Lawcorp Blog

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Why sole company directors/shareholders need a Will

Posted by Ian Campbell on Friday, September 15, 2017

Difficulties arise when an ordinary person dies without leaving a valid Will. If that ordinary person is also a sole company director, the complications can be immense. The death will usually leave the company without any person properly authorised to immediately manage the company.

Ordinarily, if a director of a company dies, the surviving directors can continue to manage the company and may even make a temporary appointment, pending the appointment of a new director by the members (shareholders) of the company.

Equally, if the sole shareholder of a company dies, the directors can continue to manage it until the beneficiaries under the will have the shares transferred to them. HOWEVER, where the sole director is also the sole shareholder, the risk of uncertainty is much greater.

Section 201F of the Corporations Act 2001 does provide that, in the event of the death of a single member/director of a proprietary company, the executor or other personal representative appointed to administer the deceased’s estate may appoint a new director to the company. The director has all the powers, rights and duties of the deceased director and can keep the company running until shares are transferred to beneficiaries who may then appoint new directors if they wish.

As mentioned above, the executor is ordinarily and most efficiently appointed by means of a valid Will.

If there is no Will, however, a complicated Supreme Court application would have to be commenced by a near relative or other person of the director for ‘letters of administration’ to manage the estate and this could take some time – possibly months. If there are no available relatives or other trustworthy friends to deal with the estate, the Public Trustee may step in and administer the deceased estate – but this process would again take many months.   Each process would be expensive and uncertain.

During that period of Court process there would be no director, so the company may be completely unable to operate or trade. Bills and staff could not be paid, Banks and the like could not accept instructions in relation to a company’s trading account if they are not satisfied there is someone properly authorized to act for it.  The company’s reputation would be destroyed.  Any potential purchaser would be unable to take over the business quickly.

The assets and value of the company, which would be eventually filtered down to the possible beneficiaries of the estate, would be decimated.

Having a Will could save the loss of your business and the transfer of your life-long work.

Lawcorp lawyers can assist you with any aspects of the above and invite you to call David Smarrelli on 98946888 who will be pleased to assist you.

Can your Will or Estate be challenged?

Posted by Ian Campbell on Monday, August 14, 2017

It is wise for you (any person) to seek to try to ensure that on death, your assets go to those you want to be benefitted, as it is not possible for you to direct what occurs with your former net assets after you have passed. When making your will, you should therefore know that your best intentions and directions may be challenged through the courts by a disgruntled relative or other person claiming to be reliant on you in one way or another after you die.

You may not know that since 1998, people who are not included as beneficiaries by a testator in her/his will, or beneficiaries who feel unfairly dealt with under a will, can legally challenge and sometimes successfully make a claim against another person’s estate, including financial assets, real property and personal possessions.

Victoria is now unique in Australia as to the test for a claimant’s entitlements. The test in Victoria is that a claim may be made and possibly succeed if the deceased had a responsibility to make (provide further) provision to the claimant. There are twelve regulated factors the Courts will use to assess whether the deceased person a responsibility to the claimant(s).

Current laws provide an opportunity for former and alienated family members, children’s spouses (former and current) and others to challenge a Will through the Courts and if successful, will receive a distribution the testator may not want to occur.

The legal industry says the number of complaints about Wills under family provision laws is increasing and courts are tending to favor claimants more often in their rulings, granting larger distributions than the testator had intended. It now seems that the type of obligation parents are assumed to owe their children while they are ‘dependents’ has extended into adult life and continues beyond the parents’ passing.

Our advice, irrespective of whether a person has a Will or not, is to consider strategies that build in protection against a claim as best as possible when making the will and ensure the testator's reasoning and wishes are known specifically and properly recorded.

Should you have any concerns about your will or estate or you feel that you may be entitled to make a claim against someone else's estate; Lawcorp Lawyers can assist you and invite you to call David Smarrelli on 98946888 who will be pleased to assist you.

What you should know about your will and estate – possible partner changes and other situations

Posted by Ian Campbell on Monday, July 17, 2017

Included in this document is a list of 'Key references'.  Throughout this document you may read words that you have never heard of or are not quite aware of and we hope the list is helpful in assisting your understanding of the matters referred to below

Most people assume that by just having a Will in place, their estate will be dealt with as they intended. However, there are a number of considerations that need to be addressed which have the potential to cause serious problems sometime in the future.

If you have family, a family trust, shared assets (family home, joint bank account etc.), been remarried, have children from a prior marriage, superannuation or life insurance, your estate and your intentions may be at risk in ways you are not aware of such as the following:

There is no Will (Intestacy) or failure of the Will.

If you die without having a legal Will you are deemed to have died intestate where your assets will then be distributed in terms of a legally prescribed formula. If you are married, the deceased’s assets do not automatically pass to the surviving spouse. This scenario may well cause some major difficulties, and the result may not be what you intended.

It is also very important to ensure your Will meets with your current circumstances and that it will be legally accepted by the Courts. Things such as not appointing an appropriate Executor, not being properly executed or witnessed, or simply being lost, can create major problems.

