Marie Brownell

Marie Brownell, National Manager, Estate Planning, Equity Trustees said the independent trustee and executor had seen a marked rise in legal wrangles over trusts in the past year.

There are a few reasons for the increase, she noted, including the use of DIY or off-the-shelf trusts, which can lead to issues down the track.

“A common issue we see with trusts is where someone has gone to their accountant to seek advice on how to minimise tax. The accountant then uses an off-the-shelf trust which is often not drafted properly.

“Australians are a nation of DIY fanatics but trusts are complex legal structures and not something anyone should create without specialist legal advice,” she said.

When SMSFs go wrong

Ms Brownell has also witnessed a rise in disputes over self-managed super funds (SMSFs), as the number of Australians seeking to take control of their own super has increased. The latest ATO data shows there are almost 600,000 SMSFs with a combined total of 1.11 million members*.

“As a result of the proliferation of SMSFs in Australia, we are seeing more SMSFs challenging trust decisions as a result of trustees acting negligently, incompetently or even fraudulently,” she said.

A well-known example of such a case is Wareham v Marsella. Mrs Swanson created an SMSF and was the sole member. The fund’s trustees were herself and her daughter, Mrs Wareham. In the terms of her will, Mrs Swanson nominated her second husband, Mr Marsella as executor.

Mrs Swanson did not leave a binding death benefit nomination for the SMSF and on her mother’s passing Mrs Wareham, who continued as a trustee of the SMSF when her mother died, resolved to pay all of the $450,000 death benefit from the SMSF to herself.

Her stepfather filed a lawsuit claiming Mrs Wareham had exercised her discretion over the SMSF without real and genuine consideration to the trust’s objectives, asked the court to set aside the trustee’s discretion and requested a different trustee be appointed.

Mr Marsella was successful in all three of the claims in the Supreme Court and Mrs Wareham also lost an appeal. **

“Before setting up an SMSF, it is important to understand the trusts rules,” Ms Brownell said.  “It’s often forgotten that superannuation death benefits do not automatically fall into the estate for distribution in accordance with the will.  In the absence of a binding death benefit nomination, the trustee of the fund will decide who gets the benefit.

“What’s usually overlooked is who that continuing trustee might be.  If it’s someone who stands to benefit themselves, in a manner contrary to your wishes, then you need to carefully consider what steps you need to take to ensure your death benefit is paid as you intend.”

Ms Brownell said there were many good reasons for establishing a trust, including:

• protecting and transferring wealth and business assets
• flexibility in distributing income and capital to beneficiaries across generations
• managing superannuation assets, and
• establishing regular giving to charitable causes.

“In order to establish a trust that is suitable for your current and changing circumstances, as well as those of your loved ones, always get proper legal advice, ensure you have a good succession plan for who is going to control the trust on death or incapacity and never sign anything you don’t understand,” Ms Brownell concluded.

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Marie Brownell

Elder abuse is a horrifying prospect we’ve come to better understand thanks to relentless work by recent media investigations and royal commissions.

No one likes to think they (or someone they love) will ever be a victim in this way but all Australians can take action well before there is a possibility of losing capacity to safeguard against this frightening possibility, according to Equity Trustees.

“Trustee companies were established with the purpose of taking care of people who could not take care of themselves – usually in relation to financial affairs,” said Ian Westley, Executive General Manager of Private Clients at Equity Trustees.

As Australia marks Elder Abuse Awareness Day today, one of the country’s oldest trustee companies which has taken care of generations of families, has urged all Australians to think ahead.

“Over time, being a trustee has come to mean ensuring broader care is in place depending on a client’s needs. We now protect the interests of and support Australians who have lost capacity due to age or injury. Almost always, these plans have been put in place well before they were needed – and sometimes in the hope they never would be,” Mr Westley said.

The problem of elder abuse is of increasing concern as Australia’s population ages. By 2050 just over a fifth of the population is projected to be over 65 and those over 85 will represent 5% of the population^[1]. As a result, more older Australians are falling victim to financial, physical or emotional abuse, neglect or exploitation by dubious service providers purporting to be professional or tradespeople.

“We have direct experience of stepping in to either stop – or claw back – money being scammed from some of our most vulnerable clients by fake tradespeople and involving police in those matters. The financial loss is serious – but worse is the impact it has on the confidence of people – particularly those who have worked hard to maintain independence in their own homes,” he said.

Marie Brownell, National Manager Estate Planning, Equity Trustees explained that some of the planning should include some fairly straightforward estate planning documents including an Enduring Power of Attorney and Appointment of Enduring Guardian.

