Question
Based on Australian law, you will be required to consider the client circumstances as detailed in the case study below and prepare a report detailing
Based on Australian law, you will be required to consider the client circumstances as detailed in the case study below and prepare a report detailing relevant estate planning issues and your recommendations.
- Tom Smith and Jenny Smith are in their 50s and have three children from their marriage, Anthony, aged 24; Ethen, who is nearly 17; and Simone, aged 14.
- Simone has Asperger's Syndrome which is a form of autism and will always be dependent on her family for her daily activities and wellbeing.
- Tom has been married before and has one child from that marriage
- Leo, aged 29. Leo currently has no contact with his father and blames him for all the problems and the financial hardships that he and his mother have experienced since their divorce.
- Tom is self-employed in his Heavy Equipment Mechanical Business, while Jenny is an employee in a school.
- Tom is an only child and he believes he will receive a large inheritance from his elderly parents, who have so far remained healthy as they age.
The couple's assets, at current market value, consist of the following:
- Shares (acquired for $120,000 in 1984) $1,300,000
Bank account $230,000
Home and contents (home acquired for $450,000 in 1992) $950,000
Managed funds (acquired for $40,000 in 2006) $100,000
Holiday home (acquired for $280,000 in 1992) $680,000
Life insurance policy Tom $1,900,000
Weston superannuation fund - Tom $650,000
Weston superannuation fund - Jenny $350,000
Superannuation account Jenny $235,000
Heavy equipment mechanical business $400,000
Land and building used to conduct the business (acquired for $100,000 in 1995) $625,000
The couple raise the following issues:
- Issues with their children:
The couple gave Leo $80,000 to establish a business 5 years ago on the basis that he would have no further claim on Toms estate. However, the couple is convinced that Leo will, nevertheless, contest Toms will upon his death.
The couple's son, Anthony, has been married for the past 6 years but the couple has experienced marriage problems for some time. Tom and Jenny would like to gift Anthony $95,000 to use as a deposit on a house but, given the marriage problems, do not want the money to be lost in case there is a divorce.
Assets:
Toms business and land and buildings are owned within a family trust. Tom and Jenny are directors of the trustee company. The trust deed states that in the event of the death of the appointer of the trust, currently Tom, the new appointer is the deceased's legal personal representative, that is the executor named in the will.
All of the couple's assets are jointly owned between Tom and Jenny, except for the mechanical business and the land and building used within the business (see below) and the holiday home which is owned as tenants in common.
Jennys mother, aged 80, owns and manages a small apartment block in Adelaide. However, the mother is in bad health and no longer wants to manage the properties. The mother is looking to gift the property to Jenny. The property cost $130,000 in 1989 and has a current market value of $620,000.
The couple would like the family assets distributed in a tax-effective manner upon their death.
Other Matters:
Toms life insurance policy is owned by Jenny.
Jennys individual superannuation fund contains a $450,000 life and TPD policy and Jenny has decided to retain this account in order to preserve the insurance policy. She completed a binding death benefit nomination 4 years ago, nominating 100% to be paid to Tom in the event of her death. Similarly, Tom has completed a binding death benefit nomination leaving all his superannuation to Jenny.
The couple each has a will in place leaving everything to their respective spouses. They have each nominated their son, Anthony, as executor of their respective estates.
Tom and Jenny have appointed each other as their respective general power of attorney.
Tom has suffered bad health for some time.
QUESTION: You are required to analyse the couple's situation and detail relevant issues and recommend appropriate strategies that the couple should consider. Your advice and recommendations should include how the couple should best structure their estate-planning needs, and be in the form of a report.
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