Ownership of the family residence

Many people in de-facto or informal relationships believe their share in the family residence automatically passes to the surviving partner. However, depending on how the property ownership and title is structured, future ownership may not evolve as you intend.

You need to be sure the family residence is owned in a manner that suits your circumstances – particularly if care needs to be provided for any children of parents who have been separated, divorced or may be living in a de-facto relationship.

Will named beneficiaries be treated equitably?

Normally a ‘standard’ Will does not make provision for an executor to take into account any payments that are made ‘outside’ of a Will. Take for example a benefit made payable from a superannuation fund to an only dependent child  before the equal distribution of the estate as per the Will. This means some beneficiaries may get a lesser distribution than others which may not have been the deceased’s intentions.

In a more customised Will that incorporates ‘entitlement adjustments’, these types of payments can be included in the total value of the estate, making distribution of remaining assets more equitable to all beneficiaries.

Will children/next of kin be unknowingly denied of their entitlements?

Where a joint bank account exists when you die, ownership of the account passes automatically to the surviving joint owner and does not form part of your estate. This situation can cause a major issue when someone remarries, sells their family residence and commences living with a partner in that partner’s residence. If the cash obtained from the sale of the former family residence is deposited into a jointly owned account with the new partner, then this asset passes directly to the new partner and not into the deceased’s estate for distribution to his or her next of kin.

If this is not what the testator intended then the proceeds from the sale of the family residence should have been placed into an account under a Tenants in Common structure to ensure the asset passed to the deceased’s estate.

Separated but not divorced?

As the intestacy rules apply if the parties involved are separated but not divorced and there is no Will in place, each party could end up with a significant part of each other’s assets. If you have recently separated you should consider who you would want to receive your assets and have a Will prepared accordingly.

What if the person who died without a Will was in a de-facto relationship and had not yet divorced the previous partner? Again, intestacy rules apply and depending on how long they have lived with their de-facto, both ex and current partners have an entitlement in the estate.

Do you think your spouse is likely to re-marry if you die? Let's say your husband or wife re-marries and with the new partner you have more children. How would you feel if your children are overlooked in the estate? Perhaps you would like to leave them something direct in your Will to avoid this scenario.

What if the new partner turns out to be a gambler? What if he/she had access to the inheritance which was put in a joint bank account? You can leave your estate to your partner via a testamentary trust which will prevent this from happening.

Are your children responsible?

If both parents die in a car accident, for example, the children could have access to their inheritance when they turn 18. Perhaps you would prefer that they were a little older before having access to all that capital.

Most people prefer their children to be at least aged 21 with a responsible person (e.g. an aunt or uncle) managing their finances until then. There are estate planning solutions to manage this request but if you die without a Will your children will have access to their inheritance at age 18.

No contact with a parent?

A person was concerned about his brother's estate as he had died unexpectedly without a Will. As the deceased was not married and had no children the intestacy rules apply and the estate was distributed to the deceased’s mother and father. This sounds fair except that the father had deserted the family when they were very young and, not only had they never seen him again, he had provided no financial support over all those years. Is this what the deceased would have wanted?

Are you getting married?

Upon marriage, an existing Will becomes invalid. However, it  is not necessary to wait until you are married to have a Will done or to update it. To ensure a Will remains valid after marriage, it just needs to acknowledge the will is being made 'in contemplation of marriage', recording who the future spouse will be.

Young children and their future?

Consideration needs to be given to the situation where both parents of young children die at the same time? Who will manage the children’s inheritance until they come of age? Who should be their guardians and what lifestyle issues need to be addressed?

Also, it is not necessary to wait until children are born before making a will. A will can be suitably worded so it does not need to be changed on the birth of additional children.

The possibility of an ex-partner sharing your estate

A single mother may not be aware that if both she and her underage child died simultaneously, she is deemed to have died first. From an estate planning perspective, under Victorian Intestacy Laws, where her estate would technically go to the child, it would then immediately pass to the child’s next of kin being the father and ex-partner. It is fair to assume that the mother would not want this to occur, so to avoid this happening, her Will should be structured so that this circumstance is addressed and her estate passes to her next of kin such as her sister, brother etc.

Will your children’s inheritance be at risk due to their choice of life partner?

Children make their own decision as to who will be their life partner and parents may be sceptical or are not confident that the relationship is a good choice. Assets left directly to a child may well end up in a joint account with their partner and this is fair enough, however, these assets are at risk of being squandered or misused if the partner acts irresponsibly.

The establishment of a testamentary trust in your will go some way in providing asset protection in these circumstances if that is your wish.

Are there assets in a family trust?

People who control certain assets in a family trust do not realise they do not own these assets and do not form part of a deceased's estate and therefore are not provided for within a standard will. Special provisions need to be included in a will ensuring any controlling interest of a family trust is passed onto the appropriate person(s) and the trust assets are accounted for and distributed from the estate as required.

