Author Archives: Rebecca Edwards

About Rebecca Edwards

With a background in aged care management, Rebecca brings hands on experience and insight into our elder law and aged services areas as well as a thorough understanding of complex estate planning issues and disputes.

Death and Taxes


Hello, I’m Rebecca Edwards of CRH Law talking to you about today about death and taxes.

Will capital gains tax be payable on estate assets?

Death duties were abolished in Australia in 1979. However, there are various taxes that remain payable for estates. These include income tax and in addition to that, CGT may be payable too. The executors are responsible for ensuring that taxes for the estate and also, in some cases, for the deceased person prior to the death, are paid.

Does the ATO need to be notified in someone dies and do tax returns need to be lodged?

The executor of the estate is responsible for notifying the Australian Tax Office or ATO of the deceased’s death. In addition to that, the executor also needs to potentially lodge tax returns for the deceased estate and also for the deceased person up to the date of their death. You should consult with a tax agent or accountant and a lawyer in relation to arranging for tax.

Will capital gains tax be payable on estate assets?

Although death is not a trigger for capital gains tax or CGT, there are certain circumstances where CGT may be payable on estate assets. CGT is an extremely complex area of law and therefore any executor with potential assets which may attract CGT should seek appropriate advice from both financial and legal professionals.

Centrelink Gifting, and Deeming Rules

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Hello, this is Rebecca Edwards of CRH Law talking to you today about Centrelink Gifting, and Deeming Rules.

Centrelink Gifting, and Deeming Rules.

Centrelink have very strict rules about how much a person may give away before they impact on their pension entitlement or age care entitlements.

What are the gifting rules?

Centrelink allow you to give away up to $10,000 a year. However, there is a maximum of $30,000 in any five-year period that you can give away. Outside that $10,000 a year or $30,000 in five years, Centrelink will consider any gifts to be what known as deprived assets and they will then be subject to the deeming rules which we’ll talk about in the next segment.

What are the deeming rules?

Centrelink assume that your assets earn a certain amount of interest. If however, you give away assets above those allowed under the gifting rules, that is $10,000 in any annual period or $30,000 in a five-year period, Centrelink will deem you to be earning a set amount of interest on any amount that you have given away over those gifting amounts.

Is it just cash gifts that are taken into account for the gifting and deeming rules?

The answer to that question is no. Cash and all of your other assets are considered to be open to the deeming and gifting rules. So for example, if you sell an asset to a family member under value, or if you give away an asset under value or, if you give away cash above and beyond the gifting amounts allowed, Centrelink will deem you to earn certain amounts of interest on those amounts.

It’s very important therefore that if you are intending on gifting any money to family or to friends that you seek financial and legal advice before you enter in to any transactions. If you failed to do so, you could end up depriving yourself of assets and having problems with pension entitlements and also, in relation to age care too.

Testamentary Trusts

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This is Rebecca Edwards from CRH Law talking to you today about Testamentary Trusts.

Testamentary Trusts

A Testamentary Trust is a trust which is established as part of your will. Having a trust included in your will can make your will a long and complex document. That said, there can be many advantages to having Testamentary Trusts created in your will for you beneficiaries and we’ll talk about those in a moment.

Benefits of Testamentary Trusts

There are many advantages to using Testamentary Trusts for you beneficiaries. These include protection from creditors and in relation to bankruptcy; protection in relation to relationship breakdowns.

Testamentary Trusts can also be beneficial where a beneficiary suffers from a vulnerability such as alcohol or drug abuse or where they do not meet the requirements for a Special Disability Trust but suffer from a significant enough disability that they need some support and someone else perhaps to control their Testamentary Trusts for them.

There are also significant tax advantages in using Testamentary Trusts.

When should you create Testamentary Trusts for your Beneficiaries?

It is possible for your beneficiaries to create what are known as Estate Trusts after your death. However, it is important to understand that Estate Trusts do not attract the generous tax advantages of Testamentary Trusts.

