#001 - Estate Planning 101

[Music] Welcome to the where there's a wheel, there's a way podcast with Colter Legal. We share our insights and busts and myths on wheels, the state planning and deceased the states. My name is Stefan Manch and I'm a principal lawyer and head of the wheels and a state's team at Colter Legal. I'm also a husband and a father of three beautiful kids and a state planning has been my professional life for quite a while now. Colter Legal is a full service law firm which serves as Jolong, Melbourne, Surf Coast and even South Australia in the areas of wheels and estates, family law, corporate and commercial law, property, litigation and workplace relations. Over the course of the coming weeks and months this podcast would work through a number of interesting topics relating to wheels, succession, the state planning, state administration and even estate disputes. We're living through the biggest intergenerational transfer of wealth and history and our job is to make that transfer as smooth, trouble free and even tax minimized as possible. And don't worry, I won't be recording these alone. Across the various episodes I'll be joined by my colleagues from the Colter Legal Wersenestates team, other professional advisors including accountants and financial planners, and anyone else who will agree to come along and get behind the mic. You can share an interesting perspective on their role in the estate planning process. Thanks for listening and we look forward to helping break some myths and sharing some useful snippets of information. So welcome along for the ride. If you want to get in touch with myself or any others from the Colter Legal team, our details will be shared in the show notes. Let's get started. I begin today by acknowledging the what or wrong people, traditional custodians of the land on which we are recording this podcast today. We pay our respects to their elders past, present and emerging, and extend that respect to Aboriginal and Torres Strait Islander people listening to this podcast. Hey and welcome to episode one of the where there's will, there's way podcast with Colter Legal. I'm Stefan Match, head of the Wersenestates team here at Colter Legal. And with me today for making her podcast, Dave Boe is Sarah Minter. Sarah, great to have you on board. How are you going? Thanks for having me, Mr Fern. Fantastic. Now today we've got the great joy of talking about what is estate planning. So what's the difference between making a will and completing an estate plan? What documents might make up an estate plan and what are the most important considerations for estate planning? Now we're lucky enough to have you for a few episodes in this season. Sarah, so it'd be great for our listeners to learn a little bit about you. You've recently been admitted as an Australian lawyer. Congratulations. Thank you. But you've been working in the legal space for many years. So can you tell us a little bit about yourself and your legal journey to this point before we get started? Yes, of course, Stefan. Well, I actually started my law degree about 20 years ago. So I'm giving away my age with that and then had an amazing end for filling career in the UK Parliament before joining Colter Legal when I moved to Australia about seven years ago. And then having been in various support roles and throughout some different teams with Colter Legal, I joined the Wersenestates team last year and was finally admitted practices a lawyer earlier this year. So really enjoying being part of the team and being able to be a lawyer within the team. It's fantastic and where is the team? I'm so happy to have you on board. Hopefully your Wersenestates life are with us. But we're here to talk about estate planning today. So let's get into it. We're going to start with the basics. So what is an estate plan and is an estate plan the same thing as having a will? Well, so an estate plan certainly includes a will, but it's much more than that. So when looking at estate planning, it's a consideration of all matters which might be important at the time a person passes away or perhaps loses decision making capacity. So there's certain documents that we might consider and amongst that that may be something like a power of attorney. That's right. And so an estate plan might also incorporate complex wills so that you know wills that incorporate trusts specifically test mentry trusts or a special disability trust. And maybe other mechanisms for the management of assets after death beyond just distributing assets directly to a person. Yeah, and it certainly also includes other documents which you might not think of. They're not quite as obvious as your initial will or your power of attorney. So that's something such as mutual wills agreement or a binding financial agreement. And these ensure that the distribution of assets is done as per the intentions where the nature of the asset holding doesn't allow for immediate control via the wills. So obviously a little bit more complex than a simple will. And so along that line, it might also include super any equation and preparation of a death benefit nomination and we'll talk more about that in length on this and other episodes. And then it might also along that same vein include consideration of existing trusts companies or other entities and providing for succession of control. And so that can be during a will makers lifetime or via their will or you know on them passing sorts that passing on of control at that point. Other things we consider which I'm sure you do in your estate planning