Estate planning is the process of ensuring that your assets are distributed in accordance with your wishes after your death or an inability to act on your behalf.

Believe it or not, you have an estate. In fact, nearly everyone does. Your estate is comprised of everything you own: your car, home, other real estate, cheques and savings accounts, investments, life insurance, furniture, personal possessions, etc.

Your hopes to ensure a secure and practical future for your family’s well-being depend on how well you plan today.

An important part of Estate Planning is determining how your assets will be distributed on your death and ensures this will happen efficiently and according to your wishes. It is as much about preserving relationships as it is about the money!

You will, of course, want this to happen with the least amount paid in taxes, legal fees, and court costs.

However, good Estate Planning is much more than that. Estate Planning should:

  • Include instructions for passing your values (religion, education, hard work, etc.) in addition to your valuables.
  • Include instructions for your care if you become disabled before you die.
  • Name a guardian and an inheritance manager for your dependent children.
  • Provide for family members with special needs without disrupting government benefits.
  • Provide for loved ones who might be irresponsible with money or who may need future protection from creditors or divorce.
  • Include life insurance to provide for your family at your death, disability income insurance to replace your income if you cannot work due to illness or injury, and long-term care insurance to help pay for your care in case of an extended illness or injury.
  • Provide for the transfer of your business at your retirement, disability, or death.
  • Minimize taxes, court costs, and unnecessary legal fees.
  • Be an ongoing process, not a one-time event. Your plan should be reviewed and updated as your family and financial situations (and laws) change over your lifetime.

If you require, we can then refer you to an appropriate professional so that the correct documentation can be drafted to ensure your wishes are met.

An effective Will should be designed according to your personal and financial circumstances and also take into account non-estate assets such as superannuation death benefits.

Some of the important Estate Planning processes encompass:

  • Preparation of a WILL
  • Appointing an Executor of the Will.
  • Determining whether a Power of Attorney is required, and a suitable appointee to that role.
  • Establishing a Discretionary or Testamentary Trust(s).
  • Investigating the opportunities with Blood Line Trusts.


Only assets owned by you will pass into your estate and be controlled by your Will.


With the exception of assets held as ‘tenants in common’, any interest you hold jointly as joint tenant with any other person or persons will pass directly to the other person upon your death, independent of your Will. This often includes jointly owned assets such as your home, home contents, and bank accounts. Where assets such as homes are held as joint tenants, unless converted to tenants in common, full ownership of that asset will pass to the survivor upon death of either party..


Assets in your sole name, including real estate, cash, vehicles, shares and units in trusts, will form part of your estate. These items will be controlled by your Will, if you have one (testate).


Usually the insured person nominates their spouse or other dependant as the beneficiary of their life insurance. In such cases the proceeds of a life policy are paid direct to the beneficiary and never form part of the deceased estate. Often the policies are owned by a superannuation fund and the proceeds payable to the fund. Again the proceeds will not pass through your estate but rather be managed by the trustee of your superannuation fund in accordance with the terms of the fund deed. You must nominate your estate as the beneficiary of your policies if you want the proceeds of the policies to pass to your estate and be managed by the terms of your Will.


Assets owned by unit trusts or companies controlled by you will not become part of your estate. The shares or units however will be an asset which forms part of your estate.


Assets owned by discretionary trusts controlled by you will not become part of your estate. They are owned by the trust.


Assets held by a superannuation fund most often pass to a dependant spouse or children, not your estate.

You can direct where death benefits are paid by completing a Death Benefits Nomination Form and serving on the trustee of the fund.

The taxation consequences vary and require careful consideration.

Your<br /> ESTATE<br /> PLAN

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The following case studies are circumstances whereby an individual has not implemented a ‘WILL’, and died in intestate or a ‘WILL’ was not suitable drafted and/or no monitoring of their ‘PREFERRED’ superannuation nomination was in place and/or their a ‘BINDING’ superannuation nomination was not maintained or implemented.

As a result, the beneficiaries of the estate were not the intended beneficiaries of the deceased.

CASE STUDY 1 – Superannuation Beneficiaries

John was divorced and remarried Kelly Had a “Preferred Nomination” for equal distribution to his 1st wife and their 2 Adult children.

At date of death this preference had not been changed.

Please note your Superannuation does not come under the jurisdiction of your “WILL”.