Therefore, if you’re interested in creating Testamentary Trusts for you beneficiaries, you should seek legal advice as soon as possible and ensure that they are included in your will before your death.

New report highlights increasing use of aged care services

A recent media release from the Australian Institute of Health and Welfare (AIHW) considered the findings of a new report which examined the use of aged care services and the take-up of care following assessment by people aged 65 and over between 2002-03 and 2010-11.

The report, Patterns in use of aged care: 2002-03 to 2010-11, links datasets about Australia’s major aged care programs, allowing analysis of the patterns of these programs’ use by the people who need them.

AIHW spokesperson Dr Pamela Kinnear commented that ‘Combining information about programs in this way gives us richer insights than a ‘snapshot’ of  single programs can provide, and helps policy makers better understand and support the changing needs of older people.’

The report shows that over the study period, the number of people aged 65 and over using aged care services in a year rose by more than one-third, from 642,000 to 874,000. In addition, the report demonstrated that on a standard day roughly 1 in 6 people aged 65 and older were using aged care services, with around 5% living in residential aged care (RAC).

As expected, service use is increasingly common with increasing age, with the oldest age groups more likely to be using services on a particular day. On 30 September 2010, 58% of people aged 85 and over were accessing care services. Almost one quarter of this very old age group were in permanent RAC.

Between 2003-04 and 2010-11, the proportion of people using an aged care service in the 12 months before admission into permanent RAC rose. In particular, the use of community care in conjunction with respite RAC and/or the Transition Care Program (TCP) before admission into permanent RAC rose.

The report also shows that more people are using aged care services in their last year of life. In particular, 70% of older people who died in 2003-04 used a service in their last year of life, compared to almost 75% of people who died in 2010-11. In 2010-11, just over two thirds of the women and half of the men aged 85 and over who died used permanent RAC in their last year of life.

In order to access RAC, care packages and transition care, an approval must be obtained through the Aged Care Assessment Program (ACAP). However, approval to use a program does not necessarily mean that the service will be used.

‘For example, even among people with both a recommendation and approval to live in residential care, only 64% went into permanent care within 12 months, while 18% did not access any aged care programs,’ Dr Kinnear said.

‘Whether a person takes up approved care depends on a range of factors, and varies with the characteristics, health profile and personal circumstances of the individual involved.’

For further information about aged care, contact the dedicated team at CRH Law on (07) 3236 2900 or by enquiry@crhlaw.com.au.

What is a Special Disability Trust

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This is Rebecca Edwards of CRH Law talking to you about Special Disability Trusts.

What is a Special Disability Trust?

A Special Disability Trust can be established during your lifetime or under the terms of your will to benefit a beneficiary with a severe disability.

Can any amount of money or assets be contributed to a Special Disability Trust?

Assets of any value or description can be placed into a Special Disability Trust at anytime.  Up to $609,500 can be placed into a Special Disability Trust and will be exempt from the assets test for Centrelink Pension purposes.  In addition to that, the trust may also own the disabled beneficiaries principal place of residence.  This property will also be exempt from assessment under Centrelink.

What can the Special Disability Trust money and assets be used for?

The capital and income from a Special Disability Trust can be used to pay for the reasonable care and accommodation needs of a disabled beneficiary.  There are special rules and criteria about what the funds can be used for.  In addition to this, an extra $10,750 can be used towards discretionary items for the disabled beneficiary.  This amount is indexed annually.

Superannuation death benefit nominations

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This is Rebecca Edwards from CRH Law talking to you about superannuation death benefit nominations.

How do I give superannuation away when I die?

Superannuation does not normally form part of your estate.  It usually goes direct to the person that you nominate to receive the benefit from your superannuation.  The way that you nominate someone is by using a death benefit nomination form or a binding death benefit nomination form.

What is a death benefit nomination?

