Setting the scene:
- Phil and Claire are married.
- Their children Haley, Alex and Luke are all minors.
- Phil and Claire assets are all jointly held and include a house, bank accounts and motor vehicles – total value $500,000.
- Phil has $150,000 in a public offer superannuation fund. He has $50,000 life cover through the fund.
Issues for Phil and Claire to consider:
||Who to nominate for the important role of executor and trustee in the event they both die. Consider alternativesAre executors/trustees to be paid?
Nominate each other at first instance then Jay and Mitchell jointly as alternatives
|Guardian for children
Consider nominating in the will a guardian for the children
Consider including wishes regarding upbringing, schooling etc
Consider including powers regarding accommodation for guardians, purchase of motor vehicle etc
Will guardians be paid?
Appoint Jay and Gloria as guardians
Clients don’t want to include wishes, powers or payment
||Outright gift or via testamentary trust?
||To each other outright
|What if the other predeceases?
Need for education trust? The children currently have different education needs. For example, Haley has almost completed school; Alex is a couple of years behind her; and Luke a couple of more years behind. Should the wills set up an education fund to pay school expenses to treat beneficiaries more fairly and avoid one person’s inheritance (eg Luke’s) being eaten up by school/university fees?
Elect not to set up education trust
|Gift-over to children?
||Yes, to children equally
|Outright or testamentary trust?
|At what age?
||At age 21
|What if a child predeceases or dies before age 21?
||Consider need to provide for grandchildren
If deceased child is survived by a child (or children), that child (or those children equally) to receive, at 21 years, the inheritance the deceased child would have received had they survived and attained 21 years
If deceased child is not survived by a child or children, the inheritance the deceased child would have received to pass to Phil and Claire’s remaining children
|What if they all die?
||If the family all die together (or no child survives and attains 21 years) who do they want to benefit from their estate?
||Half to Phil’s siblings, half to Claire’s siblings
|Other issues for discussion
||Should Phil make a binding nomination/direction for his superannuation fund?
||Discuss with client
|Is there a need to include superannuation proceeds trust and equalisation clause in will?
||Clients don’t want super trust/equalisation clauses
Is Phil’s insurance cover adequate? Does he need income protection cover and should this be held personally or in the superannuation fund?
Should Claire take out insurance cover?
|Discuss with client
Phil's stratregy might look like
|Phil dies and …
||Distribution of estate
|Claire predeceases and one or more of Haley, Alex and Luke survive and attain 21 years
||Jay and Mitchell
||Jay and Gloria
||1/3 to Haley if she survives and attains 21 years. If not, then:
||1/3 to Alex if she survives and attains 21 years. If not, then:
||1/3 to Luke if he survives and attains 21 years. If not, then:
|If Haley leaves a child or children who survive and attain 21 years, to that child or children equally
||Otherwise, add to Alex and Luke’s shares
||If Alex leaves a child or children who survive and attain 21 years, to that child or children equally
||Otherwise, add to Haley and Luke’s shares
||If Luke leaves a child or children who survive and attain 21 years, to that child or children equally
||Otherwise, add to Haley and Alex’s shares
|Claire predeceases and no child or grandchild of Phil’s survives and attains 21 years
||Jay and Mitchell
||Jay and Gloria
||½ to Phil’s siblings
||½ to Claire’s siblings
Note: “survives” means survives willmaker by 30 days; “predeceases” means fails to survive willmaker by 30 days.