Estate and business succession planning : a practical and strategic guide for the trusted adviser

498 Pages·2015·1.33 MB·English

by  O’Sullivan

Estate & Business
Succession Planning 2015 -16
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A practical and strategic guide for the trusted adviser a
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Key features and benefits: Online subscription includes: &
■■ provides a thorough overview of succession planning ■■ 12 months of unlimited access to the 2015-16 online B
laws in every Australian jurisdiction book, with updates u Estate & Business
■■ presents case studies, tips, diagrams and strategies to ■■ interactive eLearning with reference links back to the s
ensure the best outcome online book (3.5 CPD hours) in Succession Planning
■■ discusses pitfalls to be aware of and troubleshooting ■■ access to the eBook version, at no extra cost e
techniques s 7th edition
■■ cross-references. s
■■ covers all succession planning topics, including:
The book is prescribed reading for: S
■■ wroillelss a onf de xpeocwuetorsrs o af nadtt otrrunsetyees ■■ Ksuacpclaens’ssi oMna asntedr eosf tAatpep plieladn nFiinnga)nce (topic: insurance, uc A practical and strategic guide for the trusted adviser
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■ rules of intestacy
■ testamentary trusts ■■ CTaexnattriaoln U Pnliavnenrsinitgy oafn Qd uEesetantsel aPnldan’sn pinogstgraduate course, es
■ claims against estates and will challenges s
■ charitable trusts and prescribed ancillary funds ■■ Curtin University’s Estate Planning unit in the School of io
Business Law and Taxation
■ special disability, estate and insurance proceeds trusts n
■ superannuation claims and disputes ■■ Deakin University’s undergraduate and postgraduate P
■ superannuation death benefit strategies courses in Estate Planning. l Bernie O’Sullivan, CTA
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■ family trusts
■ international estate planning Bernie O’Sullivan, LLB, CTA, TEP, of Bernie O’Sullivan n
Lawyers, was assisted by selected experts in the n
■ tax consequences of death development of this guide. The guide is current as at i
■ family law and death 30 June 2015. n
■ business succession planning. g
For more information about this book,
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please visit successionplanningonline.com.au.
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Published by The Tax Institute i
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ABN 45 008 392 372 a
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6/15 taxinstitute.com.au
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2 A Tax Institute Publication
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Publisher
Published in Australia in 2015 by
The Tax Institute ABN 45008392372
Level 10, 175 Pitt Street, Sydney, NSW 2000
taxinstitute.com.au
© The Tax Institute 2015
O’Sullivan, Bernie
Estate & Business Succession Planning 2015-16
7th ed. Includes index.
ISBN: 978-0-9943560-0-0
Acts other than fair dealing
Apart from any fair dealing for the purposes of private study, research, criticism or review as permitted
under the Copyright Act 1968 (Cth), no part of this publication may be stored or reproduced or copied
in any form or by any means without prior written permission. Enquiries should be made to the
publisher only.
Important disclaimer
This publication is intended as an information source only. The comments and extracts from legislation
and other sources in this publication contain generalisations, may not be up to date and do not
constitute legal advice and should not be relied upon as such. All readers – whether purchasers of the
book or otherwise – should seek advice from a professional adviser regarding the application of any of
the comments in this publication to a particular fact scenario. Information in this book does not take
into account any person’s personal objectives, needs or financial situations. Accordingly, you should
consider the appropriateness of any information, having regard to your own objectives, financial
situation and needs and seek professional advice before acting on it.
Bernie O’Sullivan and The Tax Institute exclude all liability (including liability for negligence) in
relation to your use of this publication. All readers must rely on their own professional advice.
Currency
The author and the publisher intend that this book is – as far as possible and subject to the above
disclaimer – current as at 30 June 2015.
Circulation
You must not circulate this book in any other cover or binding than its original and you must impose
this condition on any purchaser or acquirer of this book.
iii
Foreword
Bernie O’Sullivan is to be commended on creating this invaluable resource for practitioners of the law,
accounting and financial planning. Now in its seventh edition, after a very successful launch into the
market, Estate & Business Succession Planning is one of the first widely available texts on the topic and
is undoubtedly a fine addition to the library of the busy planning professional.
