Videos

We are often asked the question ‘What happens if I die without a Will?

In this video, Wills & Estates Solicitor Richard Dawson takes us through the issues that arise from not having a will when you die

Contact our Gold Coast Lawyers team for more information on Wills & Estates.

Transcript

Hi, I’m Richard Dawson, Partner of OMB Solicitors and today I’d like to talk to you about what happens if you die without a will. When a person dies without a will or without a valid will, they are called dying intestate.

Under the intestacy laws, a person has to apply to the Supreme Court in Queensland for what’s known as a grant of letters of administration on intestacy. It is the law which says who will be entitled to apply for that grant of letters of administration.

In most cases, it will be the surviving spouse. However, where the spouse may not be able to act, or he or she may be unwilling to act, then it would fall to the children. If there are no children available to act, then there are usually other next of kin, in an order of priority who apply for court.

One way to avoid having to apply for letters of administration is for a person to do a will prior to their death. This is very important and should be done by all adult people. An application to the Supreme Court can be a very costly exercise.

It’s an application to the Supreme Court, It can take several months to obtain, and during that period, there may be a downtime in which the estate can be administered, or worse still, there could be a contest over who actually has the highest right to apply for letters of administration.

Under the intestacy rules, the estate must be distributed in accordance with those rules and not in accordance with the person’s will, because there is no will. In Queensland, the spouse is entitled to the first $150,000 of the estate and the household chattels and depending if there are any children, that spouse would be entitled to either a half or a third of the residuary estate.

If there are no children, then the spouse is entitled to all of the estate. This can potentially create problems because a deceased person may, in fact, have more than one spouse. You could imagine the fights that would erupt where you have an ex spouse and a current spouse feuding over a deceased person’s estate.

This can be easily avoided by doing a simple and straightforward will through your solicitor. If you would like to prepare a will, please contact our office on 5555 0000, or email the estates team at [email protected].

What are the differences between Single and Multiple Testamentary Trusts in a person’s Will?

In Part 4 of our Part 5 series Wills & Estates Solicitor Richard Dawson takes us through those differences of a single and more complex multiple Testamentary Trust Wills.

Contact our Gold Coast Lawyers team for more information on Testamentary Trusts.

See Part 1
See Part 2
See Part 3

Transcript

Hi, it’s Richard Dawson, partner with OMB Solicitors. Today, we’re continuing our five part series on testamentary trusts. Today is part four of that series, and we’re going to be talking about the difference between a single testamentary trust versus multiple testamentary trusts in a person’s will.

Like most estate planning, there is no correct approach and it must be dealt with on a case by case basis. For example, use a will maker who is leaving his estate to three children who are going to be the beneficiaries of the estate.

The first question the lawyer needs to ask is, is it appropriate to use a single testamentary trust for the three children? Or if circumstances permit, would it be more appropriate that three separate testamentary trusts be used, one for each child?

In the case of using a single testamentary trust, it would be appropriate if all of the children were under 18 years of age and there was a trustee or preferably co trustees managing the testamentary trust on behalf of those minor children until they turned a responsible age, usually 25. Another reason for using a single testamentary trust would be to protect the assets going into the trust, which we call the trust fund.

Now, this might consist of shares, cash, a property portfolio, and the family home. Where there is risk of a child entering into a divorce or a family relationship breakdown situation, the single trust offers the most robust protection in that situation because there is a great deal of protection from the family court because there is more than one primary beneficiary, namely the three children and their children who are all beneficiaries of that one testamentary trust.

Another reason you might use a single testamentary trust is where the will maker wants to pass it to the next generation, but also for them to act as custodians for future generations, and this would be quite often the case in very large estates.

Another circumstance where a single testamentary trust is appropriate is where there is one large asset which is difficult to split. For example, you might have the family home and a business premises which earns rental income, it’s very difficult but not impossible to split that real property arrangement.

Moving to circumstances where we might use a multiple testamentary trust arrangements, that is, one testamentary trust for each child. Circumstances which the lawyer would need to consider would be the geographical location of the adult children.

For example, if you had one child on the Gold Coast, one child in Melbourne, and one child in London, it’s very inappropriate to have one testamentary trust if those three children were the trustee, it’s very impractical. Each of those children will always have a different risk and investment strategy, depending on their personal circumstances.

So, that has to be factored into consideration, if one was a high risk investor and one was a low risk taker, you’re going to get conflict. So it might be appropriate in that instance to set up a multiple style testamentary trust will.