A death benefit nomination is a non-binding nomination made by you.  In it you express your wishes to the trustee of your Superannuation Fund about who you would like to receive your death benefit in the event of your death.  The trustee of the Super Fund then has the ultimate discretion about who will receive that benefit.

What is a binding death benefit nomination?

A binding death benefit nomination is a binding nomination made by you.  It tells or directs the trustee of you Superannuation Fund who they should pay your death benefit to in the event of your death.  The binding death benefit nominations usually expire after three years, however in some circumstances for Self-Managed Super Funds, you can do a non-lapsing nomination.

It is important to understand that there are only certain types of people who you can nominate under a binding death benefit nomination.  These include a spouse, including a de facto, children in some circumstances including step children, dependents, inter-dependents, and also your estate.  As you can see, giving away your Superannuation after your death can be a complex matter, therefore it’s very important that you seek financial and legal advice about making your nominations and about deciding whom to give your death benefit to.  There can be significant tax consequences for adult children and it is also important to make sure that your wishes are carried out in the event of your death.

What is Probate?

Transcription:

Rebecca Edwards from CRH Law and I’m to talk to you today about Probate.

What is Probate?

Probate is an official court document. It’s issued by the supreme court where the court is satisfied that a will is the last valid will of the deceased person.

Who can apply for Probate?

An application for Probate is usually made to the court by the executor or executors who are named in the deceased person’s last will.

When is Probate required?

Probate is often required by financial institutions who hold assets on the behalf the deceased person. The financial institutions set thresholds above which they will require a granted Probate to be produced prior to releasing assets. Thresholds vary from institution to institution but can be as low as $15,000.

[This has been Rebecca Edwards talking about Probate.]

 

Can a Provider refuse entry to an eligible resident?

The Aged Care Act 1997 is replete with rights and obligations of residents and providers once a person has become a resident in a facility. But what does the Act say about an eligible person’s rights to become a resident of your facility or, conversely, a provider’s obligation to accept an eligible person as a resident in that facility?

Resident Eligibility

  • The Act describes some of the bases upon which a person can be eligible for a subsidised place at an aged care facility. Most notably, it requires the person to be approved for the place by way of an ACAT assessment.
  • The Act also permits providers to determine some of the criteria for a person’s eligibility. The best example of this is a provider’s ability to require a person to pay an accommodation payment (note : the rules about these payments will change significantly on 1 July 2014).
  • None of this is particularly controversial for an eligible person where there is an available place. As well, eligibility issues are, at best, academic, if there is simply no available place.

Some What Ifs

Scenario 1

What if a person satisfies both the Act’s and your criteria for eligibility to be a resident, there is a place available in your facility and the person has a current ACAT assessment for high care?

Then let’s say you’re approached by a family with a view to having their mother become a resident in the high care wing of the facility. When one of the adult children lets slip that their mum had been in two previous facilities and this would be her third, the manager became quite anxious. This anxiety only grew when the manager was also told by the same child that the previous facilities were not up to the standard they expected for their mother. To the manager, they had all the tell-tale signs of the much feared “helicopter” family hovering over the facility 24 hours a day.

Scenario 2

What if your facility has a funded and an unfunded place available in high care. A family approaches you wanting a high care place for their parent, who is eligible for the funded place but can also afford to take the unfunded place. Times are tough and you would love them to take the unfunded place.

Scenario 3

What if the manager of the facility up the road rings you. She tells you that they are in the process of evicting a resident from high care because their family has simply refused to pay the care fees and they are in huge arrears. The manager wants to know if you can take the resident because, as you know, they can’t actually force the resident to leave unless the resident has suitable alternative accommodation to go to. You have an available place as well that they could go to.

What would you do in any of these scenarios and would your actions be lawful?

The Law

Curiously, there is nothing specific in the Aged Care Act or associated principles which directly answers the conundrums thrown up by these scenarios.

