. We have attached a sample for your reference. You can use this as is, or tailor to your needs or that of the client. It’s initially intended as a thought provoker which makes them more receptive to your call when you follow it up (because they will have already self identified areas where they have no plans). This means it doesn’t matter if they send it back to you. (Once you get to the stage of an appointment you will go though a comprehensive fact find anyway.)

Notes

1. Investors Group Survey Feb 2012 ‘Trillion Dollar Wealth Transfer – Myth or reality?’
2. Cerulli Associates: Cerulli Quantitative Update-Retail Investor Provider Relationships 2011 (based on data from Phoenix Marketing International, Cerulli Associates)

Other sources

a. Australian Bureau of Statistics, 2004, ‘Household and Family Projections, 2001 to 2026’.
b. Australian Bureau of Statistics, 2008, ‘Family Characteristics and Transitions’.
c. Accenture, 2012, ‘The Greater Wealth Transfer: Capitalising on the Intergenerational Shift in Wealth’.
d. AMP.NATSEM, 2003, ‘Income and Wealth Report’, Issue 5.
e. National Seniors Australia, Productive Ageing Centre, 2012, ‘It’s not just about the money : intergenerational transfers of time and money to and from mature Australians’.

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Estate planning can extend relationships with clients.

With an ageing population and increasing divorce rates, the demand for estate planning solutions will continue to grow rapidly in both the short and long-term.

For many advisers, the term ‘estate planning ‘ conjures up thoughts of complex, highly technical advice solutions such as wills and testamentary trusts. Whilst some aspects of a comprehensive estate planning process can indeed be complicated, advisers are ideally placed to act as a ‘facilitator’ of such a process, bringing in highly qualified specialists as required.

Aside from the significant demographic trends which are driving growth in demand for estate planning solutions, there are 4 major benefits of applying an estate planning methodology across your business (rather than thinking of it as a service relevant only to your older clients):

• It can uncover new opportunities for advice with your active clients
• It can be a cost effective way of re-engaging with inactive clients
• It can be an easy to articulate, high value-add proposition to take to your referral partners
• It can add significant flesh to your proposition and can be reflected in your Fee Disclosure Statement.

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This is an extract from a collection of business improvement tips for advisers, launched at Zurich’s Trax2Success national roadshow, featuring the 2013 AFA Adviser of the year Jenny Brown.

Click here to read Hot business tip number 1: Look after yourself and your staff

Click here to read Hot business tip number 2: Survey your clients

Click here to read Hot business tip number 3: Place a higher value on your time

Click here to read Hot business tip number 4: Review your client onboarding process

Click here to read Hot business tip number 6: Tailor your communication strategy by client generation

Click here to read Hot business tip no number 7: Change your approach to review meetings

Click here to read Hot business tip number 8: Create a differentiated service offering (segment your client base)

Click here to read Hot business tip number 9: Set up a Board of Advice

Click here to read Hot business tip number10: Develop a client retention strategy

Click here to read Hot business tip number 11: Run a program where staff drive improvements

Click here to read Hot business tip number. 12: Build your emotional intelligence

Click here to read Hot business tip number. 13: Go Social

Click here to read Hot business tip number. 14: Get better at handling objections

Click here to read Hot business tip number. 15: Create stronger referral sources

Click here to read Hot business tip number. 16: Set up a Google account

Click here to read Hot business tip number. 17: Learn from leading advisers

Click here to read Hot business tip number. 18: Make better use of technology in your business

Click here to read Hot business tip number 19: Improve your office environment

Click here to read Hot business tip number 20: Develop a great value proposition

Click here to read Hot business tip number 21: Make more use of video in your business

Click here to read Hot business tip number 22: Optimise your website for mobile

Click here to read Hot business tip number 23: Have a marketing plan

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Estate planning can require special focus for same sex couples .

Centric Wealth has said that even without recognised gay marriage, there are many areas where those in same sex relationships are given the same rights as traditional couples.  However, as legislation varies amongst states and territories, it is imperative that same sex couples seek estate planning and financial advice to ensure their partner is taken care of in the future.

