The importance of estate planning

Transcript

Peter Fletcher

[00:00:00] Peter Fletcher: Welcome to the WA Property Q& A, the podcast where I explore the ins and outs of buying property in Western Australia. I’m your host Peter Fletcher and each week I interview local property experts to help you to develop a deep understanding of the nuances of buying property in WA. From market trends to legal considerations, no topic is off limits.

But before we dive in, a friendly reminder. While we provide valuable information, it’s important to note that nothing discussed in this podcast should be construed as personal investment advice. Always remember to seek the appropriate professional advice for your specific circumstances. Now, let’s get started and unlock the secrets to successful property buying in WA.

Well, welcome to this week’s guest. None other than, Joel Stark from J. Stark Legal. Now Joel is an estate planning lawyer. Is that right, Joel?

[00:01:00] Joel Starke: That’s right. Estate planning law.

[00:01:02] Peter Fletcher: Yeah. You were admitted to the, is it the bar? Is that what you call it?

[00:01:07] Joel Starke: The Supreme Court of Western Australia. Yeah. So that was back in October 2016.

Yes. Okay.

[00:01:13] Peter Fletcher: Time flies by. Time flies when you’re making this much money. I mean, when you’re having

[00:01:17] Joel Starke: fun. Yeah, fun, fun. That’s what we call law. That’s why all of our hair falls out.

[00:01:22] Peter Fletcher: Oh, is that right? Oh my god. Is that what happened? You get into law and you

[00:01:26] Joel Starke: Exactly, exactly. You should have seen the Ashley Marden ads plastered outside our office.

[00:01:31] Peter Fletcher: Oh my god. Rightio. Now, Joel, we wanted to talk today about wills primarily wills and the importance of wills, especially around the home buying and home ownership side of things wills and powers of

attorney, the different types of powers of attorney. Let’s start out, Joel, with a will.

Why is it important that people should have one?

[00:01:57] Joel Starke: So your will is the legal document that sets out what happens to your assets after you’ve passed away. But it’s actually only just part of what I would call the estate planning process. The estate planning process is looking at everything that you have and how it’s structured rather than just Where your assets go because there are certain assets that actually don’t even pass directly through your will.

So that could always cause an issue if you’ve drafted a will and all your assets are held in trust structures, superannuation or jointly owned property. It’s not really going to do a whole lot of work for you when you pass away because all those assets are actually passing parallel to your will.

[00:02:39] Peter Fletcher: Is that right?

Okay, so can you give us an example of the sorts of assets that, that do run outside of a will or parallel to the will as you call it?

[00:02:49] Joel Starke: Absolutely. So, I mean, in property, the most common one is a joint tenancy property. And you want to think about the family home. That’s mum and dad with the family home.

Often that’s going to be owned as a joint tenancy, and that’s going to pass to the survivor on the death of one of them. And that’s pretty much automatic, isn’t it? That’s right, yeah. So you do have to do an application at Landgate to take the title from joint tenancy to the sole owner at that point, but most people tend not to worry about doing that until they have sold the property.

Your classic example is the mum and dad who have had the property for 30 years. Dad passes away and then mum hangs on there for another 10 years and then passes away herself. In all likelihood, that property title hasn’t been updated at Landgate to take it to just her. And so when the estate goes through, at that point you’re going to have the mum’s will passing that property because she’s the sole owner.

But prior to that, you’re going to need to do a application through Landgate to just move the property solely into her name. And then her will can pass that property to her children or wherever she’s left it.

[00:03:59] Peter Fletcher: Okay. So yes, we’ve seen we’ve seen those double transfers or double Survivorship applications and they can actually get quite complex.

So, alright, that’s how the standard family home works. So, what are the other examples where, that aren’t involved in, Will?

[00:04:21] Joel Starke: Your classic after that is going to be either a trust or superannuation, so if you hold the property in a trust structure, that’s going to be determined by who takes control of the trust.

You do not own assets in trust, so if I’ve got a family trust, I’m merely a beneficiary of that family trust. Rather than the owner of the asset within the family trust you have to think of it as an asset owned by the trust Not an asset owned by you anymore. That’s the whole point of the trust So you’ve got to look at what the trust deed says and who takes control of that trust and who are the beneficiaries of the trust I always make sure whenever clients have a trust To carefully look through it, and it may require an update to the trust deed, so that’s known as a deed of variation to potentially bring other people up to who are gonna be the pointers at that point.

Now the appointer is the person who hires and fires the trustee of the trust, essentially. . And the trustee is the person who makes all the day-to-day decisions on distributions of income and capital from that trust. So, the trustee handles all the day to day running, and who gets what, and they have absolute discretion in a family trust over that for the most part.

