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Questions and Answers
What is the minimum required payment for an account-based pension in its first year?
What is the minimum required payment for an account-based pension in its first year?
Which of the following best describes the risk associated with account-based pensions?
Which of the following best describes the risk associated with account-based pensions?
What typically governs the maximum drawdown from a Transition to Retirement (TTR) account-based pension?
What typically governs the maximum drawdown from a Transition to Retirement (TTR) account-based pension?
What characterizes the payments received from an annuity compared to other investment returns?
What characterizes the payments received from an annuity compared to other investment returns?
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What is a key advantage of account-based pensions over non-account-based retirement income streams (RIS)?
What is a key advantage of account-based pensions over non-account-based retirement income streams (RIS)?
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Under what circumstances is a trust tax return not required for a deceased estate?
Under what circumstances is a trust tax return not required for a deceased estate?
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Which factors may render a will invalid?
Which factors may render a will invalid?
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What is the primary function of probate in the estate administration process?
What is the primary function of probate in the estate administration process?
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Who does the Testator's Family Maintenance Act 1912 (TFM claim) allow to contest a will?
Who does the Testator's Family Maintenance Act 1912 (TFM claim) allow to contest a will?
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What happens if a deceased leaves assets without a will?
What happens if a deceased leaves assets without a will?
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What is required for an executor to take possession of estate assets after a death?
What is required for an executor to take possession of estate assets after a death?
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When can increased tax rates apply for a trust related to a deceased estate?
When can increased tax rates apply for a trust related to a deceased estate?
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What must be proved for a will to be recognized as the last will and testament in the probate process?
What must be proved for a will to be recognized as the last will and testament in the probate process?
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What is one requirement for a valid will?
What is one requirement for a valid will?
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Which of the following individuals is NOT eligible to make a will?
Which of the following individuals is NOT eligible to make a will?
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In what order should a will typically be structured?
In what order should a will typically be structured?
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What is one reason why additional planning may be necessary regarding a BFA?
What is one reason why additional planning may be necessary regarding a BFA?
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Which of the following laws does NOT directly pertain to the creation and validity of wills?
Which of the following laws does NOT directly pertain to the creation and validity of wills?
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What does it mean for a testator to have 'sound mind' when creating a will?
What does it mean for a testator to have 'sound mind' when creating a will?
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What is a potential consequence if a beneficiary dies before the testator?
What is a potential consequence if a beneficiary dies before the testator?
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Who is responsible for managing a deceased estate according to the will?
Who is responsible for managing a deceased estate according to the will?
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Which condition does NOT constitute valid grounds for contesting a will under common law?
Which condition does NOT constitute valid grounds for contesting a will under common law?
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Under the Testator’s Family Maintenance Act 1912 (TFM claim), which of the following is NOT considered a valid claimant?
Under the Testator’s Family Maintenance Act 1912 (TFM claim), which of the following is NOT considered a valid claimant?
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Which statement correctly describes the 3-year rule for tax on a deceased estate in Australia?
Which statement correctly describes the 3-year rule for tax on a deceased estate in Australia?
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What is a key difference between a general power of attorney (PoA) and an enduring PoA?
What is a key difference between a general power of attorney (PoA) and an enduring PoA?
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Which type of trust provides beneficiaries with a right to receive distributions based on the number of units they hold?
Which type of trust provides beneficiaries with a right to receive distributions based on the number of units they hold?
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Which of the following actions is NOT permitted by a general power of attorney?
Which of the following actions is NOT permitted by a general power of attorney?
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Which group is typically considered disqualified from contesting a will or making a TFM claim?
Which group is typically considered disqualified from contesting a will or making a TFM claim?
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Which statement best represents the legal status of a power of attorney?
Which statement best represents the legal status of a power of attorney?
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Who is NOT considered a potentially valid claimant to a deceased estate under the mentioned conditions?
Who is NOT considered a potentially valid claimant to a deceased estate under the mentioned conditions?
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Which of the following best describes a discretionary trust?
Which of the following best describes a discretionary trust?
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Which of the following accurately describes a legacy in estate planning?
Which of the following accurately describes a legacy in estate planning?
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What is the primary role of an executor in estate planning?
What is the primary role of an executor in estate planning?
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Which statement about estate and non-estate assets is correct?
Which statement about estate and non-estate assets is correct?
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What distinguishes a corporate trustee from a traditional trustee?
What distinguishes a corporate trustee from a traditional trustee?
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What is the key purpose of a Binding Financial Agreement (BFA) in estate planning?
What is the key purpose of a Binding Financial Agreement (BFA) in estate planning?
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Which element is NOT typically included in estate planning?
Which element is NOT typically included in estate planning?
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Who is responsible for ensuring that the wishes of a testator are honored after death?
Who is responsible for ensuring that the wishes of a testator are honored after death?
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What is an example of ademption in estate planning?
What is an example of ademption in estate planning?
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In what scenario would non-estate assets typically be transferred to another party?
In what scenario would non-estate assets typically be transferred to another party?
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Which of the following best defines a beneficiary in the context of estate planning?
Which of the following best defines a beneficiary in the context of estate planning?
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Study Notes
Contesting a Will
- A person can leave assets to anyone they wish, there is no obligation to distribute equally or fairly.