Therefore, the Trustee of the Fund had the final decision. The Trustee makes his determination on who is “financially dependent” on John, the decision was:

  • To pay 100% of the proceeds to Kelly, as John’s adult children are not financially dependent upon him.

CASE STUDY 2 – Superannuation Beneficiaries

Lorraine died at the age of 48, intestate. She had never married, nor had children. She was abandoned by her parents, Jane and John, at the age of 3. She had lived with a couple, Bill and Gabriel, who she considered to be her “parents”. Her “Preferred” rather than “Binding” nomination (through her superannuation fund), was to Bill and Gabriel.

The Trustee of the “Superannuation” fund sent the proceeds to the “Public Trustee”, whereby the Public Trustee awarded Jane, Lorraine’s birth mother and only relative, as the sole beneficiary of her “estate”. Even though Jane had been estranged from Lorraine at time of her death, she was her sole living relative.

CASE STUDY 3 – Superannuation Beneficiaries

Stuart died in 2008 and had “Preferred” rather than “Binding” nomination to his “Father”.

Stuart died intestate (with no “WILL”) and at the time of his death was survived by, his parents, his current spouse and adult step children, an adult child from his first marriage, his divorced spouse and a minor second son he was paying child support for after a DNA paternity test proved he was the child’s father. In dispute, was $75,000 from his superannuation fund!

The Trustee, determined that even though, estranged spouse, step children, adult son and minor son all satisfy SIS dependant definition and there was no guidance from a “Will” and financial hardship is not financial dependency, the proceeds were paid to “Child Support” to support the child he had out of wedlock until he reaches the age of 18 and all remaining proceeds will be divided up between the remaining dependences. Even though it was contested the original decision was upheld.

CASE STUDY 4 – Simple Will

John and Mary have a simple Will and no nomination on their superannuation funds. John and Mary die in a tragic accident and are survived by three children, Ben (age 26) – marriage breakdown, one child, Jake (age 22) – problem gambler and Sarah (age 16) – full-time student

In this case, Sarah received the entire benefit from the superannuation fund plus the life insurance within the fund. The remaining proceeds were equally divided amongst the three of children. If John and Mary died intestate (no “WILL”), Sarah would have inherited the total estate, which would have been a better outcome. Had John and Mary made provision within their WILL for Testamentary Trusts for their beneficiaries and outlined their wishes clearly in a better designed WILL all beneficiaries would have received their bequeathed entitlements, equally and without any financial loss.

In this case, Sarah received the entire benefit from the superannuation fund plus the life insurance within the fund. The remaining proceeds were equally divided amongst the three of children. If John and Mary died intestate (no “WILL”), Sarah would have inherited the total estate, which would have been a better outcome. Had John and Mary made provision within their WILL for Testamentary Trusts for their beneficiaries and outlined their wishes clearly in a better designed WILL all beneficiaries would have received their bequeathed entitlements, equally and without any financial loss.

  • Ben

    Beneficiary Controls Testamentary Trust

    Funds are paid directly to Trust. Income to children is tax-effective. Family Law courts orders, do not apply against Testamentary

  • Jake

    Gambling Debts

    Assets held within a “Testamentary” trust are protected from bankruptcy.

  • Sarah

    Taxed Dependent

    Provisions within the “WILL” can be made, to ensure each sibling receives and even distribution from the Estate with the ability to receive Allocated Pension payments from their Superannuation fund.

*Case Studies – AMP Wealth Protection

Your<br /> ESTATE<br /> PLAN

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There is a great deal of interest in the concept of a testamentary trust and its usefulness as an estate planning tool. The concept of a testamentary trust is not new. Indeed, it is as old as succession law itself. The more recent interest in testamentary trusts arises because of the provisions of Division 6AA which were inserted into the Income Tax Assessment Act 1936 (ITAA) in 1980. Division 6AA ITAA imposes penal rates of tax on unearned income of minors with some exceptions. These exceptions include certain testamentary trusts.

To a certain extent, the term testamentary trust is misleading. Any trust created under a will is a testamentary trust. It is rare for the administration of an estate to proceed without a trust being created. At its simplest, a trust exists in circumstances where the executors hold the assets of the estate for the benefit of the beneficiaries. Normally a beneficiary only becomes absolutely entitled to his or her share of the estate (providing there are no other conditions attaching to the entitlement) if the beneficiary survives the deceased for 30 days (section 32 on the Succession Act 1981 although this provision is modifiable).