So if I’m in, if I’ve got three children, and I only make one of them the appointer of the trust, and that trust holds a bunch of property. One of my children who’s now the appointer might go hmm, you know what? I don’t want to share with my siblings They weren’t very nice to me and they never shared with me when I was a child So I’m gonna pay him back really well now They remove the trustee and appoint themselves and then suddenly in their absolute discretion Only they are getting distributions from the trust and not their siblings and their siblings can’t really do much about it.

[00:06:13] Peter Fletcher: Wow Okay, and how can that be? Redressed or sort it Out.

[00:06:18] Joel Starke: So, you can make all three children the appointers at that point make sure that they’re all on an equal footing. You could also include, say, a independent third party. But it really depends on a case by case basis and how the family dynamic pans out.

There are a myriad of options.

[00:06:35] Peter Fletcher: Trusts are fairly common when people are buying investment properties.

[00:06:39] Joel Starke: Quite, quite often. Depends what their structure’s like though. So, a lot of people like trusts because they think it’s going to give them a real leg up in family law proceedings. And they’ll often create trust structures they probably don’t need or probably won’t utilize.

So a single person who’s buying a lot of property and is holding them in trusts might not be receiving any family law benefit, but they may, if they are using those properties for rentals, be getting an advantage on tax, depending on how it’s structured. So it’s going to depend on what your purpose with holding the property is.

whether you want to hold it within a trust. You’ve also got to remember that if you take it out of the trust, in all likelihood, you’re going to incur taxation. So that could be stamp duty or it could be capital gains tax. So you have to think of those pretty carefully in advance. Now I’m not an accountant or financial advisor.

So I always say before you put an asset in trust or put this structure in place, please go get the proper accounting or financial planning advice to make sure that you want to do it this way. And then I’ll help you do that and tell you all the legal side of it, but make sure you’ve got your finances all lined up before you do that.

[00:07:52] Peter Fletcher: So for people buying an investment property, it’s essential that they get that accounting and financial planning advice first before they come to you. Is that right?

[00:08:02] Joel Starke: They can always take a breather in between what I’m doing, so they can come to me, find out they probably need to get a little bit of extra advice, I can send them to somebody I trust or they can go and use somebody that they like, and then they can come back and we can finalize it, or if there’s nothing further to be done, that’s not a problem, that means that I’ve done my job and made sure that they haven’t essentially put their foot in it, and made a mess, so I’m quite happy anytime somebody turns around and says, you know what, Upon the advice, I don’t want to do it that way. That means I’ve done my job.

[00:08:33] Peter Fletcher: So it sounds like that you and the accountant slash financial planner work as a, almost as a team to achieve an outcome that the, client is chasing.

[00:08:44] Joel Starke: Absolutely. So the accountant, the financial advisor and the lawyer What I would call the triumvirate, that we’re the three people you need in the room.

Anytime, particularly when you’ve got, say, an estate that’s ongoing and I like to think of things like a larger estate where you’ve got, say, minor children as beneficiaries of that estate or an ongoing trust situation, you probably want to get your lawyer, accountant, financial planner around the table at least once to work out what your plan as the executor or the trustee of that estate is.

And then go forward from there. So you don’t have to always be calling myself or whoever the lawyer involved is, it can just be one time advice and just sort of guidance as to what needs to happen, or it could be just ongoing updates and tinkering around the margins to make sure things are working as intended.

[00:09:31] Peter Fletcher: So for most people, for people that are buying their family home, a trust would really, and they weren’t planning, they didn’t have an elaborate estate, all of this stuff goes away. It’s just like, family home, you’re done.

[00:09:45] Joel Starke: For the 99 percent of people, yes some people might be very high risk so lawyers, doctors, accountants.

It depends if you’re going to get sued. If you’re a company owner, you might want to structure yourself differently, because you may have a higher likelihood of getting sued by somebody. However, for most people, it’s not going to be a problem. Even for most professionals or company owners, it’s not going to be a problem owning their own home.

It’s just going to be An issue of whether that suits their individual needs.

[00:10:14] Peter Fletcher: Okay. Right. So even with, even for people that are buying their family home, if they’re in a high risk industry, they might still want to go down that trust path.

[00:10:26] Joel Starke: That’s right. Otherwise often what I’ve seen happen is If one spouse is, say, hypothetically, a CEO of a company, and they’re doing something innovative, and they have a higher risk, and then their spouse might be, say, a teacher.

Well, if the spouse owns the property, it’s not really a problem. And if something happens in the family law courts, they can still ask for half that property anyway. So it really. Doesn’t matter so much which side of the couple owns it at some times. Now, it’s really going to depend on how you want to structure your assets, and I don’t ever tell people how to structure their assets, I just provide them with a series of options.

