Leaving it all behind
The importance of estate planning cannot be overstated. To find out all about probate, joint ownership of assets, what happens if you don’t have a will, and the cost and expectations of being an executor.
Read these two articles from Your Life magazine to learn about the process for those left to sort out the often complicated and time-consuming legal tasks involved with an estate. Plus, there is information on how more and more people are including community and charitable organisations in their legacy – a wonderful expression of an individual’s values and beliefs.
We may be leaving it all behind, but there’s work ahead for our families and executors in distributing our worldly goods when we die, as Mark van den Berg explains.
We read a lot about legal wills and how important they are. But we don’t often read about what happens after someone dies – from a legal aspect, that is. Understanding what your family will be required to do when you do quit this life may affect how you arrange your estate.
What is a will?
A will is a document that contains your instructions on how you want your property (including assets such as land, a home, shares, cash etc.) to be distributed after you have died. It can also set out who you want to look after any children who
are minors if the unthinkable happens to you and your partner – an unhappy thought, but an essential consideration if you have young children.
What happens after you die?
Your nominated executors are responsible for ensuring that your wishes are carried out. In the vast majority of cases, this means dealing with your assets. The most common assets in a typical estate are bank accounts, shares, motor vehicles,
real estate, superannuation, life insurance policies and personal possessions. Your executor’s job is to have these various assets sold, or transferred into the name or names of the beneficiaries listed in your will.
Now comes the hard part. Your executor will need to contact the company, body or government department that controls the title to those assets and request that they transfer the asset either into the name of the executor if the asset is to be sold, or directly into the name of the beneficiaries. In some cases, the controlling body will oblige after you send them a copy of the will and death certificate. But in other cases, the controlling body will ask for a Grant of Probate from the Supreme Court before they will transfer the assets. The type of asset and whose name or names are on the title of the asset will determine if a Grant of Probate is required. The reason they ask for this document is to protect themselves against being sued by someone who may have a financial claim of some kind against the estate. It is worthwhile noting that there are no death duties in Australia. The application for a Grant of Probate is not about the State collecting money. It is a ‘due diligence’ processdesigned to ensure that your estate is properly administered.
Assets in joint names
Jointly-owned assets are assets that are in two or more people’s names. For jointly-owned assets, such as real estate, title to the asset automatically passes to the second person when the first person dies. The title laws override the laws covering wills and probate, and thus jointly-owned assets would not be covered by a will. Examples of assets in the sole name of the deceased that are normally subject to probate include land and real estate, bank and savings accounts above $10,000, share accounts where the value of each separate company is above $15,000 and, in some cases, life and superannuation policies. Examples of assets where probate is usually not required include motor vehicles, personal possessions and, in some cases, life and superannuation policies. Your life insurance policy and superannuation account are a little different from other assets in that in some circumstances they form part of your estate, and are therefore subject to probate, and in some cases they are excluded from your estate, and therefore not subject to probate. If you have named a specific beneficiary or beneficiaries in either of these, then on your death, title passes directly to them. If you have not named a specific person or persons, then the monies will be deemed to be part of your estate. The insurance company or super fund will almost certainly require a Grant before they will release the funds to your beneficiaries.
The probate process
So what exactly is required to obtain a Grant of Probate? The executors named in your will are required to make a formal application to the Supreme Court in your State for a Grant of Probate. The application consists of a number of completed forms and affidavits (sworn statements), your will, the death certificate, and a copy of the death notice placed in the newspaper. As each State has different requirements, the format, content and number of forms for the application vary. The Probate Registry with the Supreme Court is the area that would process your application and they are extremely pedantic about the accuracy and content of the forms. A misspelled name is sufficient to cause the rejection of an application. Once the Grant is issued, your executors will have the authority to deal with your estate.
What happens if you die without a will?
If you die without a will, your assets will usually be divided according to the intestacy laws in your State. The result of this is typically that your property may not be divided according to your wishes, your children and other minors in your care may not receive the financial and other assistance you would have desired, your de facto spouse, stepchildren, friends and favourite charities may miss out and your estate may be administered by someone of whom you disapprove. State intestacy laws typically have
fixed rules on how your estate will be divided among your family members. Unfortunately, it will be extremely difficult for your family to change this outcome if they are not happy with the way the estate is distributed. As the body controlling the title to your assets requires a Court authority before releasing the asset, an application to the Supreme Court still needs to be made. The application process is similar, but follows different rules and is more complex than probate. In this case, the application can only be made by a relative or, in special circumstances, a person who has a valid claim on your estate. The application would be for a Grant of Letters of Administration, and the applicant would be seeking the role
of administrator of your estate.
What is the cost and how long does it take?
If you have been asked to be an executor, or you wish to apply to be the administrator for a relative, you have a number of options with regard to applying for a Grant. A solicitor will typically charge $3000 to $5000 to prepare the application for a Grant of Probate and $5000 to $8000 to prepare an application for Letters of Administration. In addition to the legal fees, there is the cost of advertising and the Court filing fee of around $500. An application by a solicitor will usually take two months to six months. However, there are alternatives. At AussieLegal we have created a number of DIY legal kits to assist people, including a range covering probate and Letters of Administration. The kits are complete with instructions, example forms and blank forms that can be edited and are written in plain English. The price of Handling Probate kits ranges from $199.95 to $999.95, depending on how much you want to do yourself, while the Letters of Administration kits range in cost from $499.95 to $1499.95. Personal applications can be done in as little as three to four weeks.
