An EPOA needs to form part of a wider estate plan.

An Enduring Power of Attorney (EPOA) is a document where a principal (a person or company) appoints an individual or individuals (called the attorney) to act for the principal in relation to financial affairs, property matters and, in some States, lifestyle matters such as medical treatment or where the principal lives and how they should be cared for.

The most common situation where an EPOA may be used is in cases where a person no longer has mental capacity to make their own decisions usually because of deteriorating health.

An EPOA may also be useful regarding an SMSF if a director of a corporate trustee has to go overseas for an extended period of time.

The Attorney who has been validly appointed by the director may step in, manage and control the affairs of the SMSF whilst that director is overseas.

Having an EPOA in place can also help alleviate any stress, delays and further costs that may arise in the event that a family member has become incapacitated and can no longer appoint a person as their preferred Attorney.

It is also worth noting that the requirements to have an EPOA differ in each state.

So in order to be prepared for the unexpected, it is not only important to have a valid EPOA document executed but to also regularly review the document to ensure it reflects the Principal’s current wishes and circumstances.

An EPOA should also always be considered in the wider context of an estate plan.

By Natasha Ng, Solicitor

The post An EPOA should always be considered in the wider context of an estate plan appeared first on AdviserVoice.

Where the proper formalities for revoking a Will are not followed, the court can consider whether there has been an informal revocation of a testator’s Will.

In the case of Public Trustee v Bott [2017] TASSC 43, Westley made a Will through the Public Trustee on 26 March 1996. In February 2009 he attended the Public Trustee’s office and advised a Public Trustee employee that he would like his Will ‘cancelled’. The employee simply wrote Westley’s request in a file note that “he would like his Will cancelled, has not made a later Will but would like to just keep it up in the air for the moment”.

The file note was kept with Westley’s records and the employee did not discuss the matter with any solicitor or any other employee as to whether the file note was a sufficient step to take for Westley to revoke his will.

When Westley passed away the Public Trustee sought clarification from the court as to whether the Will was valid or whether Westley died intestate.

The court looked at three things:

• whether there was a document;
• whether that document embodied the testamentary intentions of the deceased; and
• whether the deceased intended the document to constitute a revocation of his Will.

Upon consideration of the file note in detail, the court held that the file note was not sufficient to constitute a revocation of Westley’s Will as there was no evidence that Westley knew it had been created or existed.

At best, the court found that Westley knew there might be an update of the Public Trustee’s records.
Whilst the courts do have the power to consider whether a document constitutes a revocation of a formal Will, in this case the particular file note was not enough.

To ensure certainty that a testator’s wishes are carried out when they pass away, a testator should always seek our legal advice, have prepared the necessary documents, and have the document properly executed in accordance with the formal requirements of the relevant legislation. A testator should never leave the distribution of their assets ‘up in the air’.

by Natasha Ng, Solicitor

The post Can you revoke a will with a file note? appeared first on AdviserVoice.

Blended families call for greater consideration when estate planning is done to ensure that the relevant individuals are adequately and properly provided for.

Walt Disney did stepmothers no favours when he created “Maleficent”, the wicked stepmother in “Snow White”. Thanks to her it is now a given that stepmothers are out to do the husband’s children considerable harm and need to be guarded against. But this is not necessarily true at all. Many step-parents care deeply for their step-children. Luckily for de facto spouses, Disney didn’t make an animated movie about them.

So what is the legal relationship between step-parents and step-children and how could that affect the family’s estate planning?

And, how do de facto spouses fare in estate planning?

Blended families call for greater consideration when estate planning is done to ensure that the relevant individuals are adequately and properly provided for. In particular, the way de facto spouses and step children are treated under the law should be taken into account when drafting wills and binding death benefit nominations.

Queensland has changed the way step children (and de facto spouses) are treated under the Succession Act 1981 (QLD).

Superannuation death benefits of an individual can only be paid to eligible dependents. These include a member’s spouse or de facto spouse and child.

The ATO’s Interpretative Decision 2011/77 held that a “step child” is not considered a “child” of a deceased member and is not eligible to receive superannuation death benefits.

