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A basic estate plan should have 3 essential documents including a Will, Power of Attorney and Enduring Guardianship. As you can see from the diagram below, a Will covers your assets in the event of your death whereas the Power of Attorney and Enduring Guardianship cover your affairs in the event of your incapacity. All three documents are equally as important given they cover off on different scenarios. More information on each document is outlined below.

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Will (distribution of assets upon death)

A Will is a legal document by which a person, the testator, expresses his or her wishes as to how their assets are to be distributed after their death.

A Will names one or more persons to manage your estate until all the assets are distributed (this is the executor). It also nominates who you would like to receive a gift or benefit from your estate (the beneficiaries). This ensures your assets pass to the beneficiaries of your choosing upon your death.

A Will may also name one or more persons to care for and make decisions in relation to your children in the event of your death (this is the guardian). This is an important appointment as it allows you to legally appoint someone to look after your minor children.

If you do not have a Will, upon your passing an interested person (usually a close family member or friend) can apply to become the administrator of your estate. This process is often time consuming and strenuous on your family/friends during a time of grief. Therefore, having a Will prepared during your lifetime will greatly benefit your family/friends.

Power of Attorney (Legal & Financial decisions)

An Attorney deals with the legal and financial affairs on behalf of the person that grants the Power of Attorney (the Principal). An Enduring Power of Attorney will continue to be effective even after you lose capacity.

The Principal can elect to have the Attorney act immediately (i.e. before they lose capacity) or only once a medical practitioner considers they are unable to manage their own affairs.

This is an important document to have in place as without it no one is able to manage your money and assets on your behalf if you lose capacity.

If you do not have a Power of Attorney in place and you lose capacity, a close relative or friend may apply to the Guardianship Tribunal to become your financial manager.  This process is costly and time consuming and can be avoided by simply putting in place a Power of Attorney while you are mentally capable.

Enduring Guardianship (Medical & Lifestyle decisions)

An Enduring Guardian deals with the medical and lifestyle affairs on behalf of the person that grants the Enduring Guardian (the Principal), once that person becomes partially or totally incapable of managing their own affairs. This includes where they live, heath care that they receive, dealing with doctors etc.  This power will only operate if you become partially or totally incapacitated.

This is an important document to have in place as without it no one is able to make medical and lifestyle decisions on your behalf if you lose capacity.

If you do not have an Enduring Guardianship in place and you lose capacity, a close relative or friend may apply to the Guardianship Tribunal to become your guardian. This is a similar process to an application for financial manager as discussed above.  As such the time and costs of this process can be avoided by simply putting in place an Enduring Guardianship while you are mentally capable.

At Southern Waters we aim to simplify these documents for you so you can easily understand the contents and importance of each document.

We encourage you to contact our office if you are interested in putting in place these documents or wish to discuss further.

Christmas is an exciting time of year, one filled with love and laughter, but also quite a hectic time of year getting presents ready for family.

Finishing off jobs at work can cause emotions to rise and the stress that comes with it. So can you imagine what would happen in the event that your work involved not only ensuring that everything was done by the strict deadline of Christmas, but also fulfilling the wishes of billions of people around the world?

Recently we found out when we had our new client Mrs Claus come in to see us.

You see, Mr and Mrs Claus generally have a quiet and simple life during the year, but December is absolutely manic for them and finally, in 2018, something snapped for Mrs Claus and she’d decided she’d had enough!

Santa has been working triple-double overtime and Mrs Claus has not been able to see him. With Mrs Claus permission, we’ll talk you through the considerations that were taken into account when Mrs Claus sat down with us for family law advice.

Property Settlement

Whilst everyone knows Santa has a naughty and nice list, his behavior in relation to his family law settlement makes me want to consider whether he actually sits on the naughty list himself.