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AussieLegal is a legal information and law firm referral service; Mark van den Berg is the organisation’s managing director. The services AussieLegal offers include Legal Advice Line, Finda-Lawyer, DIY legal kits, a legal forum and access to a range of legal articles.
Ph 1300 728 200
Web www.aussielegal.com.au
Email
Contacts for State probate offices are:
Probate Division, Supreme Court NSW
Ph (02) 9230 8111
Probate Office of NT
Ph (08) 8999 7953
Probate Office of Tasmania
Ph (03) 6233 3716
Probate Office of Victoria
Ph (03) 9603 9296
Probate Office of WA
Ph (08) 9261 7699
Probate, Registrar ACT
Ph (02) 6267 2761
Probate, Registrar Queensland
Ph (07) 3247 4313
Probate, Registrar SA
Ph (08) 8204 0505
Giving back to the community
When it comes to making a will, many people are now opting to take a more community based approach and endow a long-lasting
financial legacy to their preferred charity, says Mark Robinson.
It’s a very personal gesture and often a very important component of people’s lives, even if they cannot give as much as they would like. Armed with the right information, it is relatively easy to follow this path and make plans to donate a proportion of wealth either during one’s lifetime or after death. In general terms, there are four ways to make a donation. Each option
has taxation and other financial and practical implications and you may require expert assistance to determine the best strategy for your circumstances.
1. Give directly
Historically, the first choice for many people has been to donate directly to an established charitable organisation, either in their lifetime or by making a bequest in their will, but a lack of transparency can be a drawback here. In some instances, the organisation’s use of the funds is apparent. The Cancer Council, for example, has clearly-defined goals and donors can expect their donation will be used to support cancer research or assist cancer sufferers in some way. However, sometimes it is not clear how the donated funds will be used, which can trouble donors. For example, some aid organisations provide assistance across a very broad range of activities and countries. Additionally, administration costs can be unclear and there is rarely an opportunity to see a tangible result from a donation.
2. Establish a Prescribed Private Fund
Prescribed Private Funds (PPFs) are private charitable foundations that provide a way to donate money in perpetuity and can best be described as an ‘agent’ between the donor and existing charitable organisations. Unlike direct giving, a PPF allows the donated capital to be retained inside a charitable trust controlled by an individual or an entire family. The income generated is distributed annually to a range of charitable organisations chosen by the
founding individual and their family. Where trustees of PPFs identify similar interests and goals, they may embark on joint ventures over a nominated period in order to provide funding for a project that would otherwise be too big for any one fund to support on its own. PPFs must distribute income annually to recognised charities and there are clear definitions about the sort of projects that can be funded. If desired, provision can be made for the charity to receive a certain percentage of the capital each year, plus income.
3. Donate to a Foundation offering Donor Advised Sub-Accounts
These are charitable trusts established and administered by a trustee company that allow intending donors to donate to a ‘sub-account’ within the trust. This relieves a donor from the cost and compliance issues involved with having their own foundation. However, like PPFs, donors still retain control over the manner in which their donation is used. For example, if an
individual donates $250,000 to a Donor Advised Sub-Account and nominates that the income go to animal protection charities, the foundation directs the donor’s income to those nominated charities each year. Donations can be made to a Donor Advised Sub-Account throughout a person’s lifetime, or in their will. Patrick Rafter’s Cherish the Children Foundation is a well-known example of a Donor Advised Sub-Account in a foundation operated by a
trustee company.
4. Establish a Testamentary Charitable Trust in a will
Establishing a testamentary charitable trust (TCT) as part of an estate plan is another way of
providing chosen charities with a reliable annual income stream in perpetuity. As is the case with PPFs and Donor Advised Sub-Accounts, the donated capital is invested and the income distributed to objects or purposes detailed in a person’s will. And like PPFs, provision can
be made for a charity to receive a certain percentage of the capital annually, plus income.
Tax implications
As indicated at the start of this article, each of these methods of charitable giving has its own tax implications and you may need the assistance of an expert in tax to work out which is the best for you. For example, donations made via the first three options are tax deductible, which may encourage or enable you to make further donations so your gift can keep growing. In the case of TCTs, however, their growth is limited by their very nature, i.e. they only become effective on the death of the person making the will and any donations made by others to top
them up are not tax-deductible. On the other hand, if the will-maker gifts an asset normally subject to Capital Gains Tax (CGT – like a house) to a TCT in a will, it is usually exempted
from CGT, preserving the full value of the gift.
Choosing trustees
Just as the structure and tax aspects of your charitable giving need careful consideration, so does the choice of trustee to manage any charitable trust in which you choose to become involved. The trustee plays an often time-consuming role in managing the trust. This includes meeting all legal and taxation requirements, ensuring that the funds are invested for the best possible returns and distributing the trust allocation. This can be a major burden for an individual. However, it is all part of the role of a professional trustee, so appointing a trustee
company is a popular answer for many. A trustee company not only provides expertise in investment and knowledge of developments in philanthropy, it also provides continuity in the management of the trust that will usually continue in perpetuity.
Disclaimer: This is intended to provide general information in summary form on the topics discussed and is current at the time of publication. The contents do not constitute legal, tax or financial advice and should not be relied upon as such. You should seek professional advice before acting on any information contained in this article.
Mark Robinson is an estate-planning specialist with national financial services firm Australian Executor Trustees.
Ph (02) 9028 1056
Email
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Further information on charitable giving can be found by contacting:
Australian Executor Trustees Australian Tax Office
Web www.aetlimited.com.au Web www.ato.gov.au
or by phoning your favourite charity direct.
