Case study A new client, Christine Jones, has come to see you on referral from her solicitor. She is concerned that her marriage is in trouble and is seeing the solicitor to understand her legal position and options should she decide to separate and divorce her husband, Norman. In the meantime, she is worried about what would happen to her young son if she were to die or become incapacitated. She has come to you to get a clearer picture of her financial position and how it impacts on her estate plans. Christine's personal and financial situation Christine (aged 34) is the second wife of Norman (aged 59). Together, they have a son Cody (aged 6). Norman is an entrepreneur with a successful history in film and television production. A couple of years ago he sold his post-production business and is now the managing director of his own vineyard and winery. Christine works as the marketing manager of the winery. They live in Mosman in Sydney in the home they bought five years ago for $3.5 million. She says she's not sure of its current value but is confident that 'we bought it really well and that the market has shot up'. A vyear ago, Norman and Christine bought a ski chalet in Japan at a total cost of 51.2 million. Norman was insistent as it was on his 'bucket list' and he spent several weeks there the winter after they purchased it. It is rented out the rest of the time. They also have a holiday unit in Noosa that is rented out most of the year although their friends and family stay there from time to time. Norman contributed a significant amount to both his and Christine's superannuation funds following the sale of his post-production business. Her current balance is $900,000 and she believes Norman''s is $1.2 million. Normans' children are as follows: With Christine + Cody (aged 6), is in his first year of school. Cody has Down syndrome. While he is currently healthy and is in @ mainstream primary school, he has mild learning difficulties and may develop health issues in the future, which would restrict his employment options. With Barbara * Susan (aged 30), is a successful neurosurgeon working in private practice. She is in a de facto relationship with Sam and they have a son Brock (age 3). They moved overseas to Sam's home town (New York) after Susan completed her training. This is also where Brock was born. Norman found out Sam has a drinking problem and was fired from his job as an investment banker a year ago because of it. He is now a stay-at-home dad. + Kevin (aged 32), works with Norman and loves it. Norman intends for him to take over ownership of the business eventually. Kevin is married to Terry, whom Norman adores. Kevin and Terry have two children Gia (aged 4) and Dion (aged 1). Terry and Kevin live on the vineyard and do not pay any rent. Ten years ago, Norman bought a unit in Coogee and registered it in Kevin's name to take advantage of the government's first homeowner's grant. Kevin lived there for a couple of years but since moving to the vineyard he and his family now use it on weekends. Norman also bought a property in Bondi with the intention that Susan would live there. She lived there for a couple of years before moving overseas with Sam and it has been rented out since. The vineyard and winery Norman is the Managing Director and maintains an active, hands-on full-time involvement. Christine is responsible for all marketing activities. Kevin's role as General Manager is to run finances, operations and human resources. Christine and Kevin both believe that they are second in charge in the business and frequently clash on business related matters. Norman wishes Christine would make more of an effort to get along with Kevin. Christine wishes Kevin had a bigger vision for the business. Christine is aware that the vineyard and winery is well-insured. Christine is certain that on Norman's death the business (Normandy Wine Pty Ltd shares) would be left to Kevin. Norman's family trust Christine is aware that Norman has a family trust and that from time to time, Norman distributes money to his children and grandchildren. Christine has received money from the trust when Cody was younger and she was only working part-time, but not in the past two years. She does not have the full information about the assets in the family trust or their value. However, she is aware that the family trust owns the vineyard and the winery's buildings that the business leases. She also knows that the family trust has a significant loan. Christine's concerns Christine has a number of concerns about her situation: Christine believes that Norman had been content to just live together and they only married because they had Cody. She is not much older than the children from his first marriage (who do not like her). Apart from Cody and the winery business, she and Norman do not have a lot in common. Christine loves her home and social life in Sydney and Cody is happy in his school. However, Norman has been talking about 'slowing down', selling the Sydney home and putting most of the proceeds into the family trust or winery business and building a small home on the vineyard. As Norman was busy building his wealth, he was not able to spend much time with Kevin and Susan. However, he has been trying to make up for that and spends as much time with Cody as he can. Christine has noticed that Norman frequently unfavourably compares Cody's development milestones and achievements with those of Kevin and Susan. She is sure Norman loves Cody but is worried about how he would treat Cody if she was not there. Recently, Norman's laptop died and he asked to use Christine's laptop. He did not log out and 50 Christine saw that Norman has been transferring $2,000 a month for the past twelve months from a personal bank account she did not know he had to Freda Sanders. Freda (aged 29) is the daughter of Norman's best friend, Robert, who died a few years ago. Christine has only met her a few times in the past but knows that Freda has a good relationship with Norman, Susan and Kevin. She asked a friend to check Freda's social media page (Christine was blocked) and learned that Freda is a single mother with a one-year-old daughter, Celeste. They currently live in the Hunter Valley. She suspects Norman is the father and this is why he wants to move.Christine believes she has made a significant contribution to the winery business's success