Understanding Estate Planning

Walbrook Wealth ManagementSeptember 24, 2020

This fact sheet provides additional information to help with understanding the investment, tax and other financial planning concepts that we have discussed with you or included in your Statement of Advice.

Please contact your adviser if there is any aspect on which you need further information or clarification.

What is Estate Planning?

It is not easy to overstate the importance of Estate Planning. Estate planning includes preparing a Will to ensure that your wishes are acted upon, as well as other documents to ensure your affairs are in order when you die or you are unable to look after them yourself.


A will is a legally binding document that allows you to state how you want your assets, including financial and personal effects, distributed when you die. It also determines who will be in charge of the administration of your estate.

Although most people understand how a Will operates, not everyone has one, and many Wills are not up to date. Once you have a Will in place, you should update it whenever your details change, for example, a change in family circumstances, and at least should be reviewed every five years.

A will can help to diffuse potential disagreements that may arise following your death. Surviving family members/associates may dispute the ownership and distribution of assets. Although a will can be contested, the existence of a valid will ensures that your final wishes are known, and this may resolve any disagreements that may arise.

The regular update of your will is essential for effective Estate Planning.

When preparing your will, you will need to ensure it is legally binding. We recommend that you consult a lawyer or professional trustee company.

Some questions you should ask or consider include:

  • What happens if you and your partner die simultaneously?
  • Who will be the legal guardian of your children if you die?
  • Consider not only who you would like to receive all or part of your estate when you die, but who will benefit if your beneficiaries predecease you.
  • Do you want to leave any specific assets to specific beneficiaries, or do you prefer that the executor sells the assets and distributes cash? You may wish to consider leaving certain items to particular individuals but beware of capital gains tax consequences if you are aiming to make equal distributions.
  • Consider whether your assets may have different values when you die, or may not be available.
  • Consider that capital gains tax may apply to the sale of certain assets.
  • Consider that assets like superannuation and joint assets do not form a part of your estate and may impact on the equal division of your estate.
  • Who will be the executor of your will? The executor is responsible for carrying out your wishes, as expressed in your will.

Assets not included in your will

Your will does not necessarily cover several types of assets. You must keep these in mind when reviewing your documents. Generally, all personally owned assets are distributed under your will with the following exceptions.

  • Jointly owned assets (held in joint tenancy) are passed directly to the surviving owner(s). Assets held in joint tenancy do not form part of your estate. A typical example is the family home; however, many investment funds and other assets can also be held in joint tenancy. When one owner dies in a joint tenancy, the asset passes automatically to the surviving owner(s). In contrast, assets held as tenants-in-common are considered assets of your estate.
  • Superannuation benefits may pass directly to an individual under a binding nomination or at trustee discretion.
  • Income streams (such as account-based pensions) may continue to be paid to a reversionary pensioner or pass directly to an individual under a binding nomination or via trustee discretion.
  • Insurance proceeds may pass directly to a nominated beneficiary.
  • Proceeds from a life insurance policy owned by another person or entity – This can arise where a superannuation fund, family member or business associate owns the policy.
  • Assets held within a trust or company structure do not form part of an estate. The shares or units that the deceased owns in the company trust will be dealt with by the will.

Choosing an Executor

The person you select should be aware of and in tune with your wishes and must be capable of performing the role and working with competent specialists. You should choose an executor who is unlikely to predecease you, and you should nominate an alternative or joint executor.

The administration of an estate can be time-consuming and is likely to need investment, taxation, accounting and legal advice. Provided your executor is aware of the services offered by professional solicitors, financial planners and accountants, the technical aspects are easily handled.

Power of Attorney

A power of attorney allows someone to represent you or perform an act on your behalf concerning financial and legal matters. It gives you peace of mind knowing that there is someone who will look after your affairs if you are unable to do so.