Natasha Panagis, Centric Wealth technical specialist said that same sex couples who are in a registered relationship with their partner or live with their partner in a de-facto relationship will have their partner recognised as their spouse under legislation for superannuation, taxation and social security purposes. “As most states and territories now allow the registration of a de-facto relationships, be they same or opposite sex, the broader definition of spouse means that same sex couples must ensure that adequate provision is made in the will for their beneficiaries such as their spouse or children. Thus, to avoid problems in the future, it’s important that same sex couples obtain advice on achieving their estate planning goals and how to minimise disputes after death. “Its natural for younger people not to want to make a will as few of us relish contemplating our mortality, which is at the centre of the will making process. Happily, though, more and more people are realising the making of a will is simply good financial housekeeping and that it is never too early to make one.

“It is highly recommended that a will be drawn up with the assistance of a lawyer given the importance of the document. These professionals will provide advice and most importantly help ensure a person’s estate planning wishes occur,” Ms Panagis said.

“All too frequently what may be fought over in a legal suit can get consumed in legal bills and everyone loses as the cost of the dispute is generally incurred by the estate which erodes the amount for intended beneficiaries.

Ms Panagis said superannuation death benefits can also be paid to a same sex partner if they are in a de-facto or a registered relationship. In the past, the partner needed to establish financial dependency or show an interdependency relationship.

Similarly, same sex couples can also make binding financial agreements, also known as prenuptial agreements, which can allow a couple to consider how assets will be divided if the relationship breaks down. Couples wishing to consider binding financial agreements for their situation should seek legal advice. These agreements can be made before, during or after a relationship.

Ms Panagis said that dying without a will (ie. dying intestate) means control over who will receive the assets in your estate will be taken out of your hands and will be determined by intestacy legislation, which varies across the country. To die without having a legal will may leave those you love with unnecessary distress, uncertainty and expense.

“The three soundest pieces of advice I would give same sex couples who are in serious long term relationship is to ensure their relationship is de-facto or registered, for both partners to make a will with the assistance of a professional adviser and to create a binding financial agreement. The importance of estate planning and financial advice cannot be underestimated”.

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EQT to provide an estate planning referral service for AON Hewitt advisers.

Aon Hewitt has selected Equity Trustees Limited (EQT) to provide an estate planning referral service for its advisers.

Through the partnership, Aon Hewitt will have access to the services and assistance of EQT’s accredited estate planning and wills specialists, on behalf of its clients.

The service is available to Aon Hewitt’s financial adviser network although over time it will be extended to members of the Aon Master Trust and corporate clients.

Jayson Walker, general manager, Aon Hewitt Financial Advice, said there is an increasing need amongst its advisers for quality estate planning services for their clients.

“Australia’s aging population and the transfer of wealth from baby boomers to their children and grandchildren means that estate planning is an area of key importance to Aon Hewitt advisers.

“As a licensee we are keen to assist our advisers in ‘future-proofing’ their business wherever we can. One of the ways we hope to do this is by introducing solutions that help our advisers add value to their client relationships, and assisting multiple generations of a client’s family to see the difference that quality holistic financial advice can make to their financial situation is a good way to do that.

“We spoke with a number of service providers in the market and selected EQT because of its experience in partnering with advisers to deliver client and business outcomes. It has a robust estate planning process, national coverage, independence, and highly experienced and qualified estate planning professionals,” Mr Walker said.

David Plant, general manager operations at Aon Hewitt Financial Advice, added that: “Providing high quality estate planning services will also ensure our advisers are able to meet Future of Financial Advice (FOFA) requirements by ensuring a full understanding of their clients’ circumstances, and acting in their best interests.

“We therefore piloted a scheme with EQT where our advisers can access EQT’s estate planning specialists and over the next year, the service will be rolled out across the rest of the Aon Hewitt business.

“It has already resulted in positive outcomes for advisers who trialled the arrangement,” said Mr Plant.

Geoff Rimmer, head of Private Wealth Services at EQT, said that EQT is seeing an increasing level of interest amongst advisers in accessing the kinds of specialist assistance and expertise that EQT offers.

“Rather than attempt to be all things to all people, many advisers are recognising that a better approach – both for them and for their clients – is to have access to a network of experts that can be called on as and when needed.

“This allows them to continue to own the relationship with the client while at the same time having confidence that they are satisfying the fiduciary responsibility, the best interest requirements of FOFA, as well as broadening the base and strength of client relationships.

“We believe we are in a strong position to create similar approaches and services to other financial planning groups,” Mr Rimmer said.

