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Questions and Answers
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?
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?
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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?
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Which factors may render a will invalid?
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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?
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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?
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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?
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What is one requirement for a valid will?
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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?
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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?
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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?
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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?
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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?
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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?
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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?
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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?
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Which of the following best describes a discretionary trust?
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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?
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Which statement about estate and non-estate assets is correct?
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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?
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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?
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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?
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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.