“Nominating an attorney and guardian who can make legal, financial and lifestyle decisions on your behalf is a key part of this process,” she said.

“While a child may seem like the natural choice, they are not always the right choice – particularly if you don’t always see eye to eye. Your attorney should be someone who you consider to be 100% reliable and trustworthy. This could be a family member or someone outside the family such as a family friend or professional.”

A professional attorney will be on the lookout for any decline in your capacity over time and can watch for any signs of financial abuse, for example by checking your accounts for any changes in spending patterns.

Specialist attorneys, such as the team at Equity Trustees can also help with other services, such as providing regular check ins and organising in-home care services.

Avoid becoming isolated

Elderly people who are isolated not only have limited opportunities to interact with others but are more vulnerable to elder abuse.

“The solution could be as simple as finding a friendly local taxi or Uber driver to provide transport to shops or regular activities,” Ms Brownell said.

“It is also worth getting to know the services and charities in your area that are catered to older people. This could be a social group that offers transport or charities which are focused on tackling isolation in the elderly.”

Look out for warning signs

Being aware of the signs of elder abuse is also important for family members or carers of an older person.

“Someone who is being mistreated may suddenly behave differently, avoid leaving their home or appear quieter or more anxious than usual. There may also be changes in their physical appearance, such as a lack of grooming or unexplained bruises or fractures,” Ms Brownell said.

Financial abuse, where an older person has their funds improperly or illegally accessed, is one of the most common types of elder abuse, so family members should be on the lookout for any financial inconsistencies.

“Look out for irregularities on bank accounts or credit cards, large sums of money or assets being transferred, the person being asked to guarantee loans or mortgages on someone else’s behalf or signs they have taken up a product or service they usually don’t use,” Ms Brownell noted.

Speak up

If you are an older Australian who is unhappy with the care you are receiving, speak up and let a trusted person know the situation.

Friends and family of an elderly person should also be aware that many cases of elder abuse are hidden and go unreported, often due to fear or reprisals or because the abuser is a family member.

“If you suspect abuse is taking place, raise the alarm with a community group, contact a lawyer or, if a criminal act is suspected, get in touch with the police.

“We all have a responsibility to advocate for older people if they are unable or unwilling to speak for themselves. While elder abuse can raise complex social and legal issues, calling it out is essential and shows your loved one that help is at hand,” Ms Brownell concluded.

——-

[1] Australian Institute of Family Studies

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Being appointed an attorney under an enduring power of attorney authorises you to make important legal and financial decisions when someone loses capacity – or chooses not to make these decisions for themselves.

“It means you have to step into the shoes of the person you are acting for, and act only in their best interests.  Ordinarily, an attorney is not allowed to benefit from the assets of that person while they are acting as an attorney – which makes sense since it can create a situation where judgment can be clouded,” said Marie Brownell, National Manager of Estate Planning at Equity Trustees.

Examples of appropriate and common use of an enduring power of attorney include buying and selling real estate, transacting on bank accounts, paying bills and ensuring the principal’s assets are properly protected and maintained.

“We have seen too many situations where children have been appointed as attorney for their mum or dad and have decided to give themselves an early inheritance, although mum or dad are still alive and may need the funds themselves for their own needs and circumstances,” Ms Brownell said.

“It’s a really sad situation – especially when someone has to go into care and finds that they don’t have the assets they thought they did – because their kids have accessed their money as attorney for their parent. Unfortunately, it happens more than we’d like to think.”

When appointing an attorney to manage your financial decisions, Equity Trustees recommends:

• Careful consideration of who you are appointing as your attorney
• Thinking about appointing more than one person so they must act jointly
• Considering if an independent appointment, such as a professional trustee company, is better suited to your circumstances
• Having a ‘plan B’ by appointing a substitute attorney to act if the first person can’t act for any reason
• Making specific and clear provisions in the power of attorney document about what benefits, if any, your attorney can derive from your assets
• Obtaining advice about whether to give expanded powers for your attorney to, for example, renew a superannuation binding death benefit nomination or to make seasonal gifts
• Looking at whether you should have separate powers of attorney dealing with different assets, and
• If you need to have restrictions around what an attorney can do.

“Everyone who has mental capacity can and should make plans to ensure they have an enduring power of attorney in place. Appointing your children is very common. However, if you have any doubts about who you have appointed, you can change your mind and revoke it at any time before you lose capacity,” explained Ms Brownell.

She urged anyone concerned about the behaviour of a friend or relative’s attorney, to seek advice.

“If someone has lost capacity and there is concern around the decisions made by an attorney or if an attorney is not acting in the best interests of a principal, it is possible to have the attorney’s appointment and decision making reviewed by the relevant State and Territory Tribunal or Supreme Court,” she said.