More specifically, the term might be used to refer to a trust explicitly created by the terms of a Will, as opposed to a contingent or conditional gift. The trust might be fixed or discretionary, depending on the testator’s wishes.


More recently, the term testamentary trust has been used to refer to a discretionary trust created under a Will. The range of possible beneficiaries and the powers given by the trust are virtually infinite. The usual provision is for the spouse and infant children of the Deceased to be named as beneficiaries, although, depending on the circumstances, this may be extended to the grandchildren of the Deceased as well as other classes of beneficiaries.

As with any other discretionary trust, the trustee of the testamentary trust (usually the executor of the estate) has the power to distribute the income and capital of the trust amongst the beneficiaries in whatever proportions and at such times as he thinks appropriate. The trust usually comes to an end once all beneficiaries are of full age and capacity, or at some specified time (eg. 21 years from the date of death). The trustee normally has the power to distribute all of the capital and income before this date – which effectively brings the trust to an end.

One of the primary advantage of a testamentary trust lies in the treatment of its income. Income of testamentary trusts (and indeed any income that resulted from a Will or intestacy) is ‘excepted trust income‘ and is dealt with separately under 102AG(2)(a))of the ITAA. Consequently, income received by a minor under a testamentary trust is not taxed under 6AA ITAA. It is taxed at the same rates as normal individual taxpayers. The opportunity to split income between minors is obviously a significant benefit of a testamentary trust. Of course, the trust only comes into existence on the death of the testator.

Another advantage of a testamentary trust is its flexibility. Rather than deciding before death how an estate is to be distributed, a person can effectively delegate that task to his or her executor to carry out after death. The executor is normally in a much better position to assess the consequences for a particular beneficiary of a distribution, and can maximise the benefit both to the estate and for the beneficiary. Obviously, it is important that the person chosen to carry out this task is someone the Testator can trust, and who is capable of making the appropriate decisions at the appropriate time.

The specific terms of a testamentary trust will depend upon the wishes of the testator. In many cases it may be appropriate to have multiple testamentary trusts. For example, a testator with three adult children, each of whom has children of their own, might establish three separate trusts under his will. Each trust would have, say, one third of the estate, or, if appropriate, specific assets could be designated to each trust. The Will could appoint each child as trustee of their trust, and each trust would be administered separately. Each family could decide how their trust was administered, whether it would continue, or whether it would be wound up. Even if one child did not have children at the time of the will, separate trusts could be used. If that child subsequently had children before the testator’s death, it may be appropriate to continue with the testamentary trust. If they were childless, the trust could be immediately wound up.


A testamentary trust can be established up to 3 years after the death of the Deceased. Section 102AG(2)(d)(ii) permits a party who was a beneficiary of a deceased estate to transfer to a trustee their benefit from the estate. It should be noted that there are number of restrictions in application of trusts established under Section 102AG(2) including:

  • Intestacy Rules – The income that a beneficiary is entitled to claim as excepted trust income is limited to income derived from property that would have been received by the beneficiary directly from the estate if the deceased person had died intestate. (s 102AG(2)). If a beneficiary has received property directly from the estate and as a result of a third party establishing a trust under Section 102AG(2)(d)(ii) the intestacy limitations will continue to apply. Any income generated by the trust created by the third party that exceeds the limitations is not excepted trust income.
  • Dealing at Arms Length – Should the parties not be considered to be dealing at arms length the excepted trust income will be restricted to the income that would have been derived if the parties were dealing at arms length. Any income that is surplus to this limitation will be subject to Division 6AA and assessable at the special rates of tax.
  • Vesting on Termination – Upon expiry of the trust, the assets of the trust established by Section 102AG(2)(d)(ii) are required to pass to the beneficiary (s 102AG(2A)). The assets must be transferred into the hands of the beneficiary and cannot be transferred in any other manner.


The opportunities that are available through a testamentary trust should be considered by people at any time they review their personal and financial affairs.

When establishing a Testamentary Trust consideration needs to be given to:

  • The nature of the trust that is to be created
  • The present and future taxation position of the Testator and potential beneficiaries
  • Whether any benefits are best achieved by distribution specific assets to a testamentary trust or to the beneficiaries.

Your<br /> ESTATE<br /> PLAN

* General Advice Warning – End of Page.


We provide comprehensive advice to assist your business to transition to new owners with minimal loss of value.