And they can choose from that shopping list as to what options suit them best and go from there.

[00:11:11] Peter Fletcher: Okay. So that’s kind of, I think, trusts. What else haven’t we covered with trust? Is there anything that stands out there, especially for investors?

[00:11:21] Joel Starke: For investors, I’d always say the key thing is going to be your Accounting and financial advice with the trust, that’s always the most important thing.

Does it make economic sense to have that trust? Because you’re probably going to be incurring an accounting fee every quarter for that trust tax return, and you might want to make sure that you’re not incurring that fee for no good reason.

[00:11:42] Peter Fletcher: Yeah, and again, if it’s just a one or maybe two properties, it’s probably you just buy it in individual names, but if, and again, financial and accounting advice dependent.

But, anything more elaborate, if somebody wants to start building a big portfolio, very elaborate portfolio, they probably want to start thinking about trust, would that be fair to say?

[00:12:05] Joel Starke: That’s quite fair to say. I mean, I’ve recently worked on a matter that had about 35 million worth of real estate in it.

And we’re piecing together. A series of company and trust structures that hold all the assets along with self managed superannuation. So, they own the, they own a series of commercial and residential properties throughout these structures and it’s piecing how all those structures now are going to pass to the next generation when the parents go and the structures need to be updated to ensure that happens in a seamless manner.

[00:12:39] Peter Fletcher: Let’s roll back to, so superannuation, that’s another one of those parallel structures that go outside the wheel, is that correct?

[00:12:49] Joel Starke: That’s right, so superannuation is held in the, by the trustee of the superannuation fund. Now, you don’t own those assets until they’re distributed out to you. What will happen is with self managed superannuation, people will often buy a property with that and use that to expand their real estate footprint.

They’ve just got to be careful again on the accounting and financial advice for super because that is a constantly changing. regulatory environment. Even now you’ve got a lot of people being concerned about potential 3 million caps coming in before higher taxation is incurred in superannuation.

So there’s all sorts of things to consider there. Though it is definitely a vehicle that you can hold property in. But you have to think about the exit plan and that’s one thing I always say to my clients is whenever you hold an asset in whatever structure, what is your exit plan for this structure and then frequently we will have to work together to create that plan and that’s often done with the accountant and financial advisor for the input.

So that the client has the most tax effective method of doing everything.

[00:13:58] Peter Fletcher: So if I were to pass away, and what would happen with my, the superannuation in my self managed superannuation fund?

[00:14:08] Joel Starke: If you’ve got a Binding Death Benefit nomination, then it will pay according to that nomination. The trustee pays it out to whoever you’ve nominated.

If not, then often it will pay into your estate though it can get a bit messy. So you can have People make claims and say that they should have been paid. I would just say get a binding nomination in place. Don’t give the trustee of the super fund any discretion as to where it goes. You then want to think about if any of the people who might be receiving a super are what’s known as death benefit dependents.

Now, they will receive your super at a lower tax bracket, so you want to consider say spouses and children who are under certain ages as receiving it. But it’s definitely something to have a very close look at and it can be quite a large topic to dive into. So it really just depends on how people have structured and how much money they have put into that super account.

If they’ve been putting huge amounts into self managed super, then it can be, it can require a bit of specialist advice that unfortunately is not particularly good for podcast format.

[00:15:17] Peter Fletcher: Yeah. Well, it’s complex stuff, isn’t it?

[00:15:19] Joel Starke: That’s right. And it’s very individual. So I can speak in general terms, but it’s always very hard to say exactly how it’s going to suit each person’s unique circumstances.

[00:15:30] Peter Fletcher: So the key takeaway so far is number one, understand what you’ve got. So in terms of Well, you’ve got two streams. You’ve got the stuff that goes outside of the will, which is trusts and superannuation, and then the will itself. And the third stream would be a house that is in joint tenants, which goes directly to the survivor.

[00:15:52] Joel Starke: Yeah, so any assets that you own directly in your own name will go straight through the will. Now that could even be shares and shares in companies that hold property. So if I’ve done a whole bunch of company structures that hold my properties and each one has, I’ve got a hundred percent share of each and I pass those shares through my will, that’s absolutely a asset of the estate.

So it really depends again on this structuring, but if that, if those properties are held in the trust, then that circumvents the will. So you could have a situation where a person owns millions of dollars worth of property, but doesn’t have enough property in their own name to require a probate application.