However, if a step child is financially dependent or in an interdependent relationship with the member at the time of the member’s death, the step child would be an eligible beneficiary of superannuation death benefits.

An understanding of the limited classes of superannuation death benefits payable to various persons (and the potential inability to distribute benefits to a step child) is critical to estate planning documents such as an individual’s ability to distribute other assets outside of superannuation to those ineligible to receive super death benefits.

Generally, the separation of the parents (whether by death or design) brings the step-relationship to an end because it is based on the primary relationship of the parents.
The QLD legislation however has made changes to the meaning of a step child and states that the relationship between a step child and step parent ceases when the de facto relationship between the step parent and the deceased natural parent ends. However, the step child and step parent relationship is not affected by the death of the natural parent if at the time of the death the de facto relationship was still in existence.

The section in relation to a step child is important when considering potential family provisions claims by a step child who may be eligible to contest a deceased’s will.
De facto marriage relationships have traditionally been treated differently to formally-married relationships. For example, where married couples get divorced, a testator’s will is revoked. But when a de facto relationship ends the individual’s will continues until changed or revoked by the testator.

Recently, there has been a shift in this view. Queensland’s amended Succession Act legislation provides that any gift to a de facto spouse is immediately revoked when the de facto relationship ends.

In comparison, other states such as NSW do not revoke a testator’s will when a de facto relationship ends.

Changing societal views on de facto spouses and step-children have changed the way these groups are treated under Succession Act legislation. A testator’s (based in Queensland) estate planning documents should be revised in light of the Queensland legislation changes to ensure that you understand how it affects any current arrangements in place.

By Natasha Ng, Townsends Business & Corporate Lawyers

The post Changes to succession laws in Queensland to affect blended families appeared first on AdviserVoice.

Following the sale and appointment of a new trustee, Fred and Wilma need to arrange to transfer title of the property to the current trustee.

What kind of stamp duty is payable on this transfer?

A transfer of property from one entity to another attracts full (or ad valorem) stamp duty. However, the Duties Act 1997 (NSW) (“Act”) sets out a number of circumstances where a concessional or nominal amount is payable.

One example is section 54 of Act, which states that $50 stamp duty is payable as a result of a change of trustee of a trust. This section deals with different types of trusts including SMSFs, discretionary trusts, unit trusts.

Before a party is entitled to $50 stamp duty on the transfer, certain requirements must be met to the Chief Commissioner’s satisfaction (s54 (3)). These are:

• none of the continuing trustees of the trust are or can be beneficiaries of the trust;
• no new trustees are or can be beneficiaries of the trust;
• the transfer is not part of a scheme to avoid duty that involves conferring the interest in the dutiable trust property on a new trustee or other person (whether or not as a beneficiary) so as to cause any person to cease holding the whole or any part of a beneficial (or potential) interest in that property.

In order to prevent any continuing or new trustees from becoming beneficiaries of the trust, the trust deed needs to have an irrevocable clause to that effect. In our example, Fred and Wilma are the retiring trustees, there are no continuing trustees, so provided the new company is not a beneficiary of the trust and the trust deed contains the relevant rule in the trust deed, this requirement is likely to be met.

Recent legislation changes this year have amended section 54 to make it clear when this section can be relied on. The section expressly applies to the transfer of “dutiable trust property” (previously, the section referred to just “dutiable property”). In other words, Fred and Wilma’s property must be a pre-existing asset of the Flintstone Unit Trust. Provided the asset is already held by the existing trust then the definition of dutiable trust property will be met.

The other main change to the legislation is that the parties have to prove the transfer is not part of a scheme to avoid duty that involves conferring the interest in the dutiable trust property on a new trustee, or other person, to cease holding the whole or any part of a beneficial (or potential) interest in that property.

With the redemption of units in a unit trust and the issue of new units (along with the change of trustee) the interest in the dutiable trust property will change to the parties who are the new unit holders. Whilst the redemption and issue of units may be necessary for a commercial transaction, the parties may have to submit evidence to satisfy the Chief Commissioner that the transfer is not part of a scheme to avoid duty.