Our advice provides certainty and peace-of-mind to stakeholders who are exiting or entering your business

From a financial planning perspective business succession planning endeavours to achieve the best financial outcome for your business or share of it in the event of your death or disablement.


Let’ s assume that XYZ Pty Ltd is owned by two shareholders – John Smith and Bill Jones. Let’s say that John and Bill own a builders supply store. Their wives, Jill and Betty both have children and are not very involved in the business. John and Bill are great friends, have known each other for many years and the two families are very close. Each partner’s share in the business is worth $100,000 and John dies in a car crash.

What happens to John’s share in the business? Normally, he will leave everything to Jill (his wife) which means Bill is now in business with Jill. Jill is a reasonable person and realises that she doesn’t know anything about the building business. She might agree to let John run the business and hope that there will be some income generated out of it for her. If this is the case, how is John going to feel having to do the work of two for the income of one?

However, the other side of the coin is that Jill may not be so cooperative. What if Jill suddenly decides she wants to be more involved in the business than John wants? What if John feels uncomfortable with her involvement in the business? What if Jill lacks the necessary skills and business acumen and causes problems with customers and suppliers?

The problem is, after someone dies, we just don’t know how successful the new relationship is going to be between the original remaining shareholder(s) and the one that inherited the share from the deceased shareholder.

Similarly, what if John didn’t die in the car crash but was so severely injured that he’d never be able to return to work? How would Bill feel about having to do the work of one, to provide income for two families? At first, he may not be too worried, but after a time, chances are that it will wear him down, erode their relationship and cause all sorts of problems. Bill might wish he had the money to buy John’s share but for various reasons he may not have the funds or be in a strong enough financial situation to be able to borrow it.

In situations where there are two or more shareholders, or partners in a business, there is a much cleaner way to pre-plan for such a situation.

A common solution is for both parties to effect some type of risk policy. A life and TPD policy or a life/trauma/TPD coverage on each partner or shareholder in the business, and to effect a Buy Sell Agreement that spells out when the shares will be transferred and what events can trigger the transfer of shares. Death is the most common trigger. But parties to these types of agreements can basically sit down with you, (seeking your advice on the insurance side) and a lawyer who is experienced in this area and can draw up an agreement that is tailored to suit the clients’ needs.

The proceeds from the policies established, provide the funds for the remaining parties to purchase the deceased or disabled’s share in the business.

Therefore, the deceased’s estate or the disabled partner/shareholder is paid out for the market value of his share in the business, and the remaining parties can take control of the business without having to borrow money to buy the deceased or disabled’s share.

In Theory, it all sounds so simple, but tread carefully!


  • Who should own the policies? There are perhaps 3 or 4 “common” methods presented by law firms and life companies on methods of policy ownership. However, none of the methods are perfect and all have their potential problems, commonly with capital gains tax type issues.
  • Capital Gains tax is a factor with this type of insurance.
  • It’s an area that needs constant review because business values can increase rapidly and it would be unfortunate if the funding mechanism (insurance) fell short of the amount of cover required. Business insurance advisers need to review this type of cover with clients regularly and keep adjusting the sums insured each year to keep the cover in line with the growing values of the shares.
  • Future insurability or insurability generally. When there are several parties involved in this type of insurance, eg. a law firm where there are say more than 3 partners or shareholders, you can bet your bottom dollar that one of them will be either uninsurable or have some type of medical condition that carries a hefty premium loading. You could find that the whole proposal or concept is eventually not followed through with because the partner who can’t get insurance or will be heavily loaded premium wise, may not cooperate or be as cooperative as the other parties.
  • If the person cannot get insurance for health reasons, it’s difficult to think of another funding method other than to set aside money in a fund to partially pay for a potential transfer of shares.

* Sourced by Tyndall / Asteron.

General Advice Warning:
The information contained in this website is for general information purposes only. The information is provided by BDM Financial Services and while we endeavor to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.

Before investing in any product BDM Financial Services recommends that you first obtain a copy of the relevant Product Disclosure Document before making any decision regarding the purchase of or investment in that product or service in order to ensure that it is suitable for your own personal financial needs and circumstances.

Michael Lobodarz, Authorised Representative (no. 256607), Director of BDM Financial Services Pty Ltd ABN 53 115 925 141, Corporate Authorised

Representative (no. 319619) of, Loyalty Financial Group Pty Ltd, ABN 72 614 992 237, Australian Financial Services Licensee (no. 227096)