I would say the solicitor who messed up wasn't honest. They marketed themselves as being able to do something they didn't know enough about. He should have known what he is doing and if he didn't he should refer the client on - to a specialist.
Super and Death
- Thread starter Terry_w
- Start date
I would say the solicitor who messed up wasn't honest. They marketed themselves as being able to do something they didn't know enough about. He should have known what he is doing and if he didn't he should refer the client on - to a specialist.
What is wrong with that? If you market super and tax planning as something you offer then you should be up to date.
Everyone thinks they know more than they do (incduding me) - look at the various threads here for evidence!
Nothing is wrong with it. However, I'm willing to pay for quality advice on things like wills. Most people want quality advice but aren't willing to pay for it, probably because they don't understand the nature of legal advice (i.e. you're paying for the person's training and experience, not the specific hours they actually spend on your issue). Is it 'better' to make the requirements so onerous that you price most people out of it altogether?
Simply YES.
If your asset base is worth less than say $5-10 m or your requirements are straightforward (probably 》90% of cases), is extremely qualified advice actually warranted?
Then you either create a two-tiered system, or you shut some people out of it altogether. Where do you draw the line?
It's not about whether your requirements are straightforward, it's about whether there are ways to maximise benefits to your heirs. Remembering that estate assets might include proceeds of life insurance policies.
I think someone who died tomorrow with say 2m would benefit greatly from high quality advice what included testamentary trusts, for example.
It's a balance between what people are willing to pay, and what people probably need.
Hi Scott. In certain areas (especially superannuation and Estate Planning), highly qualified advice is potentially useful to most people. By 'most' I mean 'anyone with assets'.
Case in point. An adviser I used to work for had a client couple. He proposed super and Estate Planning advice that was... inadequate. I countered with a proposal that, if something should happen to either one or both of them, their beneficiaries would save significant amounts of tax and the assets would be sufficiently protected.
These clients weren't particularly well off, financially. Now, I'm no Estate Planning expert, far from it. But I do have a reasonable understanding of the subject. I 'know what I don't know' as it were. In many cases (over 90% in my estimation), advisers either ignore Estate Planning altogether or tell their clients to contact their solicitor (translation: I don't know anything about Estate Planning, I don't want to know anything about Estate Planning, therefore I couldn't give a rats what you do about it).
So it's vital to have someone that knows what they are doing.
As far as super goes, well that's a bit different, because most peoples' funds are administered by professional trustees. Knowing how and when to review your BDBN is about as far as most people need to go. But SMSFs are a completely different story. Trustees are responsible for maintaining compliance, regardless of where the advice came from.
It doesn't matter how much is in the SMSF, the rules apply to everyone. So trustees must ensure they have top notch, specialist advisers in this area. If you doubt what I'm saying, read some of the case study blog entries over at DBA Lawyers.
Case in point. An adviser I used to work for had a client couple. He proposed super and Estate Planning advice that was... inadequate. I countered with a proposal that, if something should happen to either one or both of them, their beneficiaries would save significant amounts of tax and the assets would be sufficiently protected.
These clients weren't particularly well off, financially. Now, I'm no Estate Planning expert, far from it. But I do have a reasonable understanding of the subject. I 'know what I don't know' as it were. In many cases (over 90% in my estimation), advisers either ignore Estate Planning altogether or tell their clients to contact their solicitor (translation: I don't know anything about Estate Planning, I don't want to know anything about Estate Planning, therefore I couldn't give a rats what you do about it).
So it's vital to have someone that knows what they are doing.
As far as super goes, well that's a bit different, because most peoples' funds are administered by professional trustees. Knowing how and when to review your BDBN is about as far as most people need to go. But SMSFs are a completely different story. Trustees are responsible for maintaining compliance, regardless of where the advice came from.
It doesn't matter how much is in the SMSF, the rules apply to everyone. So trustees must ensure they have top notch, specialist advisers in this area. If you doubt what I'm saying, read some of the case study blog entries over at DBA Lawyers.