Available in both hard copy and online, this publication has proven to be a very useful tool for both the
experienced and less experienced adviser in the area of estate and business succession planning.
I would invite the less experienced adviser to peruse the contents pages, which demonstrate the broad
scope of the issues that need to be considered in rendering quality advice to clients. The experienced
practitioner will find it a very worthwhile and up-to-date aide-mémoir.
This text is practical, clearly expressed and based on a sound appreciation of the law in all Australian
jurisdictions. Further, readers are encouraged to enquire more widely through relevant footnote
references to the cases and professional articles.
Lastly, trusts, superannuation funds and family law are comprehensively considered. This is a
significant and valuable point of difference from many other texts on this topic, as these structures
play an increasingly important role in modern family wealth accumulation.
Ken Schurgott, BAppSc, LLB, BA(Acy), MAppFin, MLS, LLM, CTA
Director, Schurgott Noolan Pty Ltd (an incorporated legal practice)
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How this book is structured
The text is structured to follow a typical chronology of the estate and business succession planning
processes. It explains the purpose of the documents that underpin the succession planning process,
the traps to be wary of, and the opportunities for effective structuring.
The legislation dealing with much of succession law is complex and differs between jurisdictions in
Australia. The chapters dealing with these topics, such as powers of attorney, wills and intestacies and
claims against estates, all contain tables that highlight the more important issues dealt with by the laws
in each jurisdiction. These chapters then generally discuss the key concepts noting, where appropriate,
exceptions to the general rules.
This book reflects the consideration of over 40 separate state and federal Acts.
This publication is also available online (located at successionplanningonline.com.au),
and includes:
„„12 months of unlimited access to the 2015-16 online book, with updates;
„„interactive eLearning with reference links back to the online book (3.5 CPD hours);
„„access to the eBook version at no extra cost; and
„„cross-references.
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Contents
Foreword iii
Preface xxxii
Chapter 1: Succession planning and the professional adviser 1
¶1-100 Introduction .....................................................................................................................2
¶1-105 Talking the talk ................................................................................................................2
¶1-110 More than just a will ........................................................................................................2
¶1-115 A team effort and a business opportunity .......................................................................3
¶1-120 The starting point: asset ownership ................................................................................4
¶1-125 How assets are dealt with ...............................................................................................4
¶1-130 Ten questions to ask your client .....................................................................................5
¶1-135 The adviser’s role – threshold issues ..............................................................................6
Advice point ....................................................................................................................7
Establishing a family trust ...............................................................................................7
Ongoing service ..............................................................................................................8
Breadth of responsibility .................................................................................................8
Legal advice and other restrictions .................................................................................8
Prohibition on offering legal advice ...........................................................................8
Prohibition on engaging in legal practice ..................................................................9
Prohibition on representing or advertising .............................................................10
FOFA 10
¶1-140 An ongoing process ......................................................................................................10
¶1-145 New legislation and case law ........................................................................................11
Chapter 2: Attorneys and guardians 13
¶2-100 Introduction ...................................................................................................................14
¶2-105 General power of attorney ............................................................................................15
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What is a general power of attorney? ...........................................................................15
Is it permitted in all jurisdictions? .................................................................................15
How is a general power of attorney created? ...............................................................15
Can multiple attorneys be appointed? ..........................................................................15
When does it come into effect? ....................................................................................16
Can the attorney’s decision-making powers be limited? ..............................................16
How long does it last? ..................................................................................................16
Does it need to be registered? ......................................................................................17
What can go wrong? .....................................................................................................17
¶2-110 Enduring power of attorney ..........................................................................................19
What is an enduring power of attorney? .......................................................................19
Is it permitted in all jurisdictions? .................................................................................19
How is an enduring power of attorney created? ...........................................................19
Who can witness an enduring power of attorney? .......................................................19
Certificate of witness ....................................................................................................19
Can multiple attorneys be appointed? ..........................................................................20
Alternative attorney .......................................................................................................20
When does it come into effect? ....................................................................................20
Does it need to be registered? ......................................................................................21
What are the duties of an attorney? ..............................................................................21
Can the attorney’s decision-making powers be tailored? ............................................22
How long does an enduring power of attorney last? ....................................................23
Can an enduring power of attorney be revoked? .........................................................23
Revocation if there is more than one attorney ..............................................................24
Can the attorney charge a fee? ....................................................................................24
Can an attorney pay certain benefits? ..........................................................................24
Liability and indemnities................................................................................................24