And just for some context for anyone who’s listening in, probate is how we go about distributing assets out of somebody’s name to the estate. It is an application to the Supreme Court of Western Australia for a grant of probate in the name of the deceased. We don’t want people saying, Oh, yes, John Smith is deceased and now I need to have his house so I can give it to his beneficiaries only for John Smith to turn up and go, Where’s my house?

So that’s why it always goes through the Supreme Court to confirm that the person is deceased, that they held assets in their name, and what the will stated, and who’s going to be the executor. The executor then applies for probate and that gives that executor the legal title to deal with the assets in the deceased’s name.

[00:17:23] Peter Fletcher: I want to come back to this point because it’s, you’ve raised a really interesting point that I think it has some real relevance to real estate agents. But let’s finish up with the will side of things. It’s important for people to have wills if you’ve got, what’s the threshold of assets?

Do you know off the top of your head it’s?

[00:17:42] Joel Starke: I would just say anyone should have a will if they’re thinking about buying property. It’s always a great moment to get a will. If you’ve just bought your first house, excellent time to get a will. Now. In Australia, about 50 percent of people have wills, the other 50 percent don’t.

If you don’t have a will, your assets are distributed out under the Administration Act of your relevant state. Now, in WA, that means that it’s going to go in certain percentages to certain people. So, at first instance, my spouse would get a certain cash amount, off the top of my head I want to say that is 650, 000 or 700, 000, and then they get 50 percent of the value of everything else in my estate.

The other 50 percent is split equally with my children. So it used to be that amount was much lower and could cause a lot of grief for people, so you’d have instances where say the family home needed to be sold and all sorts of other problems. That’s less so now, but that may not be what people want.

The Administration Act is a blunt tool to sort of keep things within families and all the way down to the point where if somebody doesn’t have any family, then it would end up in the government’s coffers and goes towards helping good taxpayer things. So, you really want to make sure you’ve got a will to ensure that your assets distribute out in the manner that you want them to, and that the people that you care about are properly looked after, because not having a will causes them a huge amount of grief, in terms of, How to deal with the estate, going back and forth with banks, with superannuation accounts, all sorts of other issues.

A lot of this stuff can just be tied up by doing proper estate planning and a will that does not take a particularly great amount of time or expense. And I always say to somebody, if they have just spent 600, 000 on a house and they don’t have a will, say a 400 or 500 will, then they’re really neglecting a very important part of what happens to the most important asset in their life.

Because for most of us, the house is going to be our most important asset. And if we do not have a plan for how that distributes out, After our passing, I think it’s a real problem for families, if they haven’t done that, particularly if the family doesn’t get along.

[00:20:04] Peter Fletcher: Yes and you pass away without a will, and it is distributed according to your, the administration act, suddenly the asset might be going to someone that you actually don’t like anymore.

[00:20:19] Joel Starke: That’s right. So I deal with a lot of estates that see children of a beneficiary removed. So, so children of a client removed, so say if I’ve got three children and I only like two of them, one of them’s estranged, then I definitely don’t want to be benefiting that one that is estranged to me.

And if I haven’t done a will, they’re going to receive. Part of my estate. And I really may not want that. Now, of course, that’s going to be individual. A lot of people, even if they’ve gotten a strange child, still wish to benefit them. But you’ve got to think about what your beneficiaries either need and who they are, and then plan accordingly.

So it’s going to be very individual. And that’s one thing about estate planning. It’s incredibly individual. So when we’ve got an estate, say if say if I’ve got a beneficiary that we wanted to remove from an estate, there’s a few ways of doing that and it’s going to depend on the beneficiary.

So recently worked on a matter where we had a child who was being removed from the estate due to drug issues and issues involving a series of arrests. The client did not want to benefit them in any way, shape or form. The problem being is that child could bring a claim for benefit under the Family Provision Act.

Now, if they do that, the estate’s going to be tied up, it’s going to take a long time to sort out, it’s going to incur significant legal fees, and it’s going to mean that Anything in the estate is up for grabs. One way around that, and it depends on how people wish to structure, is to use trusts. If the assets are held in the trust and that child you did not wish to benefit is not included, or is specifically excluded as a beneficiary of that trust, makes it very hard for that child.

to extend their family provision claim to the assets within that trust. So you’re essentially segregating assets away from that problem child. Now how far you want to chop and change your assets structure in terms of this is going to be a very individual issue. And it’s also going to have to take in light tax and financial planning advice, but that is one option.

There are. Other less extreme options, like doing statutory declarations and specifically cutting the child out of the estate. However, it depends how that’s going to go if that child makes an application for family provision. If you’ve done that poorly And you’ve included a whole lot of reasons for why the child might not want to be given anything, might not be given anything under the will.