Instead, the answers to these real life problems are found in other areas of the law, both State and Commonwealth. These laws also affect, practically speaking, how you manage your waiting list.

Space does not permit me to traverse the issues and solutions in this article. Suffice to say that these scenarios are not uncommon, they are real and the decisions you take in confronting them can have a powerful impact on your reputation and the quality of your legal compliance. Applying the proper principles and acting appropriately can also keep you out of the gun barrel of “A Current Affair”.

Training

The scenarios above are just some that we tackle in our specially developed training presentations for aged care staff entitled “Taking the risk out of Aged Care”. The presentation extends over 3 hours and is rife with real life situations and even better, a suggested answer on how you should respond.

If this sort of training is what you need to instill some confidence in your staff’s decision making, please do not hesitate to ring the Aged Care and Retirement Living Services team at CRH Law.

Rebecca Edwards
Associate
CRH Law

 

What is a Special Disability Trust?

A Special Disability Trust [“SDT”] is a trust which can be created during your lifetime or under the terms of your Will to provide for a person with a severe disability.

There can be significant advantages of giving to disabled beneficiaries in this way because not only does it mean that there will be a trustee in place to manage the trust for the benefit of the beneficiary but also, because there are generous social security provisions which can assist to preserve the beneficiary’s pension entitlement despite the giving of a sizable gift to them through the SDT.

There are various criteria and rules which must be met and complied with in order to successfully establish and qualify for a SDT. A trust will not be a SDT unless these legal requirements are met. For example, a SDT must include many compulsory clauses in accordance with the legislation that governs it. These are provisions that cannot be watered down if the trust is to qualify as a Special Disability Trust. However a Special Disability Trust can have its own individual provisions, so long as they are consistent with the specified requirements.

A beneficiary can only have one SDT created for them.  The beneficiary can have other types of trusts as well as a SDT but any additional trusts will not qualify for the generous SDT asset and gifting concessions.  In addition, a SDT can only have one beneficiary.

Each SDT is reviewed annually by Centrelink / Department of Veterans’ Affairs . The required documents must be provided to Centrelink / Department of Veterans’ Affairs on or before 31 March each year for the previous complete financial year.

We recommend that financial and legal advice be sought prior to establishing a SDT to ensure that these criteria and rules can be met.

Who can create a Special Disability Trust?

Anyone can establish a trust for a person who meets the relevant criteria for an eligible severely disabled beneficiary.

It is important and therefore, recommended that, before a SDT is established, the prospective trust beneficiary be assessed as severely disabled under the legislation for this type of trust. If a beneficiary does not meet the criteria of ‘severely disabled’ then they are not eligible to be a beneficiary of a SDT.

There are usually four key roles in creating a SDT:

The Settlor: The Settlor is the person or company who, with the trustee(s), establishes the trust by contributing an initial amount (typically $10 is the settled sum) and executing a trust deed. After the trust is set up, assets or cash to purchase assets can then be transferred into the trust.

The Settlor will often be an accountant, solicitor or even a distant family member, who will not have an ongoing role in the operation of the trust. A Settlor cannot be a beneficiary, contributor or trustee of the trust.

The purpose of this provision is to stop the person who formally sets up the trust from still being seen as the owner of the trust assets and income for tax purposes. To make sure of this, the Settlor has no further involvement with the SDT.

The Appointor: An Appointor can be any person or corporation who is not the beneficiary or Settlor. The Appointor usually indirectly controls the trust and hires (and also can fire) the trustee or trustees of the SDT. An Appointor is not responsible for the day-to-day running of the SDT.

The SDT deed should provide for the future control of the trust after the Appointor dies.

The Trustee: The Trustee manages the day to day running of the SDT, and makes decisions affecting the day to day operations including making investment decisions aimed at increasing the value of the assets and distributing capital or income of the SDT in accordance with the rules governing it.