One practical but quite often overlooked consideration is the relationship between the children. Whilst we hope our children get along with one another, quite often they don’t, and this will create legal and practical issues and complications down the track if the siblings fight amongst themselves.

You also have to look at the beneficiaries themselves, the children themselves and their children and you might have a happily married couple with three children in the white picket fence scenario versus the other child who might be a bachelor and loves to roam the world, traveling at will. So there’s different styles of trusts being set up for those different types of children.

Probably lastly, and most importantly, is the various controlling mechanisms for that multiple testamentary trust, and that will depend on the child themselves. You might have, for example, a very responsible, capable, and intelligent child who can act as a sole trustee of their own trust with little or no risk.

Then you might have the wayward child who is likeable and loveable but probably needs a little big brother looking over his shoulder, therefore, you would have a co-trustee arrangement. For example, that child and maybe a sibling, or that child and an independent trustee, such as the family lawyer, or the family accountant, or a trusted aunt or uncle, so to speak.

The third situation is where you have the spend thrift beneficiary or the beneficiary that has various troubles like alcohol, drug addictions, or a gambling problem, or has the very high risk of entering into a family relationship breakdown down the track.

In that instance, you would strongly consider not having that child as a trustee at all and have them have that trust arrangement with two independent trustees, for example, a brother or a sister, and an independent, experienced trustee like the family lawyer or the accountant or both.

So, as you can see, there are many different arrangements that can be put in place with testamentary trust wills, essentially, it depends on a case by case basis. If you’re planning to come in for an estate planning meeting, expect to put aside at least an hour because they’re the type of questions that I’m going to ask you about your family dynamic so that I can recommend to you the most appropriate testamentary trust will for your family and future generations.

Thank you and I look forward to speaking to you at the next session, which will be the last series of our five part series on testamentary trust.

The benefits of having a Testamentary Trust for Tax Advantages.

In Part 3 of our Part 5 series Wills & Estates Solicitor Richard Dawson takes us through the benefits of using the structure of a Testamentary Trust for Tax advantages.

Contact our Lawyers Gold Coast team for more information on Testamentary Trusts.

See Part 1
See Part 2

Transcript

I’m Richard Dawson, Partner at OMB Solicitors, and I’m in charge of the estate planning team. Today, I want to talk to you about setting up testamentary trusts within your will and the tax advantages of doing so. A testamentary trust is a trust that is established in a person’s will.

It comes into effect when the will maker passes away and the executive administers their estate. There are a number of advantages of having a testamentary trust in your will, and one in particular is income splitting for tax advantages.

For example, let’s say a deceased estate was worth one million dollars, and it left that million dollars to a testamentary trust. In that testamentary trust, there may be a number of beneficiaries. For example, the deceased person’s children and grandchildren.

One of the advantages in a testamentary trust is that children and grandchildren under the age of 18 are taxed at adult marginal rates. This is different from family trusts, which are more commonly used to run family businesses and the like. So let’s use an example, let’s say the million dollars was invested and the return on the investment was 5 % per annum. That will generate $50,000 a year in taxable income.

The trustee of the testamentary trust, which more often than not is the deceased person’s child or potentially grandchildren, they have the day to day management and responsibility of administering the testamentary trust. One of those responsibilities is to ensure that a tax return for the trust is lodged after 30 June each financial year.

Using the $50,000 income as an example, let’s say we had three grandchildren under the age of 18. The trustee has the ability to split that $50,000 to each of those three grandchildren, and the first $18,200 for each grandchild is tax free. Therefore, you can see the $50,000 a year in income from that testamentary trust is completely tax free.

One of the advantages and peace of mind for the will maker is instead of paying the tax that would otherwise have been paid if that million dollars was left to an adult child on a high taxable income, the tax savings can be used for the grandchildren’s education.

Therefore, I like to say, let the tax man pay for the grandchildren’s education. Think of it this way, instead of paying the tax that would have been payable to the ATO, the testamentary trustee can pay it to the school headmaster to be used for private school education, sporting needs, or any other maintenance that these young children or grandchildren may need in their life.

So, If you would like any further information about testamentary trusts or the advantages and disadvantages as to why they are used, please get in contact with me or one of my estate team members, and we’ll be more than happy to assist.

Thank you.

The benefits of having a Testamentary Trust and using it to your benefit.

In Part 2 of our Part 5 series Wills & Estates Solicitor Richard Dawson takes us through the analogy of using the structure of a Testamentary Trust as a Bank Model.

Contact our Lawyers Gold Coast team for more information on Testamentary Trusts.

See Part 1
See Part 3
See Part 4