They can turn around and say, well, that’s your opinion as to how that conversation or interaction went down, but it’s not quite right. And it opens your will up to making a factual error on something quite important, which then opens it up to being further broken apart. And essentially disregarded by a court if it went that far.

[00:23:22] Peter Fletcher: And just the legal costs involved in fighting something like that would make you wish that you had of invested a little bit more time and energy and advice in creating a, the proper structure or the proper will in the first place.

[00:23:36] Joel Starke: Thankfully for most people whose estates are involved in this, they’re not going to be around to see that.

But it will make the beneficiaries quite upset.

[00:23:44] Peter Fletcher: Yeah, yeah, yeah. Well, that’s fair. Yeah. Yes. Fair point. Okay. So, and of course, the one, the example that you gave where you’ve got children involved is quite like, it’s almost simple. But when you’ve got, like, a person, an individual that doesn’t have children or a couple that doesn’t have children, it becomes even more complex in a way as to, how that will get shaped.

[00:24:13] Joel Starke: Absolutely. And you really want to think about who you’re going to be using. As your executor at that point because your standard will is going to always be everything between mom and dad to whoever passes from whoever passes away first to the survivor and then equally among the children and if any of the children pre deceased then.

to their children. So that’s the usual structure. Now when that’s not happening, you really want to have a careful think about who’s still going to be around to administer the estate on your behalf. So some people may appoint a friend or a relative, maybe a younger relative, so a nephew or a niece. And often what they’ll do is they’ll leave, say, a gift in that will, just to say thank you to that nephew or niece or whoever’s administering the estate for doing the job.

So, could be five or ten thousand dollars, however much they want to leave. Now it’s not mandatory. A lot of people will just do this job anyway for free out of love and affection. Even if they’re not receiving anything. And then maybe this hypothetical person wants to leave everything to a series of charities.

Then you want have a look at the charities and have provision in place for how much each charity is going to receive in terms of a percentage of the estate. So

you could say have two charities each getting 50%. So, you could have, say, the Cancer Council and the Shenton Park Dogs Refuge getting 50 percent each and then it would be the job of the executor to essentially liquidate the estate and give half and half to those two charities.

I’d also say whenever you’re benefiting a charity, it’s nice to let them know. They love to put you on mailing lists and send you all sorts of free stuff and then you can update the will afterwards and take them right out after you’ve got the free stuff.

[00:25:58] Peter Fletcher: Oh, right. Thank you, Joel.

Okay, so what’s some of the weird things you see in, in wills? Have you seen any weird stuff?

[00:26:12] Joel Starke: I see weird stuff in people’s estates every day of the week it’s always a new adventure. One of my favourites has got to be, somebody left a giant ship’s anchor, and I mean a ship’s anchor from an old ship of the line these things are huge to somebody as a specific gift.

Now that’s just a item in your will that you leave directly to somebody. This thing had to be picked up with a forklift and taken off the property to be given to that beneficiary, and I’m not entirely sure whether it was a gag gift or not, but the beneficiary did actually take that item. So you do see all sorts of weird things.

A lot of people will leave various bits of art or other things to people. In my own will, I’ve left a few little gag gifts to my friends. Because I don’t have, at this point, a spouse to leave anything to, so I’ve picked on all my friends to, to leave them silly little things that they probably don’t want to receive.

[00:27:08] Peter Fletcher: Right here. Fair enough. Now, I want to roll back to something that is very relevant to real estate agents. So, We often see contracts that come through across our desk that are made subject to probate. Now, it is my belief that those contracts are, shall we say, invalid, because the, whoever signed it to accept the offer does not have the authority to do so, granted to them by the Supreme Court of, is it Western Australia or Australia?

[00:27:43] Joel Starke: That’s Western Australia. So am I correct there? I can’t say entirely without being a judge as to each individual matter, but I would caution anyone who is dealing with an estate not to enter any contracts prior to getting a grant of probate, particularly if you say you want to get out of being the being the executor of the estate.

You have at that point intermeddled with the estate, and there is no way out. The court will not let you off the hook, and you are stuck in that role. So, before you start doing anything on an estate, make sure that you actually want to stick around for the long run. You can easily say no to being an executor.

It’s not a forced position. You can say, it was very nice of that person to nominate me in their will, but my life circumstances right now don’t really mean that I have the time or ability to deal with this, and I’m going to pass on doing that job. Now you can just do an affidavit to the court, and you’re off the hook at that point.

However, if you’ve started entering property, Transactions on behalf of the estate at that point, you’re not going to get off the hook. I’d also be surprised if Landgate even let any applications through. Now, Landgate being our state to settle’s office.