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The source and control tests for Centrelink attribution of a trust’s capital and income pose challenges for the operation of testamentary trusts.

In its Guide to Social Security Law, the Government makes the following statements:

Testamentary trusts activated after 31 March 2001
If a testamentary trust is activated by the death of the testator after 31 March 2001, the surviving partner will be attributed with the assets and income of the trust if:

• the surviving partner has control of the trust (irrespective of whether the surviving partner is a beneficiary), or
• an associate of the surviving partner has control of the trust, and the surviving partner is a potential beneficiary.

Explanation: If the surviving partner directly controls the trust, they can simply appoint themselves as a beneficiary or alternatively exert their powers to obtain benefit informally.

If an associate has control and the surviving partner is a potential beneficiary, a reasonable assessment of the situation is that the surviving partner will enjoy the benefits of the trust.

If the surviving partner (or an associate of the surviving partner) does not control the trust, attribution may be made, via the basic attribution rules, to the person(s) or members of a couple (1.1.M.120), whether of the same sex or a different sex, who have control of the trust.

Testamentary trusts with a commercial trustee
Some testamentary trusts will be established with a commercial trustee as the controller of the trust. In these cases the terms of the will need to be examined carefully to determine who the testator intended to benefit under the terms of the will.

Where the surviving partner is not a beneficiary of such a trust, attribution should be made to those who are specifically nominated as beneficiaries of the trust.

Generally such trusts are established to benefit specifically named individuals, with the direction in the will that the needs of a particular beneficiary or beneficiaries be considered.

It is not possible to attribute to a corporate trustee. In these types of cases it should be considered that the corporate trustee is administering the trust on behalf of the beneficiaries of the trust. Attribution will be made to those beneficiaries on whose behalf the trust is being administered.

In the case where neither the will maker nor the testamentary trustee is a Centrelink administered benefit recipient, it is most likely that the trust will be assessed on the basis of its pattern of distribution to beneficiaries or capital entitlement of beneficiaries.

Consideration for trust drafting
A trust where a primary beneficiary is the appointer or controller of the fund will be attributed to the beneficiary.
A trust where beneficiaries are not named but rather described (for example, ‘my children or grandchildren’) will most likely be assessed in accordance with who is in the class as the time the will maker dies.

A trust where there is discretion in the recognition of beneficiaries and their entitlements will mean that the trustee’s decisions rather than the will maker’s will drive the Centrelink consequences.

Centrelink will look for where beneficial interest lies in the administration of the trust. Where default capital rights lie with people other than Centrelink benefit recipients, expect detailed negotiation will be needed with Centrelink to agree the capital attribution pattern they will make on the trust.

Impacts on investment strategies for testamentary trustees
Capital attribution to a beneficiary will need to be assessed as the default capital that will be used to produce an investment return. Investment returns need to be considered in the light of the deemed income attributed to the beneficiary.

The collateral benefit loss a beneficiary may suffer needs to be considered when formulating a benefit attribution strategy. Recent experience has indicated some $70,000 per annum is needed to fully compensate someone who aged 55 is formerly fully dependent on public welfare, but through operation of her mother’s will, is forced out of that system.

Consider how s. 14A – D of the Trustee Act 1925 (NSW) affects the operation of the trust.

Some questions to consider asking the client and potential beneficiaries

• Is capital expected to be used to support beneficiaries?
• How large is the beneficiary pool? (In a recent matter 3 generations of a family were all alive and in the beneficiary pool. This brought up issues with Centrelink about on whose behalf capital of the trust was to be administered.)
• How long is the trust intended to operate?
• How is succession of the control of the trust to be handled?
• How is the trustee to inform themselves of the situation needs and objectives of the beneficiaries?
• Do the criteria in s.14C of the Trustee Act 1925 (NSW) (and its counterparts in other states) apply to the administration of the trust?
• What is the impact of the distribution on the overall benefit levels received including health costs?
• Is any Centrelink registered beneficiary in receipt of a non means tested benefit?

Some problems to avoid

• Do not use testamentary trust precedents that have optional operation at the election of the beneficiary.
• Do not appoint beneficiaries as appointers of any trust.
• Do not erode the independence of trustee operations with beneficiary accountability if Centrelink attribution is intended to be constrained by the trust’s operation.

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