As is often the case with a property settlement, exact values are not known and parties need to estimate them. For example, when you have a property and one of you want to keep it, you are never going to sell it just to find out the exact value. Accordingly, you will need to agree on a value. This is where things came a bit unstuck with Santa and Mrs Claus. You see, Santa believes his vast property empire at the North Pole and small subsidiaries in each shopping Centre throughout the world that he holds and owns in December each year are worth nothing. Mrs Claus obviously begs to differ. He is one of the largest landholders in the world. Santa’s property portfolio is vast and substantial. Accordingly, we have had to ask a Valuer to value the landholdings in the North Pole and associated areas. Now whilst it may not be prime farming land, or for many people, even considered to be habitable, it is actually home to thousands of elves and a number of reindeer. As such, it does provide substantial value. The same thing applies to Santa’s Toy Operation. Now whilst kids do not pay for the toys they receive, Santa does not do everything of his own accord. Out of complete goodwill, Santa is actually paid a licensing fee to create the toys and makes a healthy profit. He normally takes off for six months each year and goes to a little known Caribbean Island to relax with Mrs Claus.

Santa’s Business

Again, as is often the case, Santa believes that his business is worth nothing without him and that it is not a transferable business and therefore, the value of the business should be considered to be zero. With profits in the hundreds of millions of dollars each year and turn over in the billions of dollars, this is obviously not the case. Santa is running quite a substantial business. It unfortunately looks as though we will be going to Court on this one, but we contend that the Easter Bunny or Mickey Mouse would easily be able to fulfill the role of Santa, if Santa was to no longer at work.

In accordance with the Family Law Act, it will be essential for us to do the following to properly advise as to an appropriate %-split in any property settlement to Mrs Claus:

  1. Identify each of the assets and attribute a value to them by exchanging financial information and obtaining valuations where necessary;
  2. Assess both Mr & Mrs Claus’ contributions to their relationship, both at the commencement and throughout;
  3. Assess both Mr and Mrs Claus’ future needs, such as, whether Mrs Claus will have to look after the reindeer after they separate; and
  4. Assess whether the proposed split is just and equitable in light of their circumstances.

Parental Arrangements

Rudolf

Often the financial aspects are difficult to resolve, but they get resolved at the end of the day and parties move on. What is a more pressing issue and one that needs to be managed and dealt with for a lot longer and continuously is who will look after the children of the relationship, where they live and how often each party gets to see them.

Now unfortunately Santa and Mrs Claus were unable to have children, but they do have their reindeer, which they treat as children. Those reindeer, named Dasher, Dancer, Prancer, Vixen, Comet, Cupid, Donner, and Blitzen and Rudolph the Red-Nosed Reindeer, were vitally important to both Santa and Mrs Claus and this is where we hit a real stumbling block. You see Santa wanted them to be with him at all times, but realistically, he uses their services just once a year on Christmas Eve and whilst he had a rapport with them, did not spend a lot of time with them. Now, as you can appreciate, while Santa was so busy working, Mrs Claus had to find other things to do and she found comfort in the reindeers. Accordingly, she wanted them to spend all of their time with her. Now this argument could have gone on and on, however we suggested to both Mrs Claus and Santa that they were going to be parents not partners, in relation to the reindeer and that they would need to consider what is in the best interest of the reindeer. Now obviously the reindeer love both Santa and Mrs Claus and wanted a resolution to be reached where they could each see them. Fortunately, it looks like we will be able to arrange this and the reindeer might even be able to go on a trip to that Caribbean Island for a couple of months a year and relax.

In any event, I’ve told Mrs. Claus that before running off to Court about her time with the Reindeer, she’ll need to head off to mediation with Santa to try and reach an agreement.

With all this resolved by Southern Waters Legal in the great Christmas rush that exists around family law and Christmas, Christmas can continue for 2018. Whist at this stage it is only a trial separation and we are hopeful that Santa can obtain a healthier work/life balance and Mrs Claus can recognise the need and desire for Santa at that particular month of the year. The resolution we have reached means that everyone can have a very merry, Merry Christmas.