SMSFs and enduring powers of attorney ....................................................................24
What can go wrong? ....................................................................................................26
¶2-112 Elder abuse ...................................................................................................................26
Are your clients at risk? .................................................................................................26
¶2-115 Medical enduring power of attorney .............................................................................27
What is a medical enduring power of attorney? ...........................................................27
Is it permitted in all jurisdictions? .................................................................................27
How is a medical enduring power of attorney created? ...............................................27
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Who can witness a medical enduring power of attorney? ............................................28
Can the medical attorney’s decision-making powers be limited? ................................28
Can multiple medical attorneys be appointed? ............................................................28
When does it come into effect? ....................................................................................28
What are the duties of a medical enduring power of attorney? ....................................29
How long does a medical enduring power of attorney last? ........................................29
Can a medical enduring power of attorney be revoked or changed? ..........................29
¶2-120 Enduring power of guardianship ...................................................................................30
What is enduring power of guardianship? ....................................................................30
Is it permitted in all jurisdictions? .................................................................................30
How is an enduring power of guardianship created? ...................................................30
Can the guardian’s decision-making powers be limited? .............................................30
Investment and special superannuation rules ..............................................................31
Can multiple guardians be appointed? .........................................................................32
When does an enduring power of guardianship come into effect? ..............................32
How long does it last? ..................................................................................................32
Can it be revoked or changed?.....................................................................................32
¶2-121 Guardianship and administration boards and tribunals ................................................32
¶2-125 Australian Capital Territory ............................................................................................35
Powers of Attorney Act 2006 (ACT) ..............................................................................35
Guardianship and Management of Property Act 1991 (ACT) .......................................37
Medical Treatment (Health Directions) Act 2006 (ACT) .................................................38
Testamentary Guardianship Act 1984 (ACT) .................................................................38
¶2-130 New South Wales ..........................................................................................................39
Powers of Attorney Act 2003 (NSW) .............................................................................39
Guardianship Act 1987 (NSW) ......................................................................................40
Protected Estates Act 1983 (NSW) ...............................................................................40
Testator’s Family Maintenance and Guardianship of Infants Act 1916 (NSW) ..............40
¶2-135 Northern Territory ..........................................................................................................41
Advance Personal Planning Act (NT) ............................................................................41
Powers of Attorney Act (NT) .........................................................................................41
Aged and Infirm Persons’ Property Act (NT) .................................................................42
Adult Guardianship Act (NT) .........................................................................................42
Guardianship of Infants Act (NT) ...................................................................................43
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¶2-140 Queensland ...................................................................................................................43
Powers of Attorney Act 1998 (Qld) ...............................................................................43
Guardianship and Administration Act 2000 (Qld) ..........................................................44
Mental Health Act 2000 (Qld) ........................................................................................45
Succession Act 1981 (Qld) ............................................................................................45
¶2-145 South Australia ..............................................................................................................45
Powers of Attorney and Agency Act 1984 (SA) ............................................................45
Consent to Medical Treatment and Palliative Care Act 1995 (SA) ................................46
Guardianship and Administration Act 1993 (SA) ...........................................................46
Guardianship of Infants Act 1940 (SA) ..........................................................................47
¶2-150 Tasmania .......................................................................................................................47
Powers of Attorney Act 2000 (Tas) ................................................................................47
Guardianship and Administration Act 1995 (Tas) ..........................................................48
Guardianship and Custody of Infants Act 1934 (Tas) ....................................................49
¶2-155 Victoria ..........................................................................................................................49
Instruments Act 1958 (Vic) ............................................................................................49
Medical Treatment Act 1988 (Vic) .................................................................................50
Guardianship and Administration Act 1986 (Vic) ..........................................................51
¶2-160 Western Australia ..........................................................................................................52
Guardianship and Administration Act 1990 (WA) ..........................................................52
Property Law Act 1969 (WA) .........................................................................................52
Chapter 3: Wills and intestacy 53
¶3-100 Introduction ...................................................................................................................54
¶3-105 Why have a will? ...........................................................................................................54
¶3-110 Requirements for a valid will .........................................................................................55
¶3-115 Special rules for wills ....................................................................................................57
Informal wills .................................................................................................................57
Wills for minors .............................................................................................................58