Trustees, among other things, must be fully acquainted with the terms of the SDT and their responsibilities, know what the assets and liabilities of the trust are, keep proper accounts and also, prepare and submit tax returns annually.

The Beneficiary: The beneficiary is the person who benefits under the trust. They have no right or claim to any of the trust property until it is vested in them under the terms of the trust. This means that they receive what the Trustee(s) determines is applicable and appropriate under the terms of the SDT deed.

What are the main characteristics of a Special Disability Trust?

A SDT must meet the following requirements:

  • have only one (1) beneficiary (that is the person for whom the trust is established);
  •  the beneficiary must meet all the relevant eligibility criteria;
  •  the main purpose must be to provide for the accommodation and care needs of the beneficiary;
  •  have a SDT deed that contains all the necessary clauses to meet the legal requirements of a SDT deed;
  •  have an independent trustee, or alternatively have more than one (1) trustee;
  •  comply with various investment restrictions;
  •  provide annual financial statements to Centrelink/Department of Veterans Affairs; and
  •  conduct independent audits whenever required.

Can any amount of money or assets be contributed to a Special Disability Trust?

Assets of any value can be contributed to a SDT at any time.  However, any gift or number of gifts whose total value is greater that the allowable concessional amount will be assessed under the normal assets tests for Centrelink purposes.  Gifting too much may mean that the disabled beneficiary’s pension is adversely affected.

On the basis that the SDT and the trust deed meet the requirements for a SDT, then at this stage, the first $609,500 of assets with a SDT will be exempt from the Centrelink assets test. This amount is indexed in accordance with CPI each September.   In addition to this, where the beneficiary also lives in a house owned by the SDT then this principal residence will also be exempt from the pension assets test.

A care need will be considered a reasonable care need if:

  • the need arises as a result of the disability of the beneficiary;
  •  the need is for the primary benefit of the beneficiary; and
  •  the need is met in Australia.

The following are examples taken from Centrelink’s Publications of what might be considered reasonable care needs:

  • Specialised food specified by a medical practitioner as essential for the beneficiary’s health;
  •  Mobility aids, prostheses and positioning aids required for, or because of, the beneficiary’s disability;
  •  Sleeping and sensory aids required for, or because of, the beneficiary’s disability;
  •  Personal care aids required for, or because of, the beneficiary’s disability;
  •  Pressure care aids required for, or because of, the beneficiary’s disability;
  •  Continence aids required for, or because of, the beneficiary’s disability;
  •  Communication devices (including computers) that are essential, or that have been modified, because of the beneficiary’s disability;
  •  Modified vehicle, if required for, or because of, the beneficiary’s disability;
  •  Modification to vehicle, if required for, or because of, the beneficiary’s disability;
  •  Transport required for, or because of, the beneficiary’s disability;
  •  Training for transitional or independent living skills of the beneficiary;
  •  The daily care fee and any additional itemised fees charged by an approved provider in relation to the beneficiary’s care and accommodation in a residential care service; and
  •  Medical related and dental costs of the beneficiary, including but not limited to: health insurance and ambulance cover, medicines, surgery, specialist and general practitioner services.

An accommodation need of the beneficiary is a reasonable accommodation need if:

  •  it arises as a result of the disability of the beneficiary; or
  •  the need to pay for property (whether purchased in part or full, or rented) is for the accommodation needs of the beneficiary AND the property is acquired or rented from a person who is not an immediate family member of the beneficiary.

The need to pay rates and taxes on a property is a reasonable accommodation need if the property:

  • is owned by a SDT, and/or
  •  is used for the accommodation of the beneficiary of the SDT.