The main benefit of a power of attorney is to ensure ongoing management of your financial affairs if you are unable to due to incapacitation or absence. Having a Power of Attorney in place means that you can meet your financial obligations and that someone you trust manages your affairs.

Your attorney's signature on a document has the same legal force as your signature. Therefore, you should take great care when deciding who to appoint as your attorney. You should also obtain legal advice as to who an appropriate attorney would be and to ensure that the correct paperwork is completed and recorded.

You can limit the Attorney's powers by specifying on the form any matters on which you do not want the Attorney to make decisions.

You can appoint more than one Attorney. An example of this would be to appoint one person as your Attorney for financial matters and another person as your Attorney for health or day to day decisions. You can also appoint joint Attorneys - more than one - for each particular matter, requiring both to sign for a certain decision.

Each state has separate legislation concerning enduring, general and medical powers of attorney. Therefore, if you have investments interstate, you should arrange for an enduring power of attorney in each state in which you have assets.

There are three main types of power of attorney:

  • General power of attorney
  • Enduring power of attorney
  • Enduring power of attorney for personal/health matters (medical).

General Power of Attorney

The general power of attorney allows your attorney to act on your behalf, usually for a specific purpose or fixed period such as allowing another person to handle your affairs whilst you are temporarily overseas. If you die, become mentally incapacitated or become bankrupt, the general power of attorney is automatically revoked.

Enduring Power of Attorney

An enduring power of attorney remains valid even if you lose your mental capacity.

Giving someone an Enduring Power of Attorney means that your wishes will be carried out as specified, even if you lose the capacity to make decisions for yourself. The person nominated as your Attorney will have the power to make decisions in your interest as well as sign documents on your behalf.

You should review your enduring power of attorney periodically to ensure that your nominated attorney(s) is still capable of acting on your behalf. If your attorney(s) dies or becomes incapacitated, you will need to arrange for your legal adviser to change your documents and register a new attorney.

Enduring Power of Attorney (Medical)

You can also appoint an enduring power of attorney only to make medical decisions on your behalf.

Testamentary trusts

A testamentary trust is a discretionary trust that is created under your will when you die. The primary purpose of a testamentary trust is to manage your estate assets to produce income for beneficiaries. A trustee administers the trust on behalf of beneficiaries.

Testamentary trusts have several advantages:

  • Taxation of income distributed to minor children at adult rates.
  • Protection against bankrupts and spendthrifts.
  • The ability to distribute different classes of income to different beneficiaries.

Where a will creates a testamentary trust, the assets and income may be attributed to the surviving spouse for means testing purposes if:

  • the surviving spouse directly controls the trust (irrespective of whether they are a beneficiary), or
  • an associate has control, and the surviving spouse is a potential beneficiary.

The rationale for the rules is that if a surviving spouse has direct control of a trust, they can exercise their discretion as trustee to benefit themselves. Further, if an associate (e.g. family member or professional advisor) has control and the surviving spouse is a potential beneficiary it is reasonable to expect that the surviving spouse will share in the benefits of the trusts.


When you die, your superannuation fund trustee may pay a death benefit as a:

  • Lump-sum to a dependant or non-dependant;
  • Lump-sum to your estate; or
  • Pension to a dependant (a dependent child must be under 18, 18-25 and financially dependent, or disabled).

A pension may continue to a reversionary pensioner.

The most important thing to note is that while superannuation law allows for all of these options, some superannuation funds only allow for a lump sum to be paid under their trust deed.

If you die intestate, without a legal representative or any dependants, the trustee may make a death benefit payment directly to a non-dependant (as a lump sum only).

Superannuation dependants

Under superannuation legislation a dependant includes the following:

  • Spouse - husband, wife or de facto spouse (including same-sex)
  • Child - of any age
  • Financial Dependent - a person who was partially or wholly depending on you at time of death
  • A person with whom you have an interdependency relationship just before your death - a relationship between two people where:

    • they have a close personal relationship
    • they have lived together
    • one or each of them provides the other with financial support, and the domestic support and personal care.