As this is a recent legislation change, the Chief Commissioner has yet to release an updated revenue ruling on this requirement and it is uncertain as to what documents a party would need to submit to prove that the transfer is not part of a scheme to avoid duty. Should the Chief Commissioner take the view that such commercial transactions fall outside s54 (3) of the Act, there is the potential for full stamp duty to be paid on such transfers.

By Natasha Ng, Solicitor

The post Changes to requirements on trust property transfers appeared first on AdviserVoice.

Currently, a member can make a so-called “non-concessional” contribution (NCC) of either $180,000 or $540,000 (an advance contribution covering the next three years, triggering the so-called “bring forward rule”).

If a member has not made any NCCs in the 2014/2015 and 2015/2016 financial years, this means that a member can make a NCC of the full $540,000 (being $180,000 x 3) this financial year (i.e. before 30 June 2017).

One way to utilise the maximum NCC of $540,000 prior to 30 June, if a member does not have enough cash, is to transfer business real property owned by the member in their personal name into their SMSF, effectively treating up to $540,000 of the value of the property as a NCC for the transferring member.

For example, Homer and Marge are members of a SMSF. Homer owns business real property in NSW in his personal name with a market value of $1,000,000. Homer wants to transfer $540,000 of the property by way of NCC and then pay the remainder $460,000 from his member balance in his SMSF.

In NSW this type of transaction attracts concessional stamp duty of $500 provided certain requirements are met, including:

• The property must be “business real property” in NSW.
• The member must own and hold the property in their personal capacity (ie, not as trustee of a trust).
• The property once transferred into the SMSF must be “segregated” for the benefit of Homer only (being the person who transferred the property) and this is irrevocable (this means once the property is transferred into the SMSF only Homer will benefit from the property (ie, any incoming rent from that property is credited towards Homer’s member account and not Marge’s account).
• The transfer must be at market value (the property will need to be valued by an independent qualified valuer).

If Homer did not have sufficient funds in his member account in the SMSF to pay $460,000, Homer could transfer a part interest in the property to the SMSF. In our example, Homer could transfer a 54% interest in the property into the fund as a NCC with the end result of the property being held as follows:

• 46% share by Homer in his own capacity; and
• 54% share held by the fund.

The transfer of Homer’s 54% interest in the property to the SMSF may be liable for only $500 duty if all the other relevant requirements were met.
We’re sometimes asked, if Homer has maxed out his NCC, can he transfer the property as a NCC for Marge?

Homer as the owner of the property needs to transfer the property to his SMSF and once transferred, the property needs to be segregated for the benefit of Homer only (see point 3 above). This means that in order to be eligible for the $500 concessional duty (subject to other requirements being met) the NCC needs to be for Homer and not for Marge. If this was not the case and Homer decided to transfer the property as a NCC for Marge this transfer would attract full stamp duty on the value of $540,000.

All of these types of transactions are complex and may require trust deeds to be amended (to ensure the relevant rules to permit the transaction are inserted) and other “segregation documents” to be prepared to show that the property is segregated for Homer’s benefit only.

If you or your clients are considering this transaction, it is important the SMSF seeks the relevant advice from their adviser first.

Our firm specialises in preparing documents to effect the transaction including amending the trust deed of the SMSF, the necessary segregation documents to meet the requirements of the Duties Office, and to be compliant with the Superannuation Industry (Supervision) Act 1993 (Cth).

It is important that no documents are signed (e.g. a contract of sale) prior to the deed being amended and relevant segregation documents being prepared and signed.
There is also a similar transaction which is permitted with business real property owned by a member in VIC where the transfer is exempt from stamp duty. However, the transfer can only occur by way of a contribution (no money can be paid by the SMSF) whereas in NSW the transaction can be done by way of part purchase and a NCC.

These transactions take time and lodgement times with the various state revenue offices and titles office take weeks. Depending on the circumstances and structure of the transaction, it is possible for the transaction to be effected prior to 30 June but a member who is considering this should get a move on!

By Natasha Ng, Solicitor

The post Making a $540,000 non-concessional contribution without any money appeared first on AdviserVoice.

Estate planning discussions should start sooner rather than later.

Good estate planning is not only about the Will but in the detailed planning that goes into the other aspects of the estate to achieve the best outcome for your loved ones.

