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Month: April 2019

by Jacqui Brauman Jacqui Brauman No Comments

Superannuation succession for blended families

Mark and Jenny are married. Both of them had previous marriages, and Mark has no children from his previous marriage, Cara and Chris who are now both adults. Jenny has a son, Lachlan, who is 12 years old and lives with her and Mark. They have no children together.

After his first divorce, Mark has very few assets. He was able to retain his superannuation with AustralianSuper, an industry super fund. He and Jenny have bought a house together, jointly owned, and mortgaged up to 70% of its value.

superannuation

Mark has $600,000 in his superannuation fund, and has life and total permanent disability insurance cover for a further $750,000. He would like to divide his superannuation benefit between Jenny 60%, Cara 20% and Chris 20%. Remember, superannuation is not an estate asset that can be dealt with under a Will, unless Mark makes a binding nomination that all his death benefit goes to his estate.

Without a binding nomination to AustralianSuper, the trustee of the super fund is likely to determine to leave the majority of the superannuation (if not all) to Jenny and Lachlan (as a financial dependent and step-child). If Mark wants to ensure Cara and Chris get some of the benefit, he will need to make a binding death benefit nomination. It is important to find out from AustralianSuper whether the binding nomination can be non-lapsing, or whether it lapses every 3 years and Mark needs to remember to redo it. There is a risk that the binding nomination would lapse if Mark forgets to redo the nomination, and his own children could miss out. 

Out of Jenny, Cara and Chris, only Jenny would be within the definition of a death benefit dependent for tax purposes. Cara and Chris would need to pay part of the benefit that they receive as tax, at the income tax rate that they otherwise earn. They may not each receive an equal amount after tax. 

If Jenny died before Mark, Mark would like to have Lachlan receive part of the superannuation. But if Jenny was dead, then Lachlan would no longer be a ‘child’ of Mark (as he was only a step-child under the definition whilst his mother was alive). However, if Lachlan is still a minor and still living with Mark, then Lachlan would likely fall within the definition of a financial dependent instead, so Mark could nomination Lachlan in that situation.

Mark has given Jenny a power of attorney if he loses capacity. If he loses capacity, he could be entitled to the insurance cover associated with his benefit. Jenny, as his attorney, could withdraw from his fund on his behalf prior to his death. This would render the binding nomination either useless (depending on how much was withdrawn), or would significantly deplete the amount of money that his children would inherit. This would either be a risk that Mark would have to take, or he could prepare a Will with a specific gift clause that tracks any superannuation and ensures it is equalised between his children.

For more on money or estate planning.

by Jacqui Brauman Jacqui Brauman No Comments

Common parenting mistakes to avoid following a separation

Parenting is challenging for those that enjoy a successful relationship and there is an added level of complexity when parents are separated. Whilst a separation brings with it emotional turmoil and adjustment, if not mindful, parents can make mistakes which can end up causing their children significant distress. These are some of the most common mistakes separated parents make and we hope that recognising them will assist you in avoiding them. 

 

1. Showcasing the worst of the worst conflict to the children 

Children that have to witness the awful scenes where spouses insult, threaten, belittle, and even resort to physical violence can suffer from a lack of security. Criticising the other parent can cause the child to feel guilty for loving that parent. Children also may start to believe that there is something wrong with them, since they are related to the person being criticised. Moving forward, children may have anxiety disorders, sleep issues, and even problems forming stable relationships themselves. Parents should also be mindful that such emotional abuse constitutes child abuse and when reported, the Department of Human Services is duty bound to investigate. 

mistakes parents make

 

2. Using the Children like ‘Messenger’

A common follow on from a separation is the unwillingness to communicate with your ex-partner. The alternative of asking your children to act as go between for messages translates to asking your child to do something you and your partner could not handle doing yourselves. 

Using your child as a quasi ‘MSN’ is a mistake, frankly, and it can lead to the alienation of the other parent over time. Partners should instead use email or text messages, and these can serve as record in case where one party is not complying with court orders.  

 

3. Your Child is NOT a ‘Stand-in’ for your ex-partner 

A separation of partners does not mean that now the boy becomes the man of the house and the girl does not turn into the woman of the house. The responsibilities of parenthood are not a child’s burden to bear. It is important that parents don’t cheat their children of their childhood by making them the ‘man of the house’/woman of the house. 

