May 29, 2023 | by Jacqui Schat
Article by Duncan Hughes | Published in the Financial Review on 26 May 2023 – 3:53pm
Disputes about inheritance and shared assets are rising because of growing wealth, longer lives and growth in the number of blended families, according to specialist lawyers.
There has been sharp increase in disputes about the validity of wills, particularly whether a testator, or person making the will, has the capacity, which means they are of sound mind, memory and understanding, the lawyers say.
Barrister Giles Stapleton, of Selbourne Chambers and Family Law Chambers in Sydney, says there is also a spike in family disputes involving overseas parents who have bought real estate in the locally domiciled children’s names.
Ines Kallweit, a solicitor with KHQ Lawyers, says more than 90 per cent of cases are settled through mediation, which attempts to identify issues and options, and reach an agreement, in am attempt to prevent expensive and potentially protracted court cases.
That makes it difficult to track the exact number of disputed cases because they can be spread across actions involving testators’ family maintenance, trusts, equity and probate.
Research by ANZ Private Bank has found about 70 per cent of transfers of intergenerational wealth fail because of dissipating wealth, family conflicts, misaligned family values, delays and bungled execution.
ANZ’s analysis is based on 3000 private banking clients over 25 years.
“Planning is critical to well-considered wealth transfer and while each plan will be unique, the most successful plans share a common pathway,” says James Dunlop. ANZ General Manager private bank.
For Graham Raggs, 65, executive chairman of Western Earthmoving, NSW’s largest family owned civil contractor, smoothly handing over control of the business to his four sons, aged 28 to 39, is a key priority.
Graham, his wife Diane, and sons meeting four times a year with select legal and banking experts to prepare for generational change and to discuss strategies for corporate strategies. “We need to generate wealth, and we need to protect it,” says Graham about succession plans for his company, which has an annual turnover of $325 million, 280 staff and 250 contractors.
In addition to expert legal and banking advice, they also have a non-executive advisory board to discuss issues that will affect the future of the family business.
Graham’s son, Michael, 33, recently took over as chief executive for day-to-day operations and two other sons are directly involved in roles ranging from equipment and training to media content. Michael says: “Succession planning is a journey, not an event.”
A recent study by the Productivity Commission found the value of wealth being passed to future generations was expected to nearly quadruple between 2020 and 2030 as Baby Boomers bequeathed as estimated $3.5 trillion to younger generations.
“There has been a massive increase in the number of wealthy people, which has been driven by the growth in real estate prices during the past 20 to 30 years,” says Dunlop.
The ANZ study also found that about eight-in10 private banking clients were concerned about their succession planning.
Dunlop says problems start with wealthy second and third generations, becoming more complex because of the increased number of family members and relationships. “Including the next generation in conversations about transferring wealth can help equip them with the necessary skills to continue the family plan in the future,” he says.
About $3 million worth of investible assets or debt (excluding the family home) is required to qualify to ANZ private banking.
Duncan Hughes is a Walkley award-winning personal financial reporter, based in our Melbourne newsroom.
May 23, 2023 | by Jacqui Schat
Article by Jacqui Clark | Published in The Australian on 28 April 2023
How to get your will sorted and avoid squabbles so you can rest in peace
The Family Provision Act allows family members to challenge your Will after you die. The Court will then consider the financial needs of the Applicant, the size and nature of the Estate, the relationship between the Applicant and the deceased and other relevant factors.
While it’s meant to protect those who have been unfairly left out of a Will, it can also lead to extensive disputes and legal battles if you haven’t been transparent about your Will and intentions.
It’s easy to think “this won’t happen to me”, but there are more than 3000 Family Provision Act cases in Australia each year.
That’s 300 families battling it out for their fair share of a loved one’s Estate and possibly spending a lifetime if savings in the process.
In NSW alone, there were almost 900 cases filed in 2021, and most were in the range of $3m-$15m.
What can you do to prevent this from happening to your family?
First the preparatory step is to ensure you are clean on your balance sheet (your net worth). It also pays to consider the needs of the family members you are planning to leave your Estate to.
Do they have the necessary financial and/or business acumen to manage this money? Is now the time to introduce them to your network to assist building their knowledge? What are the other needs of your beneficiaries?
Second, and most critical, is to ensure that your Will is clear and transparent. This mean being up-front an spelling out exactly who gets what and why.
If you have a good reason for leaving more to one person than another, make sure you explain it in your Will (and if necessary, ensure you have historical financial records set aside with your Will to back this up.)
If your family understands you intentions, they are less likely to fight about it later. According to the Australian Research Council, although 60 per cent of Australian have a Will, many of these are inadequate.
Third, talk to your family about your Will.
This might sound awkward and most people avoid it altogether. If your family knows what’s in your Will and why you make the decisions you did, they are less likely to be surprised or upset later.
