Supperannuation and Wills

Make sure they're binding nominations as beneficiary. You can also make non-binding nominations, which are more along the lines of wishes than directions, the trustee can choose to ignore them if they choose (and the difference could just be a tick-box on a form). Also even binding nominations expire on some regular basis. I think its 3 years off the top of my head, but it would be worth confirming.

I am doing a masters degree in wills and estates now and am interested in this area.

firstly what state are you in?

Secondly, your potential inheritance has dropped dramatically because of your dad marrying!

Superannuation does not form part of your estate on death. Super is a trust and is not the asset of the individual until they receive it from the fund. You need to speak to your dad about a binding death nomination. These have to be prepared correctly otherwise they are invalid. Without one the trustee of the superfund will decide where to pay any benefits. Usually they would just pay the surviving spouse. The benefit can be paid to an individual or it can be paid into the estate. It may be best to keep it out of the estate as wills can be challenged – but this will depend on which state you are in. There are also tax considerations too. If your dad leaves a tax dependent then the super canbe received by the dependent tax free. it can be a lump sum or a pension. Its a very complex area and I don't know much about super.

There are also provisions known as Family Provision which enable someone who is not adequately taken care of in a will to apply to the court for an order to basically rewrite part of the will to give them a share or to increase their share. Only an eligible person can apply for a Family Provision order and being a spouse or a child of the deceased would qualify. Even if he leaves her a little bit she can still make a claim, as can you. The court will take into account various factors such as the person's needs, their own resources, and the size of the estate etc.

Also, if you are in NSW property that does not form part of the estate can be deemed to be part of the estate. This includes property such as superannuation and trust assets, property sold before death without adequate consideration etc. eg. Your dad transfers property to you for 50% of its value 3 years before his death. This could be deemed to be part of his estate and she could make a claim for it.

Spouses also have rights to acquire property. He may die leaving you half and her half and she may be entitled to say she wants to keep the house she is living in and have it reduce her share of the remainder of the estate.

So many things to consider, especially with blended families.

If your dad dies without a will, then the rules of intestacy will prevail. She may end up with a very large chunk if this were the case.

I don't know much about ACT law, but think you may find there are no notional estate provisions there. However, if he has property in NSW it is still possible for it to be challenged in NSW.

I think the best strategy may be to get your dad to be open with the wife and everyone else in the family. Often problems arise because beneficiaries feel left out and shocked or disappointed at this. Discussing it now and giving reasons may help later on.

Watch out for the BDNs as some will have to be renewed every 3 years. This depends on the fund and its size etc.

Also get your dad to consider a prenup or postnup. This can be done under the Family Law Act (even after marriage) and will help in the event of divorce and death.

Get him to do a proper will. Cover ever eventuality etc and make sure he makes provision for the wife.

Then finally you may also want to consider taking mortgages on his property or buying options to purchase his property as added extra protection.

Wills should be updated regularly. e.g change in assets – buying, selling, mortgages etc and change in family – births, deaths, marriages etc.

provision for the wife refers to allowing for her "proper maintenance, education or advancement in life"

Sounds like large sums of money are involved. You will surely need professional advice.

Your grandfather may be able to change his will (if he still has capacity etc) to incorporate a testamentary trust so that his assets don't fall into your father's hands which will make it harder for the new wife to make a claim on these. It will also be great for asset protection generally and tax savings. But you need to carefully consider what assets the grandfather has and consider any general tax, and land tax issues too.

an option is an agreement which gives you the right to buy something for an amount sometime in the future. It is a right and not an obligation.

So if your dad's property is worth $1mil and he sells you an option to purchase it for $1,200,000 at any time within the next 10 years then you can buy it for this price no matter what the value is. eg after 9 years it may have doubled to $2mil, but you can get it for $1,200,000.

An option also gives you the right to lodge a caveat on the property. So it cannot be sold or further mortgaged.

This may give you some priority over others who also may have a claim on the property. Careful planning is needed as it could be undone in some cases such as if it is an artifical scheme used to defeat creditors.

Assets of a trust don't form part of a person's estate. So they cannot form part of the will. They will need to pass control of the trust on by having back up appointors to the trust and also making sure the shares of the trustee (if a company) are passed on via their will. But it is the appointor that controls the trust by hiring and firing the trustee so this is the important bit.

Any personal assets they hold can be left in the will to a testamentary trust (a post death trust). Under the tax act ITAA 1936 any income received by a minor from a will or a testamentary trust is taxed at adult rates. That means a 2 year old kid could receive $16,000 pa tax from from a testamentary trust. This is a huge sum. Imagine an extended family with 10 kids!

Income from normal trusts set up during lifetime (inter vivos)are taxed at normal rates. For kids this means $3333 pa tax free for this year and this drops to $416pa from next year. over that they pay tax at penalty rates.

So you need to get your grandfather to produce his trust deed and then see what is in there concerning the appointors. it may need to be amended. If it hasn't been amended for a while you should get them to fix it up as there have been a lot of changes and the definition of income etc used in the deed will probably need to be changed too

Stephen

you will need an option contract and some legal advise would be handy.