Advice and documentation on succession and estate planning should take place sooner rather than later. It becomes difficult to have documents prepared and signed where a person has started losing mental capacity, and may be costly if court applications need to be made.

We can assist with succession and estate planning by providing advice and documents including wills, tailored binding death benefit nominations, updating trust deeds and power of attorneys.

What can happen if proper planning and documents are not in place?

• assets may not pass to a person’s intended beneficiaries
• assets may be at risk from claims under a lawsuit or relating to bankruptcy
• assets may be at risk as a result of a relationship breakdown with a former spouse
• vulnerable beneficiaries may not be properly protected
• disputes could arise between family members which may end up in court
• beneficiaries may end up paying higher tax than necessary when receiving assets

Jack works as an accountant in his own practice and will inherit his mother’s $2 million dollar share portfolio. The income from the share portfolio will be taxed at Jack’s highest marginal tax rate and his inheritance is then vulnerable if there’s a successful law suit against him arising out of his practice.

An alternative option his mother could have put in place before her death is to set up a testamentary discretionary trust (a trust which comes into existence when his mother passes away).

The share portfolio could be transferred to the testamentary discretionary trust upon her death and income paid to his non-working spouse and minor children. The income paid to the spouse and minor children would be subject to different tax treatment potentially saving many thousands of dollars in tax every year.

Succession and estate planning should be on your “to do list” and is something that should happen every few years or when your circumstances change. You can’t control when you pass away but you can take steps to control what happens after.

By Natasha Ng, Solicitor

The post Proper planning is always key to a succession and estate plan appeared first on AdviserVoice.

Peter Townsend

A director’s electronic signature placed on a guarantee without his knowledge led to court action by a company seeking recovery of a debt from the director personally.

In Williams Group Australia Pty Ltd v Crocker [2016] NSWCA 265, Mr Crocker was one of three directors of a company which supplied building modules. His company filled in and completed a credit application to Williams Group Australia Pty Ltd (“Williams Group”) which provided building materials to the company.

The credit application contained the electronic signatures of all three directors of the company and was also accompanied by a guarantee which contained the same three electronic signatures. The electronic signatures were applied to the documents via an online system where users receive login details and are able to upload their electronic signatures in order to apply it to documents.

During all relevant times, Mr Crocker did not change his initial password that was given to him, so anyone who knew or had access to his original login details could have accessed and affixed an electronic signature on any document on behalf of him. It was not until the company went into liquidation and Williams Group sought recovery of money owed to them that Mr Crocker became aware that his electronic signature had been applied on the credit application and guarantee.

The Supreme Court held that Mr Crocker was not liable under the guarantee as his electronic signature was placed on the documents without his knowledge and authority.

On appeal, Williams Group accepted that there was no actual authority given by Mr Crocker to another person in the company to affix his signature to the document, however, Williams Group argued that person had ‘ostensible authority’ (i.e., Mr Crocker held out to Williams Group that whoever placed his electronic signatures on the documents and forwarded them to Williams Group was authorised by him to do so).

The judges on appeal held that the failure of Mr Crocker to change his password in relation to the online system and Mr Crocker’s use of that system on a number of other occasions did not amount to authorisation of another person to use his electronic signature to bind him to the obligations under the credit application and guarantee.

The use of electronic signatures may seem to offer an efficient and convenient way to have documents or agreements signed and returned to another party. However the desire for expediency must be balanced against the need to protect and treat electronic signatures as if they were your real signature. The potential for fraudulent misuse may be greater than simple forgery of a signature.

Treat electronic signing carefully and be aware that in NSW it is not permitted to witness a document by electronic signature.

Prepared by Peter Townsend and Natasha Ng

The post Electronic signatures: the cases have begun appeared first on AdviserVoice.

Extracting yourself from a SMSF requires a clear pathway.

Winding up a SMSF may occur for a number of reasons but what needs to be done and what documents need to be prepared?

There is a compliance/legal path to follow and this article outlines key points along that path.

Note: This article is a general guide to winding up.  Each fund will be different depending on each member’s circumstances, the rules of the trust deed, and the asset/liability position of the fund.

