Executor
The executor is responsible for the execution or administration of the will. This can take weeks, months or years depending on the complexity of the estate and should be considered carefully. Rather than appoint an individual you may choose to appoint a trustee service which can resolve any perceived bias. Being executor contains huge responsibility and individuals should think carefully before accepting the role.
Enduring Power of Attorney
Vital to estate planning. The Enduring Power of Attorney has the ability to operate an individual's legal affairs if the individual cannot. This may be because the individual becomes incompetent, medically or physically. A common misconception is that an individual signs away their rights when appointing an Enduring Power of Attorney. Note the Enduring Power of Attorney only operates when the individual cannot effectively run their affairs. Note this power of attorney ceases on the death of the individual. Who should you appoint? Someone you can confidently expect to operate in your own best interests when you cannot. Other forms of Powers of Attorney to be considered are Financial and Medical.
Guardianship
For parents with minors under their control, yes even teenagers, consideration should be given to appointing a guardian. Single parents are particularly at risk as the other natural parent may not be in a position to provide the necessary care for the minor/s. Whilst it is rare for both parents to become deceased at the same time it does happen.
Testamentary Trusts
A Testamentary Trust is a trust created pursuant to your Will and may have several significant advantages. There are different types of Testamentary Trusts, including Discretionary Trusts and Special Disability Trusts which is a trust established for a vulnerable person. Testamentary Trusts may assist to distribute your estate to your beneficiaries in a more tax-effective manner and may reduce the likelihood of a successful challenge to your Will. As with any trust, the trustee must act according to the terms of a trust deed and has the duty and responsibility to look after trust property for the benefit of others. Appointing a trustee may involve a financial cost and as the trustee will have discretion over the assets, you should carefully consider who you appoint as trustee. The terms of the trust deed of a testamentary trust are contained in the Will. As with most trusts, a testamentary trust will normally give the trustee:
- the discretion to allocate income and capital among any of the Beneficiaries,
- wide powers of investment,
- the power to wind up the trust at any time.
If the gains derived by a trust are allocated to the beneficiaries, then those beneficiaries are liable to pay tax on those gains at their normal marginal tax rates. It is therefore a common practice for the trustees of a discretionary trust to distribute any derived gains to those beneficiaries who have the lowest marginal tax rate in the distribution year. This is one of the main advantages of using testamentary trusts.
Normally if a beneficiary of a trust is under 18 years of age then the trust income that is distributed to that person is taxed at penalty tax rates. Under these rates the child only has a limited tax-free threshold. However if the income derived by the trust was generated from inherited assets then the child will be taxed at normal adult tax rates.
A Testamentary Trust may also provide asset protection for beneficiaries of your estate who may face certain legal claims on their assets, divorce or bankruptcy for example. Until such time as the trustee exercises their discretion to pay an income or asset entitlement to a beneficiary, all trust assets and income remain the property of the trustee. However, if the trust is established in contemplation of frustrating the claims of, for example, legitimate creditors, the courts may effectively unwind the arrangement.
These and other factors, require careful consideration by your solicitor in conjunction with your financial adviser.
Trustees
If a testamentary trust is deployed there will need to be trustees appointed. Not unlike an executor, consideration of accepting the role is important as well as the actual appointment itself. Trustees are responsible for the administration of the trust. An important feature of a trust is that it is not included in the estate and once established is not subject to the terms and conditions set out in the will as the will refers only to assets contained in the estate.
Superannuation beneficiaries
Your Superannuation is an asset excluded from your Will. Any benefit payable upon death is distributed by the Superannuation Trustee in accordance with the Trust Deed. This usually gives the Trustee the discretion to decide who should receive your Superannuation entitlements. Eligible beneficiaries are detailed in superannuation legislation and include your legal personal representative and your "dependents". A dependent for this purpose includes; your spouse, your children, any financial dependent or a person in an interdependency relationship with you.
A Binding Death Nomination is a written declaration to the Trustee outlining of the beneficiary or beneficiaries who you wish your superannuation entitlements to be paid to in the event of your death. The nomination is able to be amended or cancelled at any time via written declaration to the Trustee.
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