Santa Claus - Divorce & Separation

Christmas is that wonderful time of the year when we shower our loved ones in gifts to celebrate the festive season. While it’s a joyous time for both those who are giving and receiving its important to forward think and know the ramifications associated with gifts in a Family Law and Estate Planning context, particularly substantial monetary gifts.

Let’s imagine Mr and Mrs Claus want to give one of their elves $100,000 to help he and his new elf girlfriend buy a new pad in the North Pole. It’d be important that Mr and Mrs Claus to be wary of whether they are giving the $100,000 to their elf or to both he and his girlfriend and also whether it is it in fact a gift or a loan?

Mr and Mrs Claus should consider the following things:

  1. Is the money going to be a “gift” or a “loan”?
  2. Will the money be given exclusively to Elf or to both Elf and his girlfriend?
  3. Is the transfer of funds documented in an agreement?

Family Law considerations

Generally, where money is given as a gift to one or both parties and money is directly applied to an asset in the pool, for example by purchasing their new home in the North Pole, the money would be thrown in the bowl of assets if the parties separated and divided in a property settlement. If Mr and Mrs Claus gave the money only to their Elf then it may be argued that Elf is entitled to a greater share of the gift because it was a contribution made by him to the pool of assets through Mr and Mrs Claus. If however, the $100,000 was a loan and there are supporting documents to support such, then it would be treated as a liability of the parties and the full $100,000 would need to be repaid to Mr and Mrs Claus from the pool of assets in any property settlement.

Estate Planning considerations

What happens to the $100,000 if Mr or Mrs Claus died?

  • Would Elf be required to pay back the $100,000?
  • Would Elf be required to reduced his inheritance by $100,000 in comparison to his sibling Elfs?
  • Does Elf keep the $100,000 and receive the exact same inheritance amount as his Elf siblings who have not received anything from Mr and Mrs Claus in the past?

The answer depends on whether the $100,000 was a gift or a loan. Loans usually have to be repaid or accounted for before an inheritance is distributed.

Some top tips for gift giving this year is to ensure that substantial monetary gifts are well documented to prevent one party later claiming the funds given were a gift not a loan, or visa versa.

Australians are known to love property as an investment vehicle. Generally this has been achieved by borrowing from a bank to purchase property before paying it off over time. Since 2007 self managed superannuation funds (SMSF) have been allowed to borrow money to acquire property, which has seen a large increase in the amount of SMSFs and the amount of property owned by SMSFs.

What is a SMSF?

A SMSF is a superannuation fund that has four (4) or fewer members and is an alternative to retail and employer sponsored superannuation funds. In a SMSF, the members (who are subject to strict rules) have control over the superannuation fund, its investments and decisions.

What are the benefits of an SMSF?

  • Investment control and opportunities – members have flexibility and control over the SMSF’s investments
  • Favorable tax concessions – a SMSF is one of the most tax-effective ways to hold investments.
  • Estate Planning opportunities – Upon death a member’s superannuation benefit is not covered by their Will and a correctly structured SMSF Trust Deed can allow the member’s superannuation to be paid to the right person in a tax effective manner.
  • Borrowing opportunities – laws allowing SMSF’s to borrow provide an avenue for members to acquire property and/or other types of property (for example shares) in their SMSF.
  • Unlock cash in business premises – a SMSF can purchase commercial property that a member may own personally which in turn unlocks cash that can then be personally re-invested.

Tell me more about unlocking cash in my business premises.

If your SMSF buys the property from you using money contributed to the SMSF, then you can use the cash received from the sale for your personal circumstances now! The property moves into your SMSF and the money moves out. Cash in the SMSF is unlocked!

Are stamp duty concessions available?

Yes, commercial property in your own name which is transferred to your SMSF may receive substantial stamp duty concessions. This strategy could save you thousands of dollars in stamp duty!

Can I buy residential property in a SMSF?

Yes, but strict rules apply and failing to comply with the strict rules can have serious consequences.

There may be capital gains tax concessions too?

Yes, tax concessions may apply depending on when the property is sold and for how much. Obtain proper advice before you act.

How does borrowing in a SMSF work?