and feels she is being 'cut out' of it by Norman. If anything were to happen to Norman, she is certain Kevin would terminate her employment once he took over ownership of the business. She is not sure if she should be worried about being personally liable for the family trust's debt if something were to happen to Norman. Christine's current estate arrangements and objectives . When Cody was born, Christine was worried about making provisions for him if she or Norman died. They both made wills using will kits. They were living together at the time and married two years later. Norman as well as Jessica (Christine's sister) are the executors of Christine's will. Christine and Kevin are the executors of Norman's will. Christine will leave everything to Cody. In Norman's will, he leaves a $1 million and a life interest in their Mosman home to Christine. On Christine's death, he directed that the home be sold and the value split equally between the three children. He left the rest of his assets in equal proportions to his three children. Christine is not happy about the low cash allocation to her. She once overheard Norman telling his best friend that Christine is young and he did not want to fund her potential future partner's lifestyle. Christine has not made any beneficiary nominations on her superannuateon fund and to her knowledge, neither has Norman. Christine does not have an enduring power of attorney. . If she were to die, Christine would want Cody to receive all her assets. However, she is concerned for his future and would want Jessica to manage things for him. You captured the following information in Christine's estate planning fact find. Christine Jones: Estate planning fact find Personal details Client name Mrs Christine Jones Name of spouse Mr Norman Jones Age 34 Spouse's age 59 Health status Good Health status Good Marital status Married Occupation Marketing Manager Occupation Managing Director Employer Normandy Wines Pty Ltd Employer Normandy Wines Pty Ltd Children/step-children Full name Cody Jones (child) Susan Jones (step-child) Kevin Jones (step-child) Age 6 30 32 Financial dependant Yes No No If yes, till age Indefinite n.a. 1.a Occupation Student Neurosurgeon General Manager Marital status Single De facto MarriedEstate asset Additional information Yes/No Are any relationships of your children in actual or potential difficulty? Yes - Susan Do you have a will? Yes Is it current? Unsure Do you have an enduring and/or medical power of attorney? No Notes: Christine would like to be buried in her family's crypt in Melbourne. Superannuateon Client - Christine Spouse - Norman Fund name Acme Super Fund Acme Super Fund Current value $900,00 $1 200,000 Insurance Life and TPD $600,000 Life and TPD $600,000 Business Trading name Normandy Wines Pty Ltd Nature of business General hospitality Vineyard, winery & restaurant Directors Norman Shareholders Norman Approximate sale value $3,000,000 (Equipment & Goodwill) Trust Name Jones Family Trust Type of trust Discretionary Trustee Norman Appointor Norman Beneficiaries Known - Norman, Christine, Norman's children and grandchildren Value Trust assets Bank account, shares, other assets? Unknown Vineyard and buildings (leased to Normandy Wines) $1,500,000 Trust liabilities Interest-only loan owed to Big Bank $1,500,000 Personal assets Asset description Owner Ownership Asset value Mosman residence Christine and Norman Joint tenants $3,500,000 Ski chalet Christine and Norman Joint tenants $1,200,000 Noosa unit Christine and Norman Tenants in common $2,000,000 Direct shares Norman Sole $1,000,000 Coogee unit Kevin Sole $900,000 ANY bank account Christine and Norman Joint tenants $50,000 Bondi unit Norman Sole $1,100,000 Bitcoin Norman Sole $200,000Question 1 (25 marks | Word limit: 500 words) Based on the information in the case study above, what are the key risks to the achievement of Christine's objectives if she were to die? In your answer, consider the following: (a) Refer to the fact-find's list of 'personal assets' and Christine's superannuation information. Explain which assets would or would not form part of Christine's estate (use the table format provided below, adding more rows as required)? Provide a brief comment on the reason. (10 marks) Personal assets Asset description Owner Ownership Asset value Estate asset Yes/No (b) What would be the consequence of her will being found to be valid or invalid and implications for managing her estate? (10 marks) (c) Who are potential claimants on her superannuation fund, and the tax status of any lump sum benefits that could be paid to them from the fund? (5 marks) Question 2 (10 marks | Word limit: 250 words) Explain to Christine the purpose of an enduring power of attorney. Provide three (3) risks she faces without one. (10 marks) Question 3 (25 marks | Word limit: 500 words) Norman's comments about 'slowing down' and buying the ski chalet being on his 'bucket list' have prompted Christine to ask you what impact Norman's death would have on her. In your answer consider the following: (a) Based on the fact-find, determine and justify which of Norman's personal, trust and business assets and liabilities are or are not likely to be inherited by Christine (use the table format provided below, adding more rows as required). (10 marks) Norman's personal, trust and business assets and liabilities Asset description Owner Ownership Asset value Inherited by Christine Yes/No (b) What is the validity of Norman's will, implications for control and potential claims on his estate? (15 marks) Question 4 (35 marks | Word limit: 750 words) Based on your analysis of Christine's circumstances, provide your recommendations on how she can achieve her estate objectives and explain how they will put her in a better position. In your answer, consider: (a) Implementing appropriate estate planning documentation (15 marks) (b) Changes to assets and ownership (10 marks) () Therole of insurance and superannuation (10 marks) Notes: *+ Recommendations are not required to be in the form of a statement of advice. * Dollar amounts are not required to be provided for recommended strategies, e.g. if recommending a type of insurance, the sum insured is not required. * You are not expected to provide legal advice. * You are not expected to provide detailed solutions that would be beyond the scope of her financial planning authorisation