4. A Spanish Inquisition post weekend with the other parent

 

When your children return home after their weekend with your partner, they should never be interrogated. It is not a child’s role to act as an umpire whilst parents are engaged in mortal combat. Such a burden is another example of emotional abuse and can lead to long term emotional damage. The opposite of the Spanish inquisition is to prevent a child from mentioning their time with their other parent. So, don’t interrogate your children and don’t pretend like the time with their other parent is a taboo discussion. Instead focus on asking fun questions and restrain yourself from giving a commentary on their experiences. 

 

5. Your child is not part of the asset pool nor are they part of a contract

Don’t discuss property settlements, parenting time and primary care in front of your children. If you are discussing such matters, be mindful of the ‘little ears’. To you its just a discussion about the ‘nitty gritty’ of property and parenting but to a child it feels like they are just part of a business deal and that they are a burden on one or both parents. 

What if I have already made these mistakes?

If you recognise that you have made any of these mistakes, you can repair the damage caused by doing the following:

  1. Identify your mistake in detail and have a conversation about why it was wrong;
  2. Say sorry;
  3. Commit to changing your behaviour from that moment on.
  4. Permit your child to tell you if and when you inadvertently make that mistake again.

For more information on family and separation click here.

by Jacqui Brauman Jacqui Brauman No Comments

Use a solicitor for conveyancing

As a solicitor, of course I’m going to say that someone buying or selling a property should use a solicitor (lawyer) to do their conveyancing work. But what are the reasons why I recommend this and what are the primary differences in the service provided?

Training

The training and licensing requirements for conveyancers are different in each State, so everything I’m going to address relates to Victoria. 

To be a solicitor, someone has to have a Bachelor of Laws, at a minimum, which takes the equivalent of 4 years of full time study. During that bachelor (undergraduate) degree, they will study Contract Law for 6 months, Property Law for 6 months and Land Law for 6 months. Along with all the other units of study, the Bachelor of Laws teaches law students to think as lawyers. 

conveyancing

After completing the degree, to be able to get a practicing certificate as a solicitor, the person would need to complete a Graduate Diploma in practical legal training, which takes another 6 months. This is when they are exposed to the practical aspects of conveyancing. 

Once they have a practicing certificate, solicitors are required to undertake ongoing legal training each year to be eligible to reapply for their certificate annually.

There are different levels of practicing certificate, and to be able to operate a trust account, a solicitor must pass an extra course on trust accounting regulation and compliance, and pay an auditor twice a year to audit the account. Most law firms have a trust account, but many conveyancers do not.

To be a conveyancer, someone must have a Diploma in Conveyancing, which takes the equivalent of 3 months of full time study. They then need to have a certain amount of practical hours of experience on the job to be signed off to get their own licence. 

Industry

Both solicitors and licensed conveyancers must hold professional indemnity insurance, and both need to be registered with their industry body to have a licence issued to them – this is the Law Institute of Victoria and Consumer Affairs Victoria respectively. 

In NSW, they were the first to deregulate conveyancing and let licensed conveyancers into the industry, taking the work off solicitors. There was a good reason for this, because solicitors in NSW charged on a percentage basis depending on the value of the property. This has never been the case in Victoria. Solicitors have generally charged a fixed fee for conveyancing, so the gauging wasn’t going on in this State. Arguably, there was no need to deregulate conveyancing in Victoria in the first place. 

Cost

Solicitors cannot compete with conveyancers for cost, so what they compete on is value for money and quality of service. Conveyancers generally work for themselves, and often work from home, so they don’t have the overheads and costs that solicitors have. Solicitors have offices, staff, higher insurance, more regulations to comply with, and often operate trust accounts which require regular audits. 

Solicitors do fixed fee conveyancing in Victoria, as do conveyancers. Conveyancers are generally a couple of hundred dollars cheaper. 

In the Office

Conveyancers generally work from home and work alone. 

Solicitors generally work in small, medium or large law firms with support staff. Quite often there are combined decades of experience, and support staff are often qualified conveyancers who didn’t want to go out on their own. 

Solicitors operate trust accounts which make settlements much easier in most cases, particularly for purchasers. Instead of the purchaser running around getting bank cheques and getting them to settlement, the solicitor can ask for all the funds into their trust account, and they do all the running around for you (hence, quality of service).

When things go wrong

Conveyancers have a very narrow scope. When something usual happens, they have to refer you to a solicitor. 

If the contract falls over and becomes a fight, the conveyancer will need to refer you to a solicitor. 

So better to start with a solicitor that can handle everything in the first place!

Here’s more on buying and selling property.

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