Superannuation death benefits

The way in which members of a super fund can direct payment of benefits on death come up in virtually every estate planning exercise.

Essentially a member of a superannuation fund has three main choices for specifying what should happen in relation to their superannuation entitlements on death (assuming the proposed recipient is entitled at law), namely:

1. no nomination - the trustee is bound to deal with a member’s benefit in their best interests. The trustee will normally make enquiries as to the member’s family situation, who their dependants are, the provisions of their will and other relevant circumstances before making a decision;

2. a non-binding nomination - the trustee is not bound by a non binding notice and has an absolute discretion as to where the death benefit will be paid. Where a non binding notice is made, it should be taken into account as part of any decision by the trustee as to how to distribute the benefit; or

3. a binding nomination - the trustee is obliged to distribute a member’s death benefits in accordance with a valid binding notice.

Binding nominations have the potential to allow members to protect their death benefits from disputes, as where there is no nomination or a non binding one, a trustee's decison can be challeneged. Binding nominations can also be used as part of a member’s overall estate plan, including, for example, as part of a tax planning strategy for infant children or an asset protection strategy for adult children.

In future posts we will look at other aspects of binding nominations, including non lapsing nominations.

Until next week.

No removal of business duty in Queensland

Today's post summarises an important issue for anyone conducting business in Queensland.

In particular, the Queensland government has announced in its January 2012 interim budget, the deferral of its plan to abolish transfer duty on non-land Queensland business assets.

Broadly, business assets include goodwill, valuable contractual rights, trade debtors, plant and equipment.

The deferral is 'until the budget can accommodate the abolition' - which many commentators are assuming will be indefinitely.

The abolition had been scheduled from 1 July 2013, following the original aim to see it removed on the introduction of GST in July 2000.

As many readers will be aware, other jurisdictions have either abolished duty on non-land business assets (e.g. Victoria, Tasmania and ACT) or have scheduled to abolish it (e.g. New South Wales and South Australia from 1 July 2012 and Western Australia from 1 July 2013).

Until next week.

Final post for 2011

With the annual leave season starting in earnest over the next couple of weeks and many advisers taking either extended leave or alternatively taking the opportunity to catch up on things not progressed during the calendar year, last week’s post will be the final one until early 2012.

Similarly, the Twitter postings will also take a hiatus until the New Year as from today.

Very best wishes for Christmas and the New Year period and thank you to all of those advisers who have read, and particularly those that have taken the time to provide feedback in relation to, the various posts.

Until the new year.

Statement of principles to be (finally) amended (?)

Many readers will be aware of the full Federal Court decision earlier this year of Clark.

In that case, the Court largely reiterated the decision from 10 years ago in Commercial Nominees that, generally speaking, a resettlement of a trust for tax purposes can only happen in a very limited range of circumstances.

At the end of last week, the Tax Office released a decision impact statement in relation to the Clark decision and has, finally, accepted that the position set out in the case may mean that the 'Creation of a New Trust – Statement of Principles' last updated in August 2001, may need to be changed.

A previous post links the Statement of Principles for those that have not seen it, and in that document, the Tax Office suggests that there are in fact quite a large range of situations where a trust may be resettled for tax purposes.

It is hoped that the Tax Office can prioritise providing some clarity around their position on trust resettlements, particularly given that most specialist advisers in this area believe that, in accordance with Commercial Nominees and Clark, significant changes should be able to be made to trust deeds without triggering a resettlement.

For those interested in reviewing the complete decision impact statement, the relevant link is as follows – http://law.ato.gov.au/atolaw/view.htm?docid=%22LIT%2FICD%2FQUD1of2010%2F00001%22

Until next week.

How do the intestacy rules work?

Following last week’s post, I have had a couple of enquiries about how the intestacy rules work.

As most readers will know, the intestacy provisions apply where a person dies without a valid will in relation to all of their assets. In this regard, it can in fact be possible to die ‘partially intestate’. This simply means that there are assets in a person’s estate that are not validly dealt with under the will in place at a person’s death.

Not dissimilar to a number of the other issues dealt with in previous posts, the intestacy rules are (at least currently) inconsistent across each state in Australia.

The intestacy rules in each state are however set out under the relevant Succession Acts and, in very broad terms, provide for the distribution of wealth amongst immediate family members according to predetermined formulas.

In very general terms, only one set of intestacy rules will apply and which rules are relevant will depend on where the deceased person was 'domiciled'.

The question of domicile can in itself a fairly complex issue and if there is a level of interest, I will try to address this in a future post.

Until next week.

Court drafted wills

Last week I had an example of a client situation which in some respects was similar to the post a few weeks ago where a sole director died without a will.

The situation that came up last week involved a client who was the sole director of a number of companies and had lost capacity.

While she had an attorney appointed via the Guardianship and Administrative Appeals Tribunal (there are separate entities in each state regulating how someone can be appointed as an attorney where the incapacitated individual has not otherwise made a valid appointment), the director here also did not have a will.

In many situations, there is now the possibility to apply to a court before someone’s death and have the court approve a will.

The process is a relatively intense one, primarily because the court system holds the making of a will as something that ultimately should only ever be made by the individual in control of the relevant assets.

This said, when compared to dying intestate, the process is often one that we strongly recommend be considered.

Until next week.

Financiers being financiers

With apologies for the lack of post last week (for reasons that I won’t bore you with), this week’s post looks at one area where financiers seem to have had a continued focus on recently. In particular, with the continuing economic uncertainty, we are seeing a number of clients being asked to comply with the financial assistance rules.

Financial assistance can be a relatively complex area of the Corporations Act, however essentially it centres around situations where a company provides some form of help to shareholders (or associates of shareholders) in relation to the provision of finance.

What amounts to ‘financial assistance’ can be an issue of some debate in many transactions, however ultimately the 'golden rule' invariably applies. That is a financier will normally have the last word as to whether they believe there is a financial assistance issue.

There is a specific process set out under the Corporations Act that allows a transaction to proceed despite the existence of financial assistance, however there are a number of strict timelines that must be satisfied in order to comply with these provisions. Therefore, unless all parties are aware of the possibility that financial assistance approval may be required, significant difficulties can arise.

Until next week.