is potentially transferring or changing the nature of ownership of existing assets. And we might do that to ensure that the estate planning intentions are met. So for instance, you know, transferring a property to joint proprietors to keep it out of the estate. One of those joint holders pass away or on the flip side changing the ownership of a property to tenants in common to ensure control via a right to reside or something like that after death. And again, we've got an episode coming up in the podcast series about assets in which assets fall into will and which don't. So listening to that episode will make a bit more sense there too. It definitely will one of the other things which a lot of clients will often want to consider is how they can plan for any anticipated claims that could be made against their estate. So somebody saying that they think that they should receive something under your will that you perhaps weren't planning on giving them. And so there's implementing strategies which can reduce the risk to the estate and also help your executives to defend those claims. And finally, my favourite subject, there's the consideration of tax consequences on the transfer of wealth. So always a fun one. So much fun but really practical. Really practical. So what I'm hearing here is that the estate plan is a more global and holistic look at the planning for death or incapacity. And it's really important that all of those facets of the plan work together to ensure that the plan is comprehensive and it's complimentary. And we've all had situations on the flip side where those plans aren't complimentary and the whole thing falls apart. And it creates real issues for the estate at the tail end so that complimentary nature is so important. Does everyone who makes a will need a complete estate plan? No. I mean there are some circumstances where adults with very simple circumstances and really quite simple assets and will not need their planning to consider all of the above aspects. But all will benefit from a holistic consideration of their circumstances. I mean a good example is you've got a young person who doesn't have a spouse or partner and doesn't have any children but they've just purchased a home. They've got their superannuation and that's got built in life insurance. They're going to benefit from a will but they will also benefit from a review and consideration of their superannuation nomination. So if they've not got any dependence who would they want their superannuation to go to on their death. It might be that they want to pay it to their estate so it's dealt with in line with their will. So we could advise for that to be paid to their legal personal representative. The other thing that that young person might want to consider, how is a attorney in case they're going to travel or if they were in an accident and were no longer able to make their own decisions. And people at that level and we've all been there often think well I don't really have anything to give away. But even just the superannuation over crude might only be $10,000 but the built in life insurance can often be hundreds of thousands of dollars. And it's really important to make sure that that goes to the right people. I've certainly seen instances where that has created significant issues for the family left behind. You know, particularly parents of a young person. And so it is something that can be really easily dealt with. And so I really like what you said there was a holistic consideration of their circumstances. It doesn't need every facet of the plan but it's looking at their circumstances and seeing where we can make sure that they're planning aligns. So what about those with increased wealth or more complicated family structures? Well, of course that's the flip side when you've got people who are perhaps a little bit more established. So we've had our young person. But what about if you're a couple in your 50s, you're in your second relationship? Perhaps you both have young adult children from the previous relationships. So a blended family arrangement. I'm feeling levels of complexity. city already, but could go. And so we've also got with this couple in their 50s, they might have acquired a significant well through property, through a share portfolio, and also, as we've mentioned before, through their sea perannuation. Those children in their 20s are going to be entering into their own relationships. They might be consideration of grandchildren in time to come. And so in those circumstances, these clients are going to really benefit from a state planning, including wills. They might want to consider a testimentary trust for their children. They might want a mutual wills agreement to ensure that they can benefit each other at first, but then secure the benefit for the respective children. They might want to use their sea perannuation to their advantage, and considering the tax consequences in relation to that. And they may well likely require consideration of a manner to reduce asset holding to ensure that their intentions can be actioned. Right. And that situation is becoming ever more common. Oh, incredibly. The nuclear family is no more in many situations. And you can certainly see the opportunity for there to be unhappy children. And of course, that couple, they need to look after each other in the first instance. But I'm sure that children of both prior relationships will be thinking, well, are we going to get our share from mum or dad's estate at the end? And so there is a significant amount we can do in the planning