Estate planning lawyers

There is no restriction on you who you can nominate as legal guardian for your minor children. But remember this: children are not property, unlike your assets, such as real estate or cash. You cannot dictate who is going to be the guardian, you can nominate people who you endorse, but ultimate it is up to the Family Court to determine if your nomination is valid.

Even if one parent has no contact, then after you die that parent can still make application to the Family Court to have custody, and they are likely to get it, unless there are extreme circumstances. The Family Court always acts in the best interests of the child, so you could set up in your Will a fighting fund to make sure the best case is put to the Family Court around your choice of guardian.

In this case, you may want to ensure that the assets you leave to your children are properly protected and that you have a good Will with a good trust in place, and if you nominate the right trustees of the kids trust then they can ensure that even though the other parent might have custody, they won’t have access to their money. Such a trust is not unusual at all and is very effective at ensuring the kids are well looked after and cared for without them losing their inheritance.

This is one of the most misunderstood aspects of estate planning, which is worrying given that for many of us, Superannuation (Super) is one of the most significant assets we have.

We all have Superannuation. Every single one of us who has ever had a job, even a summer job picking grapes in Margaret River or who started out flipping burgers at Hungry Jacks, has Super.

Some of us through decades of hard slog have accumulated hundreds of thousands of dollars, sometimes millions, in super. Some of us have only just started our first job and have only a couple of hundred dollars, and then there are the millions of us in between.

In all cases, no matter how much you have, we are all subject to the same rules and laws that govern how your Super is treated. And the long and short of it is as follows. Your Super is NOT covered in your Will – it sits outside of your Will.

Your Super is governed almost entirely by two things – your particular Super Fund Trust Deed and the SIS Act (Superannuation Industry Supervision Act).

You may be with what is known as a Retail Fund (MLC or GESB or Colonial for example) or an Industry Fund such as Hesta, or you may have a Self Managed Fund (SMSF). Each fund is similar, but different. They are all governed by the SIS Act, but they all have different internal rules. Never assume that what your brother has in place in his fund in Melbourne is the same as what you must have in place with yours in Perth, often they will be different.

Whilst on the surface it looks like you own your Super, you don’t; it is a Trust asset, and you are merely the beneficiary of that Trust. Your Super fund has a Trustee who decides who gets your Super when you die. And that means you must nominate to your Trustee who gets your Super. If you don’t, then your Trustee makes that decision for you, having regard to what family members you leave behind. Your Trustee has quite a limited choice as to who to give it to, however.

The Trustee can only give your Super to a spouse, de facto spouse, child, someone in what is called an ‘interdependency relationship’ and your Legal Personal Representative – that is your Executor if you have a Will and your Administrator if you don’t have a Will.

So your Super is only in your Will if it goes to your Legal Personal Representative, which really only happens when you die without a spouse or defacto spouse or child or someone dependent on you.

To make matters more complex, all Super funds have a system where you can nominate who you want the Trustee to give your super to. But only some of those funds allow Binding Nominations, which effectively force your Trustee to follow your nomination. But some of those funds only allow a Binding Nomination to last for three years before it lapses, and at which point it becomes a normal nomination, which is no more than a suggestion to your Trustee who still makes the choice themselves.

Confused yet? If you have a SMSF, you can even have a non-lapsing Binding Nomination, which doesn’t expire after three years.

But until you go and look at your own fund, your own fund’s Rules and Trust Deed, how are you to know how to control your Super? Well, a good estate planning lawyer can do that for you, and can help you navigate the path through this complexity to make sure your Super is steered to the right person, and not left open to the whims of the Trustee.

Finally, to all of you who think ‘this doesn’t apply to me – I have $200 in Super, it’s not even worth thinking about’, remember this: when you signed all those forms for your first job and became a member of whatever fund/s you are a member of, you may well have also have without even realising it signed up for a life insurance policy, the premium for which comes out of your Super each month and is so small you don’t even notice it.

In this case, your life insurance may easily be worth a quarter of a million dollars, or more. You may be a lot richer (in death) than you think, and that money could be life changing to your loved ones left behind. Worryingly, it also means there is significant pot of money left behind worth fighting over.

You can hold life insurance either through your Super, or through a separate policy taken out by you personally. What happens to that life insurance will depend on how you hold it. If a policy you hold through your Super fund, it will be dealt with in the same way as your Super (see our ‘What happens to my Super?’ FAQ for more information). On the other hand, if you hold life insurance separately to your Super, it all comes down to who you have nominated on your policy.

If the policy is in your own name, the proceeds will likely be paid to your Estate, to be dealt with either according to your Will or, if you don’t have a Will, the intestacy provisions of the Administration Act WA (1903).

If the policy specifies a particular beneficiary, then the proceeds will bypass your Estate and go directly to that person. This can be problematic – for starters, it means those funds are available to any of your beneficiary’s creditors, so if you have a beneficiary who is bankrupt, they might not see a cent of the proceeds. On the other hand, if your children are your nominated beneficiaries and they are under 18 at the time of your death then the funds will be held in trust for them on the very restrictive terms of the Trustees Act WA (1962), and then the bulk of the funds will be given to them outright at 18 years of age – a very young age to come into a significant sum of money. Of course, there is no right or wrong answer but it is always important to consider the particular circumstances of your beneficiaries and think about how it might all play out before making your nomination. This is a good time to consider how a testamentary trust, established within your Will, could help you get these funds to the right people, with strong protections and on your terms.

A Will is revoked by both marriage and divorce. There are ways around this, such as where your Will specifically states that it is made in contemplation of one of those events and that you intend for it to remain valid whether or not the marriage or divorce ultimately occurs.

Don’t make the mistake of putting off your estate planning until after your divorce is finalised! Separation is one of the most important times in your life to have a Will in place. Even if you have already come to a property settlement, if you have not formally divorced and you die without a Will, your former spouse will be entitled to a share of your estate. With the upcoming changes to the Administration Act WA (1903), this could be as much as the first $435,000 of your estate plus a third of what remains, or if you don’t have children, that share can be as high as $650,000 plus half of what remains.

Similarly, if you have already separated and settled up your financial affairs, but not yet divorced, the old Will still applies (and may still say it leaves all to the spouse!)

And of course, it is equally important where you do have a Will in place to consider making a new one shortly after separation rather than waiting until the divorce is finalised, given that it is highly likely that your wishes as to the distribution of your estate will have changed.

Ex-spouses can claim against your estate. But the good news is, they can only do so if they were being maintained by you, or were entitled to be maintained. So if you have settled up your financial affairs in a Family Court property settlement, and you are not paying spousal maintenance, then the ex-spouse should have no claim.

Be careful not to confuse spousal maintenance with child maintenance – they are not the same thing, and just because you are paying child maintenance to the ex-spouse that is not spousal maintenance and does not give rise to a claim by the ex-spouse. Of course, if you don’t make proper provision for the kids who are receiving the maintenance, they may claim against your estate (and will likely be successful in such a claim) and there is every chance that the person who will run that claim on their behalf would be the ex-spouse.