Understanding Australian Estate Planning: Wills, Trusts, and Super

A will is the legal document that directs how your assets will be distributed after death. Without one, intestacy laws apply - and the result may not match your wishes.

• Intestacy: dying without a valid will means the law decides who gets what, based on a statutory formula; in most states a spouse receives the entire estate only if there are no children from another relationship - blended families face particularly unpredictable outcomes
• Valid will requirements: you must be 18 or over (or married), of sound mind, sign in the presence of two adult witnesses who are not beneficiaries or spouses of beneficiaries
• Executor role: the executor administers the estate - collects assets, pays debts, lodges a final tax return, obtains probate, and distributes to beneficiaries; choosing a capable and trusted executor is critical
• Update your will after: marriage (which revokes a prior will in most states), divorce (revokes gifts to a former spouse in most states), major asset acquisitions, changes in family circumstances, and births or deaths of intended beneficiaries
• Specific bequests vs residual estate: leaving specific items (a car, a painting) to named people creates complications if those items have been sold - prefer pecuniary legacies or residual percentages where possible
• Digital assets: cryptocurrency, online accounts, and business platforms need to be addressed - include instructions for accessing digital wallets and ensure the executor can access account information securely

---

One of the most misunderstood aspects of Australian estate planning is that superannuation does not automatically form part of your estate. It is governed by separate super law.

• Super death benefits: the trustee of your super fund pays your death benefit to either your dependants or your estate - unless you have a valid binding death benefit nomination
• Binding death benefit nomination (BDBN): a written direction to the trustee specifying who receives your super and in what proportions - the trustee must follow it if validly made
• BDBN lapse: most BDBNs expire after three years and must be renewed; some funds offer non-lapsing BDBNs - check your fund's product disclosure statement and set a calendar reminder to renew
• Eligible BDBN recipients: you can nominate a legal personal representative (directing super to your estate) or a dependant - dependants include a spouse or de facto partner, a child of any age, someone in an interdependency relationship, or anyone financially dependent on you
• Tax on super death benefits: the taxable component paid to an adult child who is not a financial dependant (the most common scenario - adult children who are working) attracts a 17% death benefits tax (15% + 2% Medicare Levy), which can be substantial on large balances
• Tax-free component: if you have made non-concessional contributions, the tax-free component passes to any beneficiary with no tax - understanding the composition of your super balance matters for estate planning
• Voluntary re-contribution strategy: withdraw from super as tax-free (over age 60 from a taxed fund) and re-contribute as non-concessional contributions - converts taxable to tax-free component, reducing future death benefits tax for adult children

---

A testamentary trust is a discretionary trust established via your will, coming into effect only on your death. It offers significant tax and asset protection benefits for beneficiaries.

• Key benefit - income splitting for children: investment income distributed to minor children through a testamentary trust is taxed at normal adult tax rates (including the $18,200 tax-free threshold), unlike income from a regular family trust which is taxed at the penalty 47% rate for under-18s under Division 6AA
• Example: a $500,000 inheritance invested in a testamentary trust yielding $25,000 per year can distribute $18,200 tax-free to each child each year - two children means $36,400 effectively tax-free annually
• Asset protection: trust assets cannot be accessed by a beneficiary's creditors, former spouses (in most circumstances), or bankruptcy trustee - providing protection for beneficiaries who have financial, relationship, or business risks
• Flexibility: the trustee (often the surviving spouse or an independent party) has discretion to distribute income and capital among beneficiaries, adjusting each year to minimise tax
• Multiple testamentary trusts: a will can establish separate trusts for each child's family, with independent assets and trustees - reducing family conflict and providing tailored protection
• Cost: administering a testamentary trust requires annual tax returns, trustee decisions, and potentially an accountant - not suitable for very small estates; typically worthwhile above $300,000–$500,000 in assets

---

Estate planning is not only about death - it also covers what happens if you become incapacitated while alive. Powers of attorney are the key tool.

• Enduring power of attorney (financial): appoints a person to manage your financial affairs if you lose capacity - signing contracts, managing bank accounts, selling property; enduring means it continues even after you lose capacity
• Enduring guardianship (medical decisions): a separate appointment in most states that authorises someone to make healthcare and lifestyle decisions if you cannot - also called a medical power of attorney or healthcare directive
• Advance care directive (living will): a document stating your medical treatment preferences if you become incapacitated - particularly regarding life-sustaining treatment, resuscitation, and palliative care
• Appointing the right attorney: choose someone trustworthy, financially competent, and likely to survive you; consider a professional trustee (such as the Public Trustee or a private trustee company) for complex situations or where family conflict is possible
• Review timing: update powers of attorney if your chosen attorney dies, becomes incapacitated, or your relationship changes significantly
• If no attorney is appointed: an NCAT (NSW) or VCAT (VIC) guardianship tribunal may appoint an administrator, which can be costly, slow, and may not reflect your wishes

---

Even a carefully drafted will can be challenged. Understanding family provision law and asset ownership structures helps protect your intended distributions.

• Family provision claims: eligible persons (spouse, de facto partner, children, sometimes grandchildren or other dependants) can apply to a court for a greater share of your estate if they were left inadequate provision
• Courts consider: the financial needs of the applicant, the size of the estate, relationships and contributions, and any gifts made during your lifetime - claims are common in blended family situations
• Joint tenancy vs tenants in common: property held as joint tenants passes automatically to the surviving owner by right of survivorship - bypassing your will; tenants in common allows each owner's share to pass through their estate
• Life insurance proceeds paid outside estate: policies with beneficiary nominations pay directly to the nominated beneficiary and are not subject to family provision claims (in most states) - consider this for assets you want protected
• Trusts and companies: assets held in a discretionary trust or company are generally not part of your personal estate - they do not pass through your will and may not be accessible to family provision claimants
• Superannuation: super is generally protected from family provision claims in most states when paid directly to dependants via BDBN - another reason to have a valid BDBN rather than directing super to your estate
• Gifts before death: large gifts made in the years before death can be scrutinised for notional estate claims (NSW) - speak with a wills and estates lawyer before transferring significant assets as gifts

---

Estate planning is not just for the wealthy or elderly. Every adult with a super account, a partner, or children should have a will, valid BDBNs, and powers of attorney in place.

Roopon members get partner discounts on estate planning services, wills, and financial advice - plus FREE included prize-draw entries per your plan and published campaign terms. Join from $19.99/month at roopon.com.au.

---

Join Roopon today for exclusive member discounts plus FREE included prize-draw entries per your plan and published campaign terms.

Join ROOPON Now