to make sure that that does happen. And we can give our clients and their children that sure that yes, they're going to look after each other first. But based on their situation, the type of assets, they're what they need to provide for each other. There are a lot of strategies we can put in place to make sure that yes, they look after each other. But at the end of the-- you know, if-- on the second of them passing, they've also secured that benefit for their respective children. Yeah. It provides that peace of mind, which is so important to our clients. And they want to be able to provide that for their children and their family members. Absolutely. And so from that description, it's clear that most people will benefit from some level of holistic consideration of their circumstances, at least. And as the state planning lawyers, we then utilize or apply the appropriate strategies, the tools-- I'm not talking about hammer and nails, but documents-- as necessary. Certainly, it isn't a one-size-fits-all. And that's where that detailed discussion that we have with clients comes into, you know, into its own. And it's clear that, you know, a state planning does not have to include all of those elements that we listed at the outset. But the appropriate combination for their clients, particular circumstances. So as we're working through that a state plan-- and if we're talking about, you know, any elements that are slightly more complex-- is it just the lawyers involved in that process or do we get others involved from time to time? Well, of course, it's primarily the lawyer who you're meeting with to discuss your state plan. But we will often work collaboratively with our clients' accountant or their financial advisor or both if they have both to ensure that we receive a complete understanding of our client circumstances and assets and to obtain specific tax or investment advice-- That's over. --again, our favorite, when considering the best course of action for the clients. In more complex state planning, the client's accountant or advisor often flags the need for a state planning in the first instance. And in those circumstances, it's often really quite appropriate for them to be involved in the process from the outset. And we really try to work together as a team to ensure that no aspects of the plan are overlooked. In my experience, that's so worthwhile, having those other advisors involved. They often have a really in-depth understanding of that client's circumstances. They've been working with them for a number of years. They might understand some of the sensitivities within the family. And if nothing else, they are involved. It's a warm introduction. And the client feels like they've got their team around them. And if there is an element of tax that we're not aware of, because it's something that the account dealt with as part of a business entity from 20 years ago, the account's going to be able to flag that for us and we can build that into the estate plan. So again, it's about that comprehensive level of advice and support that we provide. So that we're not trying to avoid tax. We're not trying to do anything unto-word to leave people out. What we're trying to do is make sure that if there is something that we can avoid as an expense later on down the line, we can avoid it. If there's some heartache or there's some upset, cause the family that we can avoid, we're going to avoid that too. And excitingly, we will actually have some of those experts joining us as guests on future episodes of the podcast. How well I look forward to that. So tax fans, listen out. Now, Sarah, we're almost out of time for this episode, but I'm going to hit you up with one last question. What is the most important consideration for people who are embarking on the estate planning process? So when we are working with clients and in our experience, the most important question for us to ask is, what are the outcomes that are non-negotiable for you? What is it that our clients want to achieve from the estate planning process? Once we understand what's non-negotiable, we can work out what's required and help fill in the gaps with the decision-making and strategies. We can use the tools at our disposal and the strategies, but there are often situations where we will need to determine the core priorities where all of the items on the wish list can't be met. We try to make sure that we ensure that key priority is included in their estate planning. Right. I think that's great advice. I really couldn't agree more. It really is about highlighting those priorities. And for us as lawyers, acknowledging that there might be a best legal outcome, but we're dealing with human beings. And so there might be a practical outcome that is going to trump the perfect legal outcome because it's what's important to the clients. And often there are a number of scenarios we can offer or solutions we can offer, which will meet a number of those targets and being really clear on the non-negotiables is going to make it easy for our clients to really focus in on which solution or combination of solutions is going to work for them. Absolutely. Well, Sarah, it's been an absolute pleasure to have you on the podcast. Thanks for your time and insights. And I really look forward to having you back on for another episode sometime soon. Well, thanks for having me. Thank you so much, DeFan. No worries. Well, that's it for episode one of where there's a will. There's a way with Colter Legal. Thanks for joining us and look forward to having you with us on our next episode.