The following are examples from Centrelink of what might be considered reasonable accommodation needs:

  • Modification to the beneficiary’s place of residence arising from his or her disability,
  • Payment for the purchase of the beneficiary’s place of residence if the payment is not made to an immediate family member of the beneficiary,
  • Payment of rental for the beneficiary’s place of residence if the payment is not made to an immediate family member of the beneficiary,
  • Payment of an accommodation bond for the beneficiary if the payment is not made to an immediate family member of the beneficiary,
  • Any itemised fees which specifically relate to the accommodation of the beneficiary residing in a residential care service. Note: The standard daily care fee charged by accredited Aged Care Residential accommodation is an approved expense,
  •  From 1 January 2011, the trust can pay for the maintenance of trust property if there is a reasonable need and if the payment is NOT made to an immediate family member of the beneficiary.

A SDT can undertake some discretionary spending that is not directly related to care and accommodation needs of the beneficiary as long as the expense complies with legislative requirements.

The level of discretionary spending is currently $10,750 (indexed annually on 1 July) in any financial year. This allows SDT greater flexibility to meet additional costs relating to the beneficiary’s health, wellbeing, recreation, independence and social inclusion.

The following are some examples of what a SDT can pay for from the discretionary amount as they are not considered reasonable care needs:

  • Food other than food specified by a medical practitioner as essential for the beneficiary’s health;
  • Toiletries such as toothpaste, toilet paper, soap, shampoo, sanitary pads and tampons;
  • Vehicle maintenance and vehicle related expenses other than those required for, or because of, the beneficiary’s disability;
  • Vehicle registration and insurance;
  • Petrol for vehicle;
  • Recreation and leisure activities;
  • Computer, except if the computer is essential for communication because of the beneficiary’s disability (as this can be paid for out of other trust monies);
  • Communication devices unless modified because of the beneficiary’s disability;
  • Therapy that is not required for, or because of, the beneficiary’s disability or that is not approved in writing by a medical practitioner;
  • Building and contents insurance;
  • Payment of utilities charges in connection with the principal beneficiary’s place of residence;
  • Household cleaning services;
  • Clothing and footwear that is not required for, or because of, the beneficiary’s disability; and/or
  • Life skills and social inclusion workshops.

What can the Special Disability Trust money and assets be used for?

The income and capital can be used to pay for the reasonable care and accommodation costs incurred by, or on behalf of, the beneficiary, including the costs to facilitate the achievement of this outcome.

There are specific rules that relate to what reasonable care and accommodation needs are and it is important that these rules are adhered to by the trustees of the SDT.

In addition, up to $10,750 each year may be used towards discretionary items.  This discretionary amount is indexed each July.

What are the social security benefits of a Special Disability Trust?

The gifting concession applies to gifts up to $500,000 per trust.

This concessional amount can only be used once. For example, if an eligible contributor gifts to a Special Disability Trust and receives a concession, then dies, their concession amount cannot be accessed by any other immediate family member. Or if an eligible contributor is of pension age or receiving a pension and gifts $400,000 and receives the gifting concession, then another eligible contributor who receives a pension or reaches pension age gifts $200,000 they can only receive $100,000 as a gifting concession. When the gifting concession has been fully used, any additional contributions by immediate family members will be assessed under the normal gifting rules.

Assets test: All of the trust’s assessable assets are attributed to the beneficiary. For the beneficiary, all assessable trust assets up to the specified limit are exempt from the assets test. The specified limit at 1 July 2013 is $609,500, and is indexed annually on 1 July in line with the ABS Consumer Price Index (CPI). Trust assets above the specified limit will be counted as assessable assets for the beneficiary.

Income test: all of the trust’s income is exempt from the means test for the purposes of calculating the beneficiary’s income support payment as long as all the trust income is only used for the benefit of the beneficiary and administrative purposes, as per the conditions of the use of the trust income.

When does a Special Disability Trust end?

The trust will end on the earlier of:

  • the death of the beneficiary;
  • if/when the assets are fully expended on the beneficiary; or
  • any earlier date as required by law (‘the end date’).

For further information about Special Disability Trusts, contact the dedicated team at CRH Law on (07) 3236 2900 or visit our website at www.crhlaw.com.au. We look forward to being of further assistance to you.