Some people who do not live together can still meet the interdependency relationship definition if the separation is temporary, or if one person has a disability. Further, two people do not have an interdependency relationship if one of them provided domestic support and personal care to the other:

  • under an employment contract or contract for services; or
  • on behalf of another person or organisation such as a government agency, a body corporate or charitable organisation.

The legislative definition of a beneficiary is not exhaustive, and the trustee may choose to take into account other circumstances (for example, emotional or financial dependency) when determining your dependants to pay a death benefit.

Superannuation payments

A spouse, child (under age 18, 18-25 and financially dependent, or disabled), financial dependant, or person who was in an interdependency relationship with the deceased, can receive an income stream or a lump-sum.

A non-dependent, including the deceased's estate, may only receive a lump-sum.

Please refer to Understanding Superannuation for more details on the taxation of superannuation death benefits.

Capital Gains Tax and Deceased Estates

In Australia, special capital gains tax rules apply when dealing with assets of a deceased estate.

The most common types of assets inherited by a beneficiary that could be subject to a capital gain are property, shares and managed funds.

Implications for Australian tax residents

Where you’re an Australian resident for tax purposes, and you inherit assets from the deceased estate of an individual who was also an Australian tax resident, the transfer of these assets from the deceased estate is not a capital gains tax (CGT) event, in and of itself.

It is when you sell the asset at a later point in time, that the CGT event occurs and the beneficiary incurs a capital gain or loss. Special rules apply to the calculation of the cost base, which depends on whether the inherited asset was, amongst other things, a pre-CGT asset.

CGT outcomes are a vital aspect to consider when selling inherited investments like shares, managed funds and investment properties. The sale of the family home may receive the ‘main residence exemption’ which means that CGT will not apply. However, where the deceased or the beneficiary used the family home for investment (income-producing) purposes during the ownership period, you may not receive the full main residence exemption.

Other Capital Gains Tax considerations

Generally speaking, if the asset:

  • a collectable asset, such as rare stamps, then CGT may apply depending on a host of circumstances
  • a personal-use asset such as jewellery, a car or boat CGT will typically not apply.

Capital gain (or losses) on an inherited asset

There are several considerations involved in calculating a capital gain or loss. Some of these can include:

  • the type of asset;
  • how the deceased used the asset;
  • the deceased’s date of death;
  • the date the asset was inherited;
  • your ownership period, before selling the asset;
  • whether you are selling the asset as an individual Australian tax resident, or not.

Beneficiaries should keep detailed financial records related to an inherited asset. This information is needed to determine if there’s any CGT payable later when they sell the asset.

Important Information

Walbrook Wealth Management is a trading name of Barbacane Advisors Pty Ltd (ABN 32 626 694 139; AFSL No. 512465). Barbacane Advisors Pty Ltd is authorised to provide financial services and advice. This post is general information only and is not intended to provide you with financial advice as it does not consider your investment objectives, financial situation or needs, unless expressly indicated otherwise. You should consider whether the information is suitable for your circumstances and where uncertain, seek further professional advice. The author has based this communication on information from sources believed to be reliable at the time of its preparation. Despite our best efforts, no guarantee can be given that all information is accurate, reliable and complete. Any opinions expressed in this email are subject to change without notice, and we are not under any obligation to notify you with changes or updates to these opinions. To the extent permitted by law, we accept no liability for any loss or damage as a result of any reliance on this information.

Walbrook Wealth Management is a trading name of Barbacane Advisors Pty Ltd (ABN 32 626 694 139; Australian Financial Services Licence No. 512465). Walbrook Wealth Management (Credit Representative Number 534783) is authorised under Australian Credit Licence 389328.

The Chartered Accountants Australia and New Zealand logo is a trademark of Chartered Accountants Australia and New Zealand and is used with permission.

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This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Version 4.0