“However, like many things in life, a little planning goes a long way – and thinking carefully about this document before there is any pressure or expectation to do so is the best course of action,” she concluded.

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“If you think about all the things that changed for you and your family over the past decade, you quickly see that your world could look very different by 2030. We can’t anticipate everything, but it’s important that everyone takes the time to review their estate planning documents such as Wills and Powers of Attorney regularly to make sure these documents reflect your current circumstances” said Marie Brownell, National Manager of Estate Planning at Equity Trustees.

“The beginning of a brand-new decade is as good a time as any to pull out your documents and re-read them to see if they would still work as you intended when you last had them drafted.

Ms Brownell said the most common changes were:

• Marriage, separation or divorce not just for the Will maker, but among any intended beneficiaries of the Will (usually the kids and grandkids)
• Births and deaths in the family
• Changes to assets

“Of course, there are many more – families and financial circumstances are incredibly varied. Once you factor in blended families, extended family – and then assets like superannuation and other investments, it can be a lot to factor in to a Will.

“The key thing to remember is that every Will should be reviewed every few years just to check in and make sure it’s right for your circumstances,” she explained.

She urged everyone, particularly those who did not yet have a Will or Power of Attorney, to consult an estate planning professional.

“And if you don’t have at least a valid current Will or Power of Attorney, you should get one. If you have children, are a member of a superannuation fund, have life insurance, own a house or any other assets, then you need to have a Will and Power of Attorney. Having these documents in place is not something you should postpone – you never know when they might be needed,” she said.

Three things to think of as you re-read your estate planning documents or consult your estate planning professional to create or review your estate planning documents:

1. Who should benefit (and why)?

Determine who you want to leave something to – and those you don’t want to leave anything to. Think about who you are responsible for, financially or otherwise.  List your assets (and liabilities) – especially the (financially or emotionally) important ones. A list also helps your executor know where and what everything is.

2. Who to appoint?

Decide who you want to appoint to specific roles, including executor of the Will, trustee of trusts, guardian of minor children and attorneys under any powers of attorney, and have a conversation with them. Have a ‘back up’ plan if they can’t or won’t do it.

3. What’s changed in the past 12 months?

Review any changes that have occurred in the past year and ask your adviser if it means you need to update your estate planning documents.

“If you think over these questions, you’ll find the process to get your paperwork in order to cope with the new decade will be fairly efficient and pain free – leaving you to get on with your life,” Ms Brownell concluded.

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People to think carefully about their family dynamics, as well as their assets when reviewing their estate plans.

It’s a common assumption fraught with danger: Many people appoint one of their children to be the executor of their will – expecting (or hoping) that everything will be resolved after they’re gone.

“It’s a very common way to think,” said Marie Brownell, National Manager of Estate Planning at Equity Trustees. “But there are two scenarios in particular where this assumption is very much fraught with danger.

“The first is where the kids don’t get along. It’s surprising how many people somehow imagine that when they die, their kids will suddenly find common ground and be able to resolve their parents’ estate amicably. It’s a nice idea, but I’ve worked on many estate administration matters and the more common scenario is that the death of a parent heightens tensions between siblings.

“It becomes especially problematic when one of the children is the executor of the estate. This can be a final straw in some families – tensions which may have been held in check while the parent is still alive, are unleashed. It can be very difficult for that child to perform the role of executor effectively in those circumstances,” Ms Brownell explained.

She said that people who know their offspring have tense relationships often appoint independent executors to keep the peace.

“When people think it through, they often want to avoid putting another family member or family friend in the middle of their children – which is probably very wise.”

Ms Brownell said the other scenario that can be difficult in managing an estate after a parent has passed away is when the arrangements in the Will are complex – or where the proper estate planning has not occurred.

“Managing an estate administration as an executor is a big responsibility.  There are tax obligations which impact the estate and beneficiaries depending on their circumstances – and also a number of legal requirements in winding up certain assets. The estate administration can be further complicated with litigious claims against the estate and complex asset structures

“In these cases, leaving it all to the kids to sort out after you’re gone can add a big workload to whichever child is appointed as executor.”

Ms Brownell advised people to think carefully about their family dynamics, as well as their assets when reviewing their estate plans.

“It can be difficult to think about some of these aspects, which is why consulting a professional can be very useful. Not just in assisting you to have the right estate planning documentation to achieve what you want in terms of distributing your assets after you’re gone, but also in getting advice on the available alternatives to keep the peace and reduce any burden that may come with that process when the time comes,” she concluded.

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