What I am alluding to is, that for the vast majority of people whose assets compromise joint tenancy ppor, industry or retail super, a handful of NRMA/Telstra shares & the family dog with a couple of kids that their intentions are usually: 1st to spouse, then to kids, then charity etc no elaborate system of TT or life estates being created.
Where life becomes more complex with 2nd, 3rd marriages & kids and assets from each relationship then some degree of estate planning is required.
At the top tier, where you have complx affairs, assets which are a mix of cgt exempt and post cgt, preference towards a proportional split of assets to heirs and grand kids/nieces/nephews. .. then the services of multiple disciplines of consultants is required. This does come at a cost and is already out of reach for a bog standard intestate punter.
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If they died tomorrow it wouldn't benefit them at all, they'll still be dead. It is the legacy left behind to their heirs.
However if the structure of the tt is such that it costs the heirs $0.01 to administer or $$ to get advice to understand they aren't going to be satisfied and will seek to unwind the structure just to get to the $
Estate planning is intergenerational planning and needs to be understood by not only the current owners but also the heir apparent.
Here is a simple example of some planning advice which could save hundreds of thousands:
Elderly widow with $1mil in a SMSF.
All children are adults and there is no spouse or tax dependants.
Advice, set up an enduring POA which specifically gives the power for the attorney with withdraw super.
Client's health goes down rapidly. Her son and daughter are attorney and once she has lost capacity they decide to withdraw all of her $1mil in super. She dies a few weeks later and the super is in her bank account as cash - it is no longer super so it passes according to her will. Notax on withdrawing super.
Had she not withdrawn super it would have been taxed in the hands of her beneficiiaries. Probably taxed at 15% plus medicare.
$165,000 saved.
Elderly widow with $1mil in a SMSF.
All children are adults and there is no spouse or tax dependants.
Advice, set up an enduring POA which specifically gives the power for the attorney with withdraw super.
Client's health goes down rapidly. Her son and daughter are attorney and once she has lost capacity they decide to withdraw all of her $1mil in super. She dies a few weeks later and the super is in her bank account as cash - it is no longer super so it passes according to her will. Notax on withdrawing super.
Had she not withdrawn super it would have been taxed in the hands of her beneficiiaries. Probably taxed at 15% plus medicare.
$165,000 saved.
2 spouses with simple affairs should still consider well drafted wills.
e.g. A and B with 2 children, c and d (lowercase because they are children).
A dies B inherits. B then married X. X inherits most of B's assets, which were originally A's assets. X treats his step children nicely but leaves his estate to his natural children. Because c and d are step children they cannot challenge the will or X under Family Provision legislation because they do not qualify as eligible persons (in NSW anywa).
e.g. 2
A and B die together...
e.g. A and B with 2 children, c and d (lowercase because they are children).
A dies B inherits. B then married X. X inherits most of B's assets, which were originally A's assets. X treats his step children nicely but leaves his estate to his natural children. Because c and d are step children they cannot challenge the will or X under Family Provision legislation because they do not qualify as eligible persons (in NSW anywa).
e.g. 2
A and B die together...
Well said, Terry. People really just do not understand the implications of not having a well written Will.
No arguments here. (Unless some bright spark takes advantage of the person on their deathbed {try to prove it after the fact & previous beneficiaries aren't present} & amends the will.
Wills sometimes are beyond the expertise of some lawyers. Sure they are qualified and legally able to prepare a will, deed etc. But some doctors arent good at general medicine either. And a heart specialist probably gives bad advice on cancer. But if will preparation incorporates financial advice adn actions which are actually financial advice isnt there a problem if that person lacks qualifications and experience ? The financial adviser does do wills so the lawyer shouldn't do financial advice either.
A competent adviser should always know when to say STOP and obtain that advice or to refer a specialist to ensure all advice is consistent. Otherwise it is negligence. And then the question is will the PI insurer refuse the claim?
Actually read that case and it is a bother . I've got a client who is a trustee of a deceased estate, his brother- cut out of the will is now disputing estate, It seems the executor is duty bound to try to bring the super funds into the estate yet as soon as that happens they becomes part of the pie to be fought over.