[00:29:00] Peter Fletcher: So I just want to roll back prior to all this, Joel. And that is back to this subject to probate issue. Because I think it’s a big problem in the, well, it’s not a big problem, but we often see it. So, before the contract comes across our desk, some real estate agent has been speaking to one of the beneficiaries named in a will, who is claiming that they are the executor of the estate, and they maybe even have seen the will, oh yes, I’m the executor.

Oh, well, if you’re the executive, you can sign my listing authority. Now, I don’t think that they can sign the listing authority at that stage because they don’t have, they don’t have the authority to do so.

[00:29:41] Joel Starke: It would be a potentially risky thing to do. I can’t speak to the entirely the validity of that.

There’s nothing wrong with, say, keeping a property ready for sale, maintaining it, things like that, and I would say to anyone, even if they’re not going to be the executor of an estate and they’re just a beneficiary, it’s not a bad idea to just keep the property well looked after.

[00:30:03] Peter Fletcher: Joel, I want to come back to this listing authority thing, yeah?

Because like, I just can’t see how anyone could sign, I just can’t see how anyone could sign a listing form if the, if probate’s not granted.

[00:30:18] Joel Starke: You really shouldn’t be doing that. You shouldn’t be entering any contracts If you are not the executor of the estate, it’s not a good idea.

You get the legal sign off from the court to be able to deal with the assets and then you deal with the assets. Nothing wrong with preserving the assets in the meantime. Yeah, got all that. That’s fine. But, but I personally wouldn’t be signing any contracts prior to being nominated.

Well, prior to being given my grant by the court to act as the executor, you’ve got a couple years to sell everything anyway before you lose any capital gains tax exemption on a family home as well. So there’s no rush to do these things.

[00:30:54] Peter Fletcher: Oh, yeah, that’s, that is a hundred percent right. But I see real estate agents who Like, somebody passes away, you know, they know that it’s sort of in, in the wings and, you know, suddenly there’s this, well, we’ve, let’s get it on the market and get it sold sort of, you know, very quickly after the fact.

And I say to them, You know, pretty regularly, you don’t, as the agent, you don’t have the authority to sell that you’re required to have if the person that’s signing it does not have the authority to sign the listing form.

[00:31:30] Joel Starke: Yeah, there’s a level of putting the cart before the horse in all of this, of if you don’t, if you’re not on the legal title to being able to transact with property, Landgate will not let you transact with that property, and just for context for anyone listening, Landgate is the Western Australian Titles Office, so they transact They hold with an iron fist all titles to property in Western Australia and they’re not going to allow someone to essentially transact or sell on that property without a grant or probate or being the holder of the title.

[00:32:03] Peter Fletcher: Yeah, look, I think that’s why agents, they put on these weird contracts, why they say subject to probate. You know, my point is you can’t, you, the contract is not even like, you can’t even enter into the contract if probate hasn’t been granted.

[00:32:20] Joel Starke: Well, you definitely shouldn’t. It is definitely, as I say, putting the cart before the horse.

People do silly things and there’s also a lot of pressure on people to get things moving in deceased estates. I understand that. Often the beneficiaries are hounding someone to get things going, but there is time, there’s no rush on these things, you can always call a solicitor and get some pretty quick and easy

advice, or even the solicitor, if the will was drafted by one you can call that solicitor and say, hold on, What were the terms of the will please explain even get a, just a brief appointment with them, maybe half an hour to just go over it and understand what you as an executor are doing if you don’t want to do the application yourself, you can actually.

Give a solicitor a application for a grant of probate to make on your behalf, you’re still going to be the executor, but you can outsource a lot of your work. You can can’t you? Yeah. I’m a great believer in outsourcing .

[00:33:19] Peter Fletcher: And at least then you know that it’s all done correctly.

[00:33:23] Joel Starke: That’s right.

And it means you don’t have to deal with the pressure of handling it all at a very upsetting time in your life. Even family members passed away. I tend to, I get a lot of calls from people saying my relative has passed away three days ago. What do I do? And my first comment is. Sit back, grieve, make sure everything is squared away and that you are, that you’re okay.

And then go and get the will, read the will. If you have any trouble, take it to a solicitor or give me a call. And then we can go and look at doing probate. We’ll also, if they had an accountant, go and get in touch with that accountant or financial advisor. Make sure things are ticking over. And go from there.

There’s no huge rush. Now, you do want to get things moving, and sooner is better than later, but do take some time to, to process what has happened before rushing out, because it is a stressful process at times, and you can outsource a lot of that stress to other people. And that’s great, but there’s still a level of stress at a time that is very difficult for those people.

[00:34:28] Peter Fletcher: Joel we see as parts of, you know, deceased estates that come through some really shonky wills. Talk to us about the stuff that goes in a bad will, or the reasons why to avoid a bad will.