The loan must be a limited recourse borrowing arrangement, which simply means that in the event of default under the loan the lender only has recourse to the property, not other assets of the SMSF.

How to avoid problems when buying property in a SMSF?

Seek appropriate advice from qualified professionals. Consult with Southern Waters Legal and an accountant or financial planner who are familiar with SMSF borrowing.

Want to know more about borrowing in an SMSF or transferring property to your SMSF? Please contact Southern Waters Legal on (02) 9523 5535.

The end of the financial year is upon us and it is a good time to consider these 5 handy tax tips…

1. Superannuation

Do you have any employees whom you are paying superannuation? Superannuation is not tax deductible until it has been paid, accordingly you must pay before 1 July 2015 to be able to claim your superannuation tax expenses and be able to reduce your income tax bill.

2. Bad Debts

For businesses that account on an accruals basis, now is the time to go through your debtor list and consider writing the bad debts off. Bad Debts are tax deductible and can therefore be used to reduce your taxable income.

3. Expenses

Need a new desk? Laptop nearly had it? As a result of this year’s federal budget, small businesses can receive $20,000 as an immediate tax deduction for assets. This applies to businesses which turnover no more than $2million per year.

This does not mean that you will receive a cheque from the ATO for $20,000; it means that this amount reduces your income and therefore reduces the tax you will need to pay at the end of the tax year.

If there is a capital purchase you are considering to buy, this incentive is a great way to help your cash flow.

4. Salary sacrificing your Bonus into superannuation

If you are due for a bonus before the end of the year, consider salary sacrificing some or all of it into Super. Superannuation contributions are taxed at 15% compared to the top marginal tax rate of 45%.

5. Plan for next year

Make an effort to review your cash management processes and review your business or investment structure. Consideration should be given as to whether your existing structures provide asset protection and are tax-effective.

If you would like any assistance getting your affairs in order, please contact Simon Bennett, our experienced tax lawyer. We also know a few great accountants and financial planners that we could recommend. Get it touch today on (02) 9523 5535 or e-mail us.

Divorce and the associated financial and parenting issues can be one of the most emotionally draining and financially crippling experiences that a person can endure. Conversely the process can be handled with dignity and respect.

Here are 6 tips to help you avoid a messy and expensive divorce.

1.   Manage your emotions  

Don’t be afraid to reach out to friends and family or professional help to get you through this emotionally difficult time.

2.    Manage your behaviour

How messy the process can get depends entirely upon the parties’ behaviour. You cannot control or dictate how your partner will behave following your separation but you can take charge of your own behaviour.

Think before you send an angry email or text message, don’t yell and argue in front of the children and think twice before you throw someone’s clothes out the window!  You can and are often held accountable for your actions.

3.  Be child focused

At separation you should always remain child focused.  The goal of the family court is to determine “What is in the best interests of the children”.

Do not involve your children in the relationship breakdown, don’t use them as messengers or pawns in a game. It is generally in the best interest of a child to have a relationship with both parents (provided there is no risk of harm).

You may no longer be partners but you are still parents and you will share many events with your children in the future.  Remember that how you behave now will determine what relationship you will have with your children in the future.

4.    Know your assets

Try and have a good knowledge of your financial position when you separate. It is important to identify and know the matrimonial assets and liabilities.  A good knowledge of your financial affairs will mean that your solicitor can advise you of your entitlements and obligations early on.

5.    Don’t rush into anything

Often parties make rash decisions at the time of separation such as moving out of the matrimonial home, cleaning out bank accounts, or stopping children from seeing their other parent.  If possible, see a solicitor before you separate to understand the implications of your actions moving forward and so that you are guided through the process.

6.    Choose the right lawyer

It is important to choose the right lawyer for you.  There are lots of lawyers but not all practice family law.  Seek a lawyer who you feel comfortable with and who is a specialist in family law.

Leona Bennett is an accredited specialist in family law, with over 13 years experience solely in family law working at Southern Waters Legal. To discuss your situation call us on 02 9523 5535