You might even discover some potential disputes that you can work out together before it’s too late. In my experience, you might find that opening the door for discussion brings a positive dynamic to the family relationship such that your legacy becomes a broader conversation that your family wish to protect.
For example, you might ordinate donations to a charity that your family would like to support, so that not only does your estate make a donation but perhaps but perhaps your surviving family continues with this over a period of time.
Finally, make sure you update your Will regularly. Your circumstances change over time and you want to make sure your Will reflects those changes.
For example, if you have a new child or grandchild, a new house, a new mortgage, you get divorced or remarried, you might need to change your Will. Remember, it’s not just your circumstances that change, it’s your family too.
The Family Provision Act can be a double-edged sword. On one hand it can cause a lot of problems for your family after you die. On the other, it provides an avenue for family members to seek fair provision from a deceased person’s estate if this was not the case.
Globally, there are many famous disputed Will cases where family members have battled over how much money they want from an estate. Michael Jackson has a short, simple Will; Jimi Hendrix died with no Will; Whitney Houston had one beneficiary, who in turn died without a Will; Phillip Seymour Hoffman has a 10 year old Will that considered one child but when he died he had three children; and James Gandolfini’s poor planning led to 80 percent of his assets being subjected to taxes.
It does take time to secure a well-considered legacy, one that enables your wealth to transition to others in a straightforward practical manner, free from complexity and worry.
If there are pain points or even unresolved issues, do what you can today to resolve them and then document the solution. Planning now means dodging disaster later. Don’t let fights over your estate tear your family apart – take action now so that you can rest in peace.
Jacqui Clark is co-founder of advisory firm, Maxima Private and author of Stop Worrying About Money.
May 22, 2023 | by Jacqui Schat
How to stop a stranger robbing the kids of their inheritance
Australian Financial Review | 15 May 2023 – 5:00am
Peter Townsend Contributor
A few tweaks to your will is all that’s needed to ensure your offspring don’t lose out after one of you dies and the other takes a new partner.
How would you feel if your estate went to a complete stranger – a person you’d never met? It’s more common than you might expect.
Jack and Jill were married in 1981 and had two children. They were happily married for 32 years. In that time, they both worked and saved and, with help from some late-career compulsory super, built up a tidy nest egg.
In their wills Jack and Jill left their respective estates to each other. They agreed that the survivor would look after the children.
Jill died from breast cancer at 68. Jack was heartbroken and alone for the first time in decades.
Try as he might to fill his life with hobbies, kids, grandkids and friends, Jack was lonely. He missed the closeness of a trusted, intimate partner – the companionship for those times when family and friends weren’t around. That’s when, at 71 met Mary, 15 years his junior.
For Jack nothing could replace the wonderful years he had spent with Jill. But his life with Mary alleviated that loneliness. They had been dating for about six months when Jack invited Mary to live with him. They became a de facto couple.
After a while Mary began to feel that, as she was likely to outlive him, it would be only fair for him to make provision for her in his will. She understood Jack wanted his kids to have most of his estate but felt she should get something.
As time passed Jack became more reliant on Mary and thankful for her care. One day, after Mary confirmed to him that she’d look after his children, Jack agreed to give everything in his estate to Mary.
When Jack passed, Mary was his sole beneficiary. In her view, Jack’s children, who’d never been very close to her, were doing fine and didn’t really need any of Jack’s estate. Mary went about managing Jack’s estate for her and her son’s benefit alone.
The money and assets that Mary inherited from Jack included all the wealth that Jill had worked so hard for, believing her kids would ultimately benefit. Jill’s estate had passed to a complete stranger.
Is this case unusual? No, it is quite common.
There are a number of different estate planning strategies to avoid this. But first, couples have to acknowledge Jack and Jill’s story could happen to them. Couples need to have the conversation acknowledging that when one of them dies, things change forever.
That change is not a reflection on the past. It does not alter in any way the importance of their relationship. It simply reflects a new situation – a situation neither of them has ever been in and that is therefore unknown. Couples must have the courage to focus on the issue, and if they are concerned about bringing up a touchy subject they can use their solicitor to introduce the topic.
To protect her estate for her children and as a half-owner in the family home, Jill could have given Jack the right to live in the family home until his death or re-marriage – after which the home would be sold and the proceeds from Jill’s half share given to the children.
Care should be taken in the drafting to ensure any right to the matrimonial home extends to the conversion of the capital value of that home into a refundable accommodation deposit with Jack’s chosen aged care facility.
Jill could also have arranged for Jack to receive only the income from her share of the couple’s other assets and ensure that the capital would go to the kids once Jack died. If the income was particularly low in any year, then Jack could have some capital to make up the difference.
Jill could appoint Jack and her two children as joint executors so that her wishes were met. Similar safeguards need to be taken in respect of the control of any family trust or SMSF after Jill’s death.
Protecting your children’s inheritance is about good planning and facing the possibilities.
Peter Townsend is principal of Townsend Business & Corporate Lawyers.