[00:34:43] Joel Starke: There’s no end to how to stuff up a will. Every stuff up is a unique stuff up to that willmaker’s situation.

However, I’d just say that. Not having a will drafted by a lawyer is in itself a risk. There are those of us in the profession who spend a good chunk, if not entirety, of our careers doing estate planning and will drafting. We carry

insurance. And there’s a level of expertise that is not just in the drafting of the will, but the advice around the will.

A lot of handmade wills will ignore the estate planning process and focus on the asset distribution focus, to the detriment of the estate in a lot of cases. So that could be not realizing that everything you owned was held in a trust, and in fact that trust is now controlled by someone you didn’t want to have control it.

I’ve seen some interesting ones where people had forgotten to take their former spouse off the appointer role for the trust, so their former spouse was going to be the key beneficiary of their estate, which raised a few eyebrows, there’s all sorts of ways that people can get a state planning wrong.

And if you’ve got a house it’s well worth just making sure that you’ve got a proper plan in place for how that property is going to transition to Your beneficiaries. Speaking to a lawyer is not as expensive as everyone thinks. There’s a lot of us who do estate planning law and for 400 to 500 you can get a single will done with some advice around that looks at your estate.

Now, depending on what your structure is, that can go a lot higher. So say if you needed a testamentary trust will, Which is where essentially the best way of summarizing it is you turn your will into a family trust that runs a little bit higher, but it’s going to entirely depend on your circumstances and what level of document review and.

Document generation is required for those circumstances. For most people, it is not overly complex.

[00:36:54] Peter Fletcher: Joel, to give you an example of something that can, that I think was wrong in a will, we saw one recently where the will stated I bequeathed all my assets to my children, full stop. Now the problem is, well, who were my children?

Now you’ve got these kids that say Well, I’m one, and I’m one, and I’m one, you know, like, there’s, well, how many did I, you know, How many children did that person actually have and who can now therefore claim? Whereas if it had have said, to my children, Bob, Jane, Sam and Jim. Okay, well, we all know Bob, Jane, Sam and Jim are going to get.

But, you know, we know that Anne can’t pop out of the woodwork and make a claim because they weren’t specifically mentioned

[00:37:44] Joel Starke: in the will. I do have some bad news for you, Peter. Unfortunately, Anne can still pop out and make a claim even if she’s not mentioned in the will. Yeah. She is one of the class of people who can make a claim under the Family Provision Act, and this is where getting the legal advice pays for itself.

Because we will say, do you have any other children other than the ones that you have left your estate to? The sheepish answer will usually be yes, and then we will come up with a plan for Anne. to make sure that the estate is protected as best as we can from any potential claim by her and go from there.

So there’s all sorts of ways that can go wrong by just saying a general class of beneficiaries but you can, if you say got a huge number of beneficiaries, say I leave, say, a thousand dollars to all of my nieces and nephews I have seen that in wills. Now, personally, I don’t love that drafting, but if you’ve got a defined category of people and you put proper limitations around it, so you say, living at the date of my death or things like that, and really make sure you’ve honed in on that category, you can do an undefined category of people.

Well, a, a unnamed category of people, as long as you define exactly who’s in that category. So, if I know that it’s going to be all of my grandchildren who are living at the date of my death, and it’s really unfortunate for those ones who weren’t quite yet born, but sucks to be them, and every one of them is getting 1, 000, that’s pretty easy to do.

I don’t need to, I don’t need to name 30 grandkids in the will. I can just say it’s these are the people who are each getting 1, 000.

[00:39:22] Peter Fletcher: Okay. So testamentary trusts, you mentioned off air that these are these are complex beasts. Can you just give us a bit of a sketch of a testamentary trust?

[00:39:33] Joel Starke: The simplest way of describing a testamentary trust is you’ve turned your will from being a standard will where everything goes out of your name and straight into the names of your beneficiaries into a family trust where everything goes into the trust for the beneficiary and then is held in that trust.

It doesn’t exit that trust immediately. The beneficiary may decide they don’t want to use the trust and then it becomes an asset that’s in their name. Essentially you’ve created a small family trust. for those beneficiaries. That’s probably the easiest way of summarizing a testamentary trust, but they are complex and there is more to them than that.

They’ve got a series of tax and asset protection advantages. I tend not to try and overstate the asset protection advantages, particularly in terms of family law. The family law courts have the ability to, to look through a lot of trusts and Testamentary trusts suffer at the hands of the family law court quite often but they do have taxation advantages particularly say if I’m a, a beneficiary of a testamentary trust and my children are also beneficiaries under my trust, I might want to, say, distribute out assets from that trust every year, say, income.

to my children. And depending on the tax advice you may be able to distribute money out at a lower tax threshold than you yourself would have otherwise had to pay for that money. And so there can be some pretty serious tax advantages in doing that.

