No Will?

JBBIf you die, without a Will, or without an effective Will, your Estate is dealt with as set out in Chapter 4 of the Succession Act 2006.

If, when you die, you have a spouse (somebody to whom you are married or with whom you were carrying on a domestic partnership), the practical effect of the legislation is that your spouse will be entitled to the whole of your Estate.

If you and your spouse have children, your spouse will continue to be entitled to the whole of your Estate.

However, if you have children, who aren’t the children of your spouse, then your spouse is entitled to your personal effects, a statutory legacy and one half of the remainder of your Estate.

There is provision for your spouse to have a preferential right to acquire certain property from the Estate.

The legislation provides for the situation where there is more than one spouse.  Your first reaction will be “How could that be?  Isn’t it a crime to be married to more than one person at a time?”  However, a person could be legally married and then also be living in a domestic relationship with another and thus have two spouses at the time of his or her death.

So the legislation makes provision for the distribution of the Estate amongst the spouses.

The legislation also makes provision for a distribution of the Estate where the deceased’s children are the children of either or both of the spouses.

But what happens if the deceased had children, but they are not children of either of the surviving spouses?  The legislation makes provision for the Estate to be distributed between the spouses and those children.

Doesn’t all this sound complex?  Wouldn’t it be easier to make a Will where you determine who gets the Estate and not the Government.

The Law Society of NSW has arranged for free seminars to be held across the state on Friday 19 August 2011 to better acquaint people with the need of having a Will.  A seminar will occur in Tamworth on that day at the Community Centre commencing at 2.00pm and in Quirindi at the Quirindi Library commencing at 12pm.  If you would like more information about making a Will please come along because Helping You is Our Business.

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Solicitors Trust Accounts

JBBSolicitors Trust Accounts are regulated by the Legal Profession Act 2004 and the Legal Profession Regulation 2005.  These laws are in place to regulate the conduct of money held in Trust for clients. Such money might include funds required to settle property purchases, to pay stamp duty, for distributions in deceased estates, for debts recovered, for settlement of claims, or funds required to pay legal expenses.

Trust accounts are subject to external examination every year, as well as periodic random audits by the Law Society’s Trust Department. These external examiners and auditors will check transactions through the Trust accounts to ensure they comply with the Regulations.

Solicitors are required to have written instructions to transfer funds from the Trust account. Often these instructions are incorporated into the Costs Agreement the firm enters into with the client. Also, a Solicitor may provide a Bill to a client, and advise that funds held in Trust for the purpose of meeting their legal costs will be transferred in settlement of the account unless an objection is received within a specified period.

Contrary to a common misconception, Solicitors do not earn any interest on clients funds held in their Trust account. In this state, all interest earned on funds in Solicitors Trust accounts is paid directly to the Law Society of New South Wales.

Clients may decide, particularly if a significant amount is involved for a lengthy  period, to instruct their Solicitor to deposit their Trust funds into a Controlled Money account to earn interest on their money whilst it remains under the control of the Solicitor. To do so, the Client must provide written instructions to their Solicitor, which includes nominating the institution and type of account to be used.

On completion of a matter where there were Trust transactions, the Solicitor is required to provide a Trust Statement to the Client. Also, on 30 June each year, subject to some exceptions, the Solicitor is required to provide Trust Statements to all Clients where there has been Trust transactions within the preceding 12 months.

Should you have any queries about Trust accounts we would be happy to discuss them with you because Helping You is Our Business.

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How the Law Changes

JBBIf you have some connection with a Family Trust, Centrelink will attribute to your assets,  for the purpose of assessing your entitlement for a pension, all the assets of that Trust.  This is so, even if you have never had any ownership or entitlement to the assets of the Trust.

If the assets are substantial, then attributed to you will be all those assets and hence you will be unable to qualify for those benefits from Centrelink which require you to satisfy the assets test.

Recently, there was a case which challenged this fact.  The case involved a couple who were in receipt of a pension which they lost because Centrelink attributed to them the value of the assets of a controlled private trust.

They appealed that decision. The matter was reviewed, firstly by the Social Security Appeals Tribunal which found in favour of the couple, secondly by the Administrative Appeals Tribunal which held that the couple were not eligible to receive the benefits they sought, and lastly by the Federal Court of Australia which upheld the original decision. Accordingly, the couple were able to retain their pensions.

While the issues raised by the case are somewhat technical, the practical effect of the pensioner’s argument was that, until the trustees exercised their discretion to make payment out of the trust fund to them, they had merely a right to invoke the equitable jurisdiction of a court to ensure that the trust was duly administered and that the trustees exercised their discretion properly.

The Commonwealth Government have subsequently amended the Social Security Act to remove the practical effect of the court decision. The amendment made states that an individual passes the control test if it could reasonably be expected that the trustee of the trust would make an application of the capital or the income of the trust to the individual if the individual could not meet his or her reasonable costs of living.

So, we are back to where we started. That is, if you have some connection with a family trust, Centrelink will attribute to your assets, for the purpose of assessing your entitlement for a pension, all the assets of the trust.

The law, and its application, is not simple. We have the expertise to assist you in understanding the law, because Helping You is Our Business.

Click here for more information on John Boag.