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Strategy 5: the blended family and life interest

Setting the scene:

As per Strategy 4: the blended family (except Jay wants to give Gloria a life interest – see comments below).

Issues for Jay to consider:

Issue Options Instruction

Personal representatives

Could Gloria act solely? Preferably nominate two persons and an alternative

Gloria and Mitchell with Claire as a further alternative

Will executors be paid?

No payment

Guardian for Manny

If Gloria and Jay die together, consider nominating in the will a guardian for Manny

Claire and Phil to be guardians

Consider including wishes regarding upbringing, schooling etc

Consider including powers regarding accommodation for guardians, purchase of motor vehicle etc

Will guardians be paid?

No wishes, special powers or payment

Nominating beneficiaries

On Jay’s death, does he want his estate to go to:

  • Gloria solely or
  • Gloria, Claire and Mitchell or
  • some other option including education trust

No education trust

Legacy (not indexed) of $250,000 each to Claire and Mitchell outright (ie not via testamentary trust)

Balance in life interest trust (see ¶4-125) with Gloria as life tenant. On death of Gloria (or earlier if she consents) balance of trust to be divided between Mitchell (40%), Claire (40%) and Manny (at age 25) (20%) via testamentary trusts

What if a beneficiary predeceases?

If any of Gloria, Claire and Mitchell predecease leaving children, do those children receive the share their deceased parent would have received? At what age?

If Gloria predeceases, whole estate to be distributed between Mitchell (40%), Claire (40%) and Manny (at age 25) (20%) via testamentary trusts

If Claire or Mitchell predecease their legacy to pass (outright) to their children who survive and attain 21 years.

If Claire, Mitchell or Manny predecease, their share in remainder to pass to their children who survive and attain age 25, via testamentary trusts

Further gift-over?

Provision could be made in the event Manny or any child of Claire and Mitchell predecease or die leaving children of their own

Client doesn’t require

Other issues for discussion

What will happen to the business on Jay’s death? Has a strategy been put in place to enable it to continue to operate if he died or became incapacitated? Is key-man insurance required? Is there a business partner and should they enter into a buy/sell agreement?

Discuss with client

 

Has Jay nominated a reversionary beneficiary to the pension in his superannuation fund? Should Jay make a binding nomination/direction for his superannuation fund?

Jay makes a binding nomination nominating Gloria. If Gloria predeceases then to his estate with the executors able (if Manny is a death benefits dependant) to allocate death benefit to a superannuation will trust for Manny with Claire and Mitchell’s share to be adjusted upwards accordingly
 

Has Jay been informed about family provision principles, including the possibility of Gloria making a claim for greater provision?

Discuss with client

 

Jay's stratregy might look like

  Personal representative Custodial guardian Distribution of estate 
Gloria survives

Gloria and Mitchell

If Mitchell predeceases, Gloria and Claire

N/A

A$250,000 legacy to Claire if she survives

If Claire predeceases leaving a child or children who survive and attain 21 years than that child or children equally take the legacy

$250,000 legacy to Mitchell if he survives

If Mitchell predeceases leaving a child or children who survive and attain 21 years then that child or children equally take the legacy

Balance of estate on life interest trust for Gloria

On Gloria’s death (or end of trust) then as per below as if “Gloria predeceases”:

Gloria predeceases Mitchell and Claire Claire and Phil (subject to Manny’s father’s rights) 1/5 (subject to superannuation equalisation) to Manny via TT if he survives and attains 25 years. If not, then: 2/5 (subject to superannuation equalisation) to Claire via TT if she survives. If not, then: 2/5 (subject to superannuation equalisation) to Mitchell via TT if he survives. If not, then:
If Manny leaves a child or children who survive and attain 25 years, that child or children equally take Manny’s share via individual TT(s) Otherwise, add to Claire and Mitchell’s shares in same proportions If Claire leaves a child or children who survive and attain 25 years, that child or children equally take Claire’s share via individual TT(s) Otherwise, add to Manny and Luke’s shares in same proportions If Mitchell leaves a child or children who survive and attain 25 years, that child or children equally take Mitchell’s share via individual TT(s) Otherwise, add to Manny and Claire’s shares in same proportion

 

Note: “survives” means survives willmaker by 30 days; “predeceases” means fails to survive willmaker by 30 days.