Legal Tip 133: Terminal Illness – Legal Aspects to Consider

Discussion in 'Legal Issues' started by Terry_w, 2nd Jun, 2016.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    9th Jun, 2006
    Australia wide
    Terminal Illness – Legal Aspects to Consider

    Please read this in conjunction with my tips on the tax aspects to consider.

    Being diagnosed with a life threatening illness is a terrible thing. You don’t want to be thinking about legal and tax stuff if this were to happen - it is the last thing you may want to think about so it is best to consider this sort of thing while you are still fit and of sound mind.

    But people do tend to put this off so many will not be prepared. Here is a list of some things to consider – if you can think of anything else please add it below.

    Should you give gifts now and retain control or leave assets via your will?

    Giving now can be beneficial in financial as well as emotional aspects – you can enjoy watching your relatives and friends enjoy their gifts as well as having direct control where your money goes.

    Make sure you will is up to date and are adequate.

    Appointment of an Attorney and a guardian
    Be sure to set up an enduring power of attorney asap as well. If you lose capacity you will not be able to make decisions and will need someone to do so for you.

    Include the appointment of a guardian for non financial decisions.

    Will it be more effective if you withdraw you superannuation money right now? This way when you die the money will form part of your estate and pass via your will. If it remains in super the super is not dealt with by your will, but will pass via the rules of the fund and any valid Binding Death Benefit Nominations (BDBN) – which can be defective if not done correctly and therefore be invalid.

    Question to ask: Should you have property loans paid off now?

    It may be advantageous to direct some or all excess funds to pay off loans. Loans generally are payable out of the property that secures them (unless specified otherwise in the will) – and not what the loan was used for. So in some cases it can be worth planning which loans to pay off and which not to. This will vary depending on the individual’s circumstances.

    Unpaid Present Entitlements
    Trust UPEs are moneys that haven’t been paid over to the individual beneficiaries of a trust. These will cause all sorts of problems in death so arrangements should be made for the money to be paid over or forgiven or converted into a loan.

    Control should probably be passed on to others before death.

    Capital distributions may need to be considered for estate planning purposes. Distributing the capital of a trust to the person about to die may result in tax savings as the income from a trust set up under a will is ‘excepted trust income’ and taxed at adult rates in the hands of children.

    Consider a memorandum of wishes for the trusts. There are guidelines on how you want the trust to operate after your death. There is no compulsion for the next trustee or controller of the trust to follow your wishes but they can use them as a guide.

    If you are sole director and sole shareholder then you had better consider appointing another director now. You cannot be director if you lose capacity.

    Check your insurance policies and see if there is provision for payment before death.

    Any guarantees you have given will be effected by your death.

    Credit Card debts
    Sometimes creditors will forgive debts or accept a lesser sum than the amount owed. This is especially the case if they fear the debtor may die and they may not be able to recover the money and/or expend time and money chasing debts. Worth a try at negotiating.

    Other debts and Expenses
    Many lenders allow concessions for those in financial hardship due to terminal illness (or other reasons). This includes Banks, councils, electricity companies, water provides etc.

    Social Media
    Plan succession aspects of facebook, email, twitter etc.

    Explanation Document
    Consider writing up a document which

    list all your assets,

    Summarises important tax aspects including how to work out cost base of CGT assets, where information is stored etc

    Passwords for electronic files

    Organ Donation?
    Do you want your organs to be donated? Consider the organ donor register at Australian Organ Donor Register - Registration
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    9th Jun, 2006
    Australia wide