Wills for Defence Force members .................................................................................59
¶3-120 Statutory wills................................................................................................................60
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¶3-125 Mutual wills ...................................................................................................................61
Making mutual wills.......................................................................................................62
How effective are mutual wills? ....................................................................................62
Alternatives to mutual wills ...........................................................................................63
¶3-130 Who to see when making a will ....................................................................................63
Lawyers and trustee companies ...................................................................................64
Will kits ..........................................................................................................................64
Internet wills ..................................................................................................................64
¶3-135 The role of the lawyer ....................................................................................................64
Taking instructions ........................................................................................................64
Timing ...........................................................................................................................65
Discussing the options ..................................................................................................65
Powers of executors and trustees ................................................................................66
Charging ........................................................................................................................66
Liability ..........................................................................................................................66
¶3-140 Undue influence ............................................................................................................67
Burden of establishing undue influence ........................................................................67
Standard of proof ..........................................................................................................67
¶3-145 Capacity to make a will .................................................................................................68
Burden of proof of establishing testamentary capacity ................................................68
Standard of proof when establishing testamentary capacity .......................................68
What to do when doubts exist regarding capacity ......................................................69
¶3-155 What happens if someone dies without a will? .............................................................70
Intestacy ........................................................................................................................70
Partial intestacy .............................................................................................................70
How is an intestate estate distributed? ........................................................................71
Deceased has no spouse or children .....................................................................72
Deceased is survived by one spouse and no children ...........................................73
Deceased is survived by one spouse and children ................................................75
Personal chattels ..........................................................................................................77
Statutory interest ...........................................................................................................77
Can a distribution under intestacy laws be challenged? ..............................................77
Intestate estates of Indigenous persons .......................................................................77
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¶3-160 Executors and trustees .................................................................................................77
Role of executor ............................................................................................................77
Timeframes for claims against the estate ...............................................................78
Notice to creditors ..................................................................................................78
Administering the estate .........................................................................................79
Proper accounts and records .................................................................................79
Role of trustee ...............................................................................................................79
Proper accounts and records .................................................................................79
Trustee investments ................................................................................................79
Appointing executors and trustees ...............................................................................79
How many executors and trustees? .......................................................................79
Who to choose as executor and trustee .................................................................80
Theft, incompetence and other catastrophes .........................................................80
Complex estates .....................................................................................................82
Ongoing trusts ........................................................................................................82
What skills should executors and trustees have? ..................................................82
Trustee companies and lawyers....................................................................................83
Accountants and financial planners ..............................................................................84
Paying executors and trustees .....................................................................................84
¶3-165 A role for the adviser? ...................................................................................................85
Chapter 4: Disposing of assets by will 89
¶4-100 Introduction ...................................................................................................................90
¶4-105 Legacies ........................................................................................................................91
Drafting issues ..............................................................................................................91
So what can go wrong? ................................................................................................91
Inflation ...................................................................................................................91
Death of legatee ......................................................................................................92
Decrease in value of estate .....................................................................................92
Increase in value of estate ......................................................................................93
Abatement of legacies ..................................................................................................93
Interest on legacies .......................................................................................................93
¶4-110 Bequests .......................................................................................................................94
Drafting issues ..............................................................................................................94