[00:41:07] Peter Fletcher: Okay. So testamentary trust would mainly be used for complex complex estates that, you know, quite big?

[00:41:15] Joel Starke: Not really. You could actually, you should be having about. Anywhere from about 500, 000, even 250, testamentary trust could be well worth it, depending on what you’re doing with the assets that are in that trust. You may also want to be using the testamentary trust because of different things going on in those beneficiaries lives.

They may be a high risk beneficiary for being sued, say a company owner, or they may be a, they may require something that’s more akin to a protective trust. Say if they’ve got dependency issues but you still want to benefit them, you want to make sure that money doesn’t flow directly to their hands where it might be misused and it’s held within the trust.

Of course beneficiaries can always challenge this structure and a lot of the time the court’s attitude is going to be That money can now come out of that trust and go straight to that beneficiary. But it’s going to, again, always depend on the circumstances. That’s part of the problem of legal podcast updates.

Unless I’ve got a specific scenario in front of me, I can’t give a very good indicator of exactly how it’s going to pan out. I can only talk in some pretty general areas.

[00:42:24] Peter Fletcher: Yep, yep. Okay, so to wrap things up, key thing is, if you’re going to be buying property, if you’re going to be buying any sort of large, you know, decent parcels of shares, if you’ve got, some, any sort of assets to your name, get a will.

[00:42:38] Joel Starke: Even if you don’t have significant assets to your name, it doesn’t hurt to get a will in place. Particularly if you’re earning decent money suddenly you’ll find that a few years have gone by, you haven’t thought about it, and you might have purchased a house by that point without really giving too much consideration to what happens to it afterwards after you pass away.

You might also want to have a look at superannuation and life insurance policies, where they pay out to. That’s going to be probably one of the bigger pools of assets for younger people particularly younger people entering the property market. If you’ve got a superannuation binding nomination in place, that’s going to save you a lot of grief or save your family a lot of grief.

Often you might have a situation where a person doesn’t have a huge amount of assets to their name directly, but they’ve got things that they’re entitled to. So life insurance payouts, things like that. And where that ends up, it’s going to be important to plan for. And you can only plan for that yourself whilst you’re alive.

So you should take advantage of that time to do so.

[00:43:42] Peter Fletcher: Joel, this has been very interesting. It’s a well, shall I say a dry subject, but an important one. It’s something that people should not ignore.

[00:43:53] Joel Starke: I do try to make my client meetings a little bit more jovial, since we’re talking about Run the pressing topic, and people can, I have had people cry with sadness about the idea of passing away only to come out of my office laughing at the relief of the process.

I tend to liken it to lifting the world from Atlas’s shoulders. It’s taking it, taking that load off and going, this is what happens, making a plan for it. And there’s no need to stress about these things. They can all be handled in a relatively simple manner. And then you can go on living your life without having to worry about what happens to the assets that you can’t bring with you after you pass away.

And knowing that you’ve provided certainty for your family and made sure that you’ve looked after everyone appropriately.

[00:44:43] Peter Fletcher: Joel, for those people that want to engage with you, that want to talk further, take it further from here, where, what are they, how would they get hold of you?

[00:44:52] Joel Starke: They’re always welcome to give me a call.

I love having a chat to people. I say on my website there’s no charge to chat and that’s true. Anyone can give me a call if they’ve got a question. I’ll answer it to my best of my ability and then if they want to engage my services then I’m very happy to meet with them. They can come to my office or I can travel out to them depending on what the arrangements are and we can go from there.

And your number is? So, you can call me on 0422 449 100 or you can leave a message for me through my website and that’s www. jstarklegal and that’s stark with an e on the end and there’s a little form on there to leave a query.

[00:45:38] Peter Fletcher: Yeah, cool. Joel, this has been fantastic. Thank you so much for your time. And until next week, this has been Peter Fletcher for the WA Property Q& A Podcast.

And that wraps up another episode of the WA Property Q& A. We hope you found our discussion valuable and gained some valuable insights into the world of property buying in Western Australia. Remember, while we strive to provide useful information, it’s crucial to consult with the appropriate professionals before making.

any investment decisions. Don’t forget to tune in next week for another exciting episode where we continue to unravel the mysteries of the WA property market. If you have any questions or topic suggestions, feel free to reach out to us. Until then, happy property hunting and remember to seek the right advice for your personal circumstances.

Thank you for listening.