In this case (McIntosh v McIntosh [2014] QSC 99) there was a son who had died without a will and a surviving mum and dad who were long time separated.
There was no will so mum applied to the courts to be appointed administrator of the estate. This meant she performed the role similar to that of the executor. She would have had to find all of his assets, paid the bills, do the final tax returns and then distribute whatever was left over (the residue) in accordance with the intestacy laws. In this case the intestacy laws meant the mother and father would end up with 50% of the residue each.
Mum was appointed administrator. This comes with legal obligations to maximise the size of the estate. e.g. sell assets for as much as possible, minimise expenses as much as possible etc.
Separately to this mum also applied to her sons superannuation fund trustee to have the super death benefits paid to herself. This was in her personal capacity.
So there was the conflict of interest. She had a responsibility to the estate to get that super proceeds paid into the estate, but also she separately wanted the money to be paid to herself.
The court ruled that as Administrator she had a special duty to the estate, and should have ignored her own interests to have had the estate become the beneficiary of the super.
What she could have done was to not apply for the role of administrator, but left it to a professional trustee. However they would likely to have requested that the super be paid into the estate as well. But as there was no binding death benefits nomination in place the trustee of the fund could have chosen to pay mum still. Mum had lived with the son and there would have been an interdependency relationship so it is possible that the trustee could have paid all or some to mum. Mum would also have been able to take the matter to the Superannuation Complaints Tribunal (Which now has a new name) to get any decision by the trustee looked at.
There was no will so mum applied to the courts to be appointed administrator of the estate. This meant she performed the role similar to that of the executor. She would have had to find all of his assets, paid the bills, do the final tax returns and then distribute whatever was left over (the residue) in accordance with the intestacy laws. In this case the intestacy laws meant the mother and father would end up with 50% of the residue each.
Mum was appointed administrator. This comes with legal obligations to maximise the size of the estate. e.g. sell assets for as much as possible, minimise expenses as much as possible etc.
Separately to this mum also applied to her sons superannuation fund trustee to have the super death benefits paid to herself. This was in her personal capacity.
So there was the conflict of interest. She had a responsibility to the estate to get that super proceeds paid into the estate, but also she separately wanted the money to be paid to herself.
The court ruled that as Administrator she had a special duty to the estate, and should have ignored her own interests to have had the estate become the beneficiary of the super.
What she could have done was to not apply for the role of administrator, but left it to a professional trustee. However they would likely to have requested that the super be paid into the estate as well. But as there was no binding death benefits nomination in place the trustee of the fund could have chosen to pay mum still. Mum had lived with the son and there would have been an interdependency relationship so it is possible that the trustee could have paid all or some to mum. Mum would also have been able to take the matter to the Superannuation Complaints Tribunal (Which now has a new name) to get any decision by the trustee looked at.
Is this the case if there is a binding nomination (upon death)?
Yes.
Super is taxed 3 different ways depending on what type of super it is and who the beneficiary is.
Under the SIS Act the super benefits can only be paid to:
A dependant,
the estate
Under the Tax Act the tax varies depending if they are a
depenant
non dependant
to make it confusing dependant is defined differently in the sis act and the tax act
The adult children are generally not classed as dependants for tax.
Super may consist of a tax free component and a taxable component.
Tax free component can be paid to all tax free.
Taxable component can be made up of a taxed element and an untaxed element.
A taxed element paid to a dependant is tax free but paid to a non dependant, such as a adult child, will be taxed at 15% plus medicare
A untaxed element paid to a depenant is tax free, but paid to a non dependant is taxed at 30% plus medicare.
So if someone has no spouse and only adult children they can save tax by withdrawinging their super (assuming they have met a condition of release) and then leaving it as cash in their will.
Super paid into an estate can be mixed up with other cash and who receives the benefits determines the tax payable. This is why it is a good idea to have a superannuation proceeds trust in the will so as to segregate this money and cause it to be paid to dependants who will pay no tax.
Also a good idea to have a BDBN if you have dependants so as to bypass the will and result in no tax. This will vary depending on the family.
Shouldn't this have been offset by anti-detriment ruling provisions? (if applicable to that fund.)
Marg
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