Step 1: Look at the trust deed

The trust deed of the fund will usually contain a section which sets out who has the power to wind up the fund, who needs to be notified, and the procedure of allocation of the fund’s assets.  This section of the deed may commonly be called “Termination of the fund” or “Winding up”.  It is important that the rules on winding up outlined in the trust deed are followed.

Step 2: Call the Australian Taxation Office (“ATO”)

The trustee should contact the ATO on 13 10 20 to find out whether there are any outstanding activity statements, liabilities or refunds relating to the Fund.

Step 3: Work out what will happen to the fund’s assets (non-cash) and where each member’s benefits are to be paid

If the fund owns real property or other assets that are not cash, it will be necessary for the trustee to consider whether those assets are to be liquidated or, alternatively, transferred in specie to the members of the fund.

Any cash benefits can be transferred as a rollover to another complying superannuation fund, or by paying the funds to the member directly.  However, the relevant condition of release under superannuation laws will need to have been met before any funds are paid out directly to a member.

Where assets of the fund are sold, transferred in specie or cash benefits paid directly to a member, appropriate advice on any tax implications and any other implications such as impact on Centrelink entitlements should be taken into consideration before determining the appropriate course of action.

If a transfer of an asset in specie is to occur the value of the asset being transferred or portion of the asset being transferred cannot exceed the member’s total benefit in the fund.

Where a member of the fund has passed away, the relevant rules in the trust deed about the allocation of a deceased member’s benefits should be followed.

Step 4: Complete the necessary paperwork

Documentation such as resolutions of the trustee, notification letters to members in relation to the winding up of the fund, relevant ATO forms and ASIC forms may need to be completed depending on where benefits are to be paid, the trustee structure and the procedure on winding up set out in the trust deed.

The relevant documents may need to be prepared by solicitors, accountants, financial advisers and auditors.

An SMSF auditor will need to be engaged and a final tax return for the fund prepared and lodged with the ATO.

Step 5: Take the necessary action to distribute the cash/assets and lodge the relevant documents/notifications to third parties

The liabilities of the fund will normally be paid out first and then the balance of each member will be distributed.  A reserve account can also be established to hold an amount of cash that will be used to pay any future liabilities.

Any documents such as land transfer documents, ATO forms etc will need to be submitted to the relevant organisation and within the required time frame, if applicable.

The ATO will need to be notified within 28 days of the fund being wound up.

Step 6: Closure

Once any outstanding liabilities or refunds are distributed, the fund’s bank account can be closed.  It is important to note that financial statements and accounts of the fund must be kept for 5 years and minutes and records of the trustee need to be kept for 10 years.

By Natasha Ng, Solicitor

The post The path to winding up an SMSF appeared first on AdviserVoice.

In the discussion of the facts of the case there was a history of violence inflicted on the wife during her marriage and the wife also had been diagnosed as suffering from anxiety and depression. During a physical assault, the wife grabbed a knife and stabbed her husband.

The wife pleaded guilty to defensive homicide and accepted that her actions were disproportionate to any threat her husband posed to her. The wife also accepted that she intended to kill her husband or seriously injure him.

Under her husband’s will, she was to receive all the benefits of her husband’s estate. However, under intestacy laws, the estate went to the deceased’s daughter.

The question for the court in this case was as follows:

Does the criminal culpability of the offender require that they should not be entitled to take a benefit arising from the death?

The court discussed the application of the “forfeiture rule” which prevents a person from taking a benefit in circumstances where that person would benefit from their own crime.

In the case of a murder, the forfeiture rule always applies. However, in the case of manslaughter the application of the rule will be determined on a case-by-case basis.

The court found that in this case the wife was guilty of an act of deliberate and intentional violence which was not excused by her unhappy marriage or ongoing depression. This meant she could not receive her husband’s estate which ended up going to his daughter. The court noted that whilst this was a sad case, the wife should not be able to benefit under her husband’s will.

Click here to view the court case: Edward v State Trustees Limited [2016] VSCA 28

By Natasha Ng

The post Wife who murdered husband can’t claim on estate appeared first on AdviserVoice.