Guide to Estate Planning Terms

Appointments

Executor – A person who is appointed to carry out the terms of the Will and administer the Estate.  The Executor is appointed in the Will.

Trustee – A person or company who is obliged to administer the trust for specified purposes and is given powers to control property in a trust but exercises discretion in making decisions under those powers.  The Trustee is appointed in the trust deed (Family Trust), the Will (Testamentary Trust) or deed of appointment (if the Appointor of the trust appoints a new Trustee).  The Will or trust deed can set out how the Trustee is replaced.  For a corporate Trustee, the majority shareholder will usually control the appointment of directors of the company.

Appointor – A person who is given the power to remove and appoint the trustee of a trust.  The Appointor is appointed in the trust deed (Family Trust) or the Will (testamentary trust).  The trust deed or Will can set out how the office of the Appointor passes, often by nomination of a successor in the Appointor’s own Will.  An Appointor can also be referred to as a “Nominator”, “Principal” or “Guardian” in a document.

Enduring Attorney – A person who is appointed to make financial decisions if you wish them to and/or are not capable of making them yourself.  The appointment can come into effect immediately or when you lose the capacity to make decisions.  The Enduring Attorney is appointed in the relevant appointment document or by decision of the relevant tribunal in your jurisdiction.  The appointment usually ceases in a number of situations, including if you revoke it, you or the Enduring Attorney die or the relevant tribunal in your jurisdiction revokes it.

Enduring Guardian – A person who is appointed to make lifestyle, health and medical decisions for you when you are not capable of making them yourself.  The appointment only comes into effect when you lose the capacity to make your own decisions.  If this is temporary (for example, you come out of a coma), the Enduring Guardian can no longer make decisions for you.  The Enduring Guardian is appointed in the relevant appointment document or by decision of the relevant tribunal in your jurisdiction.  The appointment usually ceases in a number of situations, including if you revoke it, you or the Enduring Guardian die or the relevant tribunal in your jurisdiction revokes it.

Guardian of minor children – A person who is appointed to make decisions for your children who are under 18.  The Guardian is appointed in your Will, but the Family Court can make the final decision if the matter comes before it.

 

Documents

Will – A legal document which:

  • sets out who receives your estate assets upon your death,
  • appoints someone to act as your executor and sets out their powers,
  • can set up a testamentary trust and appoint someone to act as trustee and set out their powers,
  • can appoint a guardian of your minor children, and
  • can pass on control of a Family Trust.

Superannuation death benefit nomination – A legal document which determines or guides who will receive your superannuation benefits.  It can be binding or non-binding, lapsing or non-lapsing.  It will only be valid if the beneficiary is your Legal Personal Representative (in effect, your estate) or a dependent under the Superannuation Industry (Supervision) Act 1993 (‘SIS dependent’).  This includes your spouse, your child (of any age) or a person with whom you have an interdependency relationship (generally, with whom you live and provide domestic support and personal care).

Trust deed – A legal document which establishes and governs a trust and sets out the powers of the trustee.  In the case of a testamentary trust, the Will fulfils this role.

Appointment document – The required document will vary from state to state.  Some states have a single document to appoint someone to make financial and personal decisions.  Others have separate documents.

Financial Agreement – A financial agreement allows you to formally note your intentions for future asset ownership should your relationship break down.  However, they can be set aside by the court in some circumstances, such as where there is a material change in circumstances relating to the care, welfare or development of a child of marriage that leads to financial hardship for a party; where there has been undue influence; where the parties have failed to comply with disclosure requirements; or where there has been a significant change in circumstances of the parties (often the case if the agreement is many years or decades old).

 

Ownership Structures

Investment Bond – A long-term investment with features similar to a managed fund combined with an insurance policy.  As it is a life insurance policy, you need to nominate a life to be insured and a beneficiary to whom the proceeds can pass directly without going via the policy holder’s estate.  Investment bonds can be tax effective for long-term investors with a marginal tax rate higher than 30%, as long as certain rules are followed.  They are designed to be held for at least 10 years to be more tax effective.

Family Trust – A type of discretionary trust which has made a Family Trust election.  The trustee, either a person or company, holds property for the benefit of the beneficiaries.

Testamentary Trust – A type of trust that is set up under the Will upon the death of the Will-maker.

Joint Tenancy – An ownership arrangement in which property is owned jointly by two of more parties, with each having a right to the whole asset, and the share of each passing to the other or others upon death under the law of survivorship.

Tenancy in Common – An ownership arrangement in which property is owned jointly by two of more parties, with each having their own distinct share that they can pass on under their Will.

 

Provision Claims

Notional Estate – NSW is the only Australian jurisdiction to have Notional Estate legislation.  Notional estate refers to the assets that you don’t own directly at the time of your death because the assets were transferred to another person or a trust without full valuable consideration in the three years prior to your death or on or after your death.  The transfer may occur because of an act (e.g. gifting assets into a trust) or an omission (e.g. failing to sever a joint tenancy). In NSW, eligible persons (s 57) are entitled to bring an application before the Court for a family provision claim where they are not satisfied that you made an adequate provision for their proper maintenance, education or advancement in life.  There is a common misconception that if your assets are transferred out of the estate before death, then they can reduce the pool for family provision claimants.  But in NSW, where the Court considers there are insufficient assets in the estate to make adequate provision for a beneficiary, then the Court will apply the assets of the Notional Estate to satisfy the claim.

Family Provision Claim (or Further Provision Claim) – An application before the Court by an eligible person where they are not satisfied that you made an adequate provision for their proper maintenance, education or advancement in life.