- A will can be contested on the grounds of lack of capacity, undue duress, or incorrect execution.
- Contesting beneficiaries can claim legal costs from the estate, but only if a valid basis for challenge is established.
- The general principle of freedom in beneficiary choice is modified by Family Law, which requires provision for family/others.
- Inadequate provision can be contested under the Testator’s Family Maintenance Act 1912 (TFM).
- TFM claims are limited to surviving spouses, children, parents, or a divorced spouse receiving maintenance.
Estate Challenges
- Each state has legislation allowing estate challenges (not specific will distributions) by individuals who can demonstrate need for maintenance.
- Potential claimants include estranged or unknown children and long-term carers.
- Estate assets alone are vulnerable to these challenges.
3-Year Rule For Tax
- Australian tax law allows executors up to three years to finalize an estate.
- The estate is taxed as an individual during this period.
- Standard personal income tax rates apply to income earned by the estate assets.
- This benefits beneficiaries, as they may be in a higher tax bracket currently and receive a lower tax rate on delayed distributions.
Power of Attorney
- A legal document appointing an attorney to act as agent for the donor.
- Operates during the donor's lifetime and can be general, enduring, or for guardianship.
- General PoA ceases upon the donor's loss of mental capacity.
- Enduring PoA remains valid even with loss of capacity.
- Authorizes the attorney to undertake legal, administrative, or financial matters specified by the donor.
Trusts
- A fixed trust/unit trust gives beneficiaries a fixed entitlement to distributions and capital based on units held.
- A discretionary trust entitles beneficiaries to be considered for distributions, but not guaranteed.
- Two main trust types:
- Pension: Transferable to dependents on death or cashable as a lump sum into the estate.
- Account-based Payment Standards: Minimum payments are pro-rata in the first year, then a percentage of the account balance annually.
Estate Planning
- Estate = net worth of a living or deceased person.
- Key elements: Will, executor appointment, trust creation, power of attorney.
- Financial Planners are generalists and can advise on estate planning but not create legal documents.
Terminology
- Testator/Testatrix: Person making the will.
- Beneficiaries: People who receive all or part of the estate.
- Bequest: Gift of property.
- Devise: Gift of land.
- Legacy: Gift of personal property.
- Executor/Executrix: Manages the deceased estate.
- Trustee: Holds property in trust.
- Corporate Trustee: Company acting as trustee.
- Guardian: Appointed to care for beneficiaries such as minors.
- Ademption: Partial extinction of a legacy by the testator during their lifetime.
Estate Assets
- Assets owned personally by the individual are included in the estate (e.g., real property, financial assets, personal items).
- These assets are disposed of by will.
- Asset distributions are vulnerable to family challenges.
- Estate assets are vulnerable to creditors if the person dies bankrupt.
Non-Estate Assets
- Assets controlled but not owned by the individual.
- Include jointly-owned assets, unreleased superannuation benefits, assets held in trust, life insurance proceeds, or assets subject to Binding Financial Agreements.
- These assets are not distributed by a will.
Wills
- A legal document detailing distribution of a deceased estate's assets.
- Specifies beneficiary details, instructions, and appoints executor, guardians, and trustees.
- Relevant laws include: Wills Act 1997 and Administration and Probate Act 1958).
Who Can Make A Will
- Individuals over 18 with testamentary capacity (sound mind).
- Exceptions: Married minors, court-authorized individuals.
- Requires understanding of the act of making a will, its effects, and the intended beneficiaries and property.
Valid Wills
- Must be in writing, although no specific format is required.
- Signed by the testator or by another person in their presence and direction.
- Executed in the presence of two independent witnesses.
- Solicitor assistance is recommended, especially for complex financial arrangements.
Recognized Will Order
- Testator's Name, Address, Occupation:
- Revocation of Former Wills:
- Appointment of Executor and Trustee:
- Specific Personal Property Gifts:
- Specific Real Estate Gifts:
- Life Interests:
- Residual Interests:
- Maintenance and Provision for Infants:
- Declarations of Intentions and Guardian Appointment:
Deceased Estate Trusts
- Subject to income tax rates, but no Medicare Levy or credits apply.
- Trust is treated as a new taxpayer, resulting in two tax-free thresholds applying in the full tax year.
- Trusts are subject to the full tax-free threshold for two years after administration has commenced.
- Increased tax rates apply after exceeding the 3rd tax year unless administration has been finalized before June 20th.
Ground For Will Challenges
- Invalid will: Not properly executed, revoked by a later will, lack of testamentary capacity, undue duress, etc.
- Valid will, but inadequate provision: Claimants can seek provision under the TFM Act.
Probate
- Verification of a will by the court.
- Executor (LPR) requires a grant of probate to possess estate assets.
- Process: Verifying the will, confirming and registering the executor, verifying proper estate administration.
- Probate parchment is issued upon completion.
- Financial institutions require this document for asset release to executors.
Intestacy
- Death without a will distributing the entire estate.
- Partial intestacy occurs when the deceased does not distribute all of their property through a will.
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Description
This quiz explores the principles behind contesting a will and the various grounds on which a will can be challenged. It also delves into legislation regarding estates, maintenance claims, and the rights of beneficiaries. Test your understanding of family law and inheritance rights.