Is your estate exposed to creditors of your intended beneficiaries?

If you have a standard type will and a beneficiary in your estate becomes bankrupt on or around the time you pass away, your intended distribution can be made available to The Trustee in Bankruptcy.

The establishment of a Testamentary Trust in your will enable assets to be held in trust until it is appropriate to release them safely.

Superannuation assets.

Superannuation monies do not automatically form part of a deceased estate. The superannuation fund trustee has the discretion as to whom benefit payments are made and this may not be the deceased’s wishes. You need to provide your fund trustee with an appropriate binding nomination to protect the interests of those you want to benefit from your superannuation monies, particularly children where parents are separated, divorced or are living in a de-facto relationship.

Care also needs to be taken to ensure any portion of superannuation assets are distributed to the right non-taxable beneficiaries. However, if a will does not contain appropriate trust provisions and a superannuation death benefit is paid direct to the estate, then these assets may pass to the wrong beneficiaries and be taxed unnecessarily.

Key references

Administrator: A person or entity appointed by the Court to deal with a deceased person's estate where no Executor is appointed or the appointed Executor is unable or unwilling to act.

Beneficiary: A person or organisation that is entitled to inherit some or all of a deceased person's estate, or a person who benefits from a trust.

Capacity: A person's mental ability to understand the nature and consequences of their actions. Having capacity is necessary in order to enter into legally valid transactions and make binding decisions.

Codicil: An addition to or an alteration to a Will that is written in a separate document. A codicil forms part of the original Will that it relates to and must meet the same formal requirements as a Will.

Estate: Consists of the legally owned assets and property of a deceased person.

Executor: A person or entity named in a Will who is legally responsible to carry out the provisions and instructions contained in the Will.

Guardian: A person responsible for the welfare of a child or other vulnerable person.

Intestate [intestacy]: To die intestate is to die without leaving a Will - in which case a legal formula is then applied in distributing a person's estate.

Joint tenancy: Joint ownership of property where the deceased person's ownership rights do not pass through his or her Will; rather the surviving co-owner automatically inherits the full ownership. This method of co-ownership is the type usually preferred by couples [see also Tenancy in common].

Legal/personal representative: An executor or administrator, being the person or entity that deals with a deceased person's estate regardless of whether they were named in the Will or appointed by a court.

Letters of administration: The formal appointment of an administrator by the Courts in an estate where no Will was left (Intestacy). If there is a Will, but an executor was either not appointed or the appointed executor is either unable or unwilling to act, the order is known as 'letters of administration with the Will annexed'.

Probate: A court order that establishes the validity of a deceased person's Will and grants the executor the authority to administer the estate.

Tenancy in common: A form of co-ownership of property where if one co-owner of the property dies, his/her share passes according to the terms of his/her Will. If he/she does not have a Will, the share passes according to the intestacy rules. It does not pass automatically to the surviving co-owner/s. This method of co-ownership is usually preferred by friends or business people who co purchases an asset together [see also joint tenancy]

Trust: An arrangement by which property is held by a person or entity [trustee] on behalf of others [the beneficiaries]. A trust can be created by way of a Will, in which case it is known as a testamentary trust. A trust can also be established for a living person which is known as an inter vivos trust.

Will: A legal document in which a person [the Testator] specifies how their estate is to be distributed after that person's death. There are many formal requirements to be met; such as a Will must be witnessed by two people aged over 18 years who do not stand Attached to this document is a list of 'Key references' to benefit from it.

The above information is provided under Victorian law and should only be used as a guide. If you would like further information or would like to discuss your particular circumstances, call David Smarrelli on 98946888 who will be pleased to assist you.

Are your affairs in order?

Posted by Ian Campbell on Thursday, May 11, 2017

Estate planning is the process of establishing, managing and reviewing your ongoing personal affairs to ensure your assets are dealt with as you would like, and avoiding unplanned consequences on your death or when you are unable to look after your own affairs.

This process includes a range of legal and financial considerations and goes beyond having a legal will - it includes planning the most effective way to arrange your assets to having a simple strategy documented for your next of kin.

We expect that you financially protect (insure) your home, contents, car and income earning capacity while you are alive. Why wouldn’t you provide yourself peace of mind knowing the same assets continue to be protected as you wish when you are unable to do so?

Some key aspects you can start thinking about today to make it easier for you and others to legally carry out your wishes in an orderly manner are to:

ü  Make/update your Will using a legal practitioner

ü  Inform your family of your Will and its location

ü  Establish Enduring Powers of Attorney while you are able to do so

ü  Consider pre- arranging your funeral requirements

ü  Prepare a summary of your financial affairs including a list of important documents and where they are kept

ü  Increase your awareness of what may be involved in dealing with a deceased person’s estate.

ü  Ensure you have trusted advisors in place e.g. Lawyer, Accountant.

ü  Establish an effective estate plan

If you do not have the legal documentation mentioned above or you would like further information based on your personal circumstances, please call David Smarrelli on 98946888 who will be pleased to assist you.

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