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Aggregation of duty and estate planning

Aggregation of duty and estate planning

A recent decision of the Queensland Supreme Court has relevance to duty considerations for estate planning.

In Queensland, the assets of a deceased person are subject to potential family provision application claims.  The result of any such claim is that the Court is able to reallocate and redistribute the assets of a deceased having regard to the needs of those with standing under the Succession Act 1981 (Qld) regardless of the terms of any will of the deceased.

One way to have some certainty in the context of estate planning is to dispose of assets prior to death, know as inter vivos dispositions.

An example of where an inter vivos disposition can be useful would be a father concerned about one child making a family provision application claim following his death in circumstances where he did not intend to make any gift to that child.  To remove the potential for dispute, the father could elect to transfer property to his other children prior to his death.  Once he was to die, the transferred assets would be beyond challenge of any family provision application claim.

In the above example, if the property transferred was land, the transfers would usually be subject to duty.  Assuming that the transfers were effected as gifts and without other consideration, the dutiable value on which duty would be assessed would be the unencumbered value of the land at the time of the transfer based on the usual duty rates.

The two transfers would usually be assessed for duty separately unless they were to become subject to aggregation under s 30 of the Duties Act 2001 (Qld).  Under that provision, transactions which “together form, evidence, give effect to or arise from what is, substantially 1 arrangement” are assessed together, usually at a higher rate of duty.

In 2014, Office of State Revenue, on reassessment of duty on certain transactions, took the view that gifts in circumstances like the example above ought have been aggregated due to:

  • the relationship of the transferee, being family members;
  • the timing of the transactions, having occurred at the same time;
  • the location of the property, being adjoining land.

Office of State Revenue’s position was the polar opposite of the generally accepted position that inter vivos dispositions of that type ought not be aggregated when the transactions were brought to duty for assessment unless there was some “unity of purpose” by the transferees (e.g. the transferees intended to use the land together).

The position has now been clarified by Bowskill J in Wakefield & Ors v Commissioner of State Revenue [2019] QSC 85 (4 April 2019), who has confirmed that the relevant transactions ought not have been aggregated.  His reasoning included:

  • Logic that, “.. if the transfers to the family members had instead been made to … strangers, on the same day, … there would be no question of s 30 applying;
  • An acceptance of Office of State Revenue previously published “long standing principle … that taxpayers in similar circumstances are treated consistently and equitably regardless of how transactions may be structured or documented or the number or type of properties involved”.

That is, whilst the family relationship between the parties was a factor to be considered for aggregation purposes, it was not, of itself, definitive.  The decision is welcomed as it provides a consistent approach for inter vivos disposition for estate planning purposes.

It ought be noted that, in addition to duty, inter vivos dispositions can also result in taxation consequences and can also effect pensions and other government entitlements.  Accordingly, inter vivos dispositions require careful consideration and financial planning.

How we can help you

JHK Legal’s commercial team can provide business and commercial structuring and estate planning advice to ensure that your business, asset holding and testamentary intentions are met.   If you consider this advice relevant to your circumstances, please call us on 07 3859 4500 to discuss how we may be able to assist.

Written by Niall Powell, Special Counsel.

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What is probate and when is it needed in Queensland?

As Benjamin Franklin wrote in 1789, “nothing can be said to be certain except death and taxes”.

We’ve come a long way since then and with some more positive certainties in life; happiness, love and Netflix were just a few that sprung to mind.

Unfortunately Mr Franklin’s famous saying still prevails today and at some point during our lives we all experience the loss of a loved one. It is always a difficult time when we lose someone close to us and if you are a named executor in your loved one’s Will or if your loved one has died without a Will it can also be a confusing time to understand what needs to happen with the deceased’s property and what even is probate?

What is a Grant of Probate?

A grant of probate is the Supreme Court’s recognition that a will is legally valid. If there is no will, or the executors named in the will are unable to act, the Supreme Court can grant letters of administration to personal representatives to deal with the estate of the deceased person.

Probate provides the personal representatives with protection to deal with the deceased’s assets. It also provides protection to third parties so they know they are dealing with the correct personal representative of the estate.

There are 3 types of probate that can be applied for in Queensland:

  1. Grant of probate – this is when a valid Will exists and the executor or executors named in the Will are making the application.
  2. Grant of letters of administration of the Will – this is where a valid Will exists and someone other than the named executors is making the application. For example: when the named executor has died or is incapacitated and otherwise unwilling or unable to act.
  3. Grant of letters of administration without a Will – this is where no valid Will exists. This is known as dying intestate.

The 3 types of probate have specific requirements that must be strictly adhered to before the Court will issue a grant of probate however there is a similar process to follow for all 3.

Does every personal representative need a Grant of Probate?

There is no legal requirement that probate be procured in Queensland.  However, there are some reasons why a personal representative would obtain probate, including:

  1. Personal protection – If it was to eventuate that there was some other Will and the personal representative should not have been dealing with the assets of the estate, probate would protect the personal representative from personal liability from any claim that they “intermeddled” with the deceased’s estate. This can be crucial in some estates where it is likely the estate will be subject to a family provision application.
  2. Dealings with others – Some entities that hold the deceased’s property (e.g. Banks, share registries, superannuation funds and aged care homes) will not release those assets until probate has been granted. This is so the entities can be assured they are handing over the assets to the appropriately authorised person.

Below are some scenarios where it would be unlikely that probate would be required.

  1. Joint assets

If all or majority of the deceased’s assets are owed jointly with someone else as joint tenants.

For example:  Ross and Rachel are married. They own the family home together as joint tenants, hold all bank accounts jointly and have a joint share portfolio.

Ross died leaving a valid Will naming Rachel as his sole executor and beneficiary.

The only assets in Ross’ sole name are his motor vehicle and his personal belongings such as his phone and clothes.

As majority of Ross’ assets were jointly owned with Rachel, upon his death full ownership of these assets automatically transfer to Rachel through the law of survivorship and as a result, fall outside his estate.

Rachel would need to advise the relevant entities and authorities of Ross’ death so that the assets can be recorded as being in Rachel’s name alone.  This could usually be effected by production of Ross’ death certificate.

  1. Low value assets

If a deceased’s assets are of low value.

Financial institutions and share registries have their own thresholds to determine whether a deceased asset is considered to be of ‘low value’ and therefore probate is not required to be produced to them.

As a general rule, banks will usually not require probate if the total funds held in the deceased’s accounts are in the vicinity of $20,000 to $50,000 (this is subject to change at the discretion of the relevant Bank).

Chandler and Monica are married. They are retired and have spent the last 3 years travelling the world together.

They do not own any real property and have no joint assets.

Monica died leaving a valid Will where Chandler is the sole executor and beneficiary.

Monica’s only assets are a bank account with funds of around $15,000 and her personal belongings such as sentimental jewellery and clothing.

Monica’s assets would usually be classified as ‘low value’.

Chandler would need to advise the relevant bank of Monica’s death and provide a certified copy of her death certificate and Will.  The Bank would not require that probate be produced to release Monica’s funds to Chandler.

Can I obtain probate myself?

A personal representative can apply for a grant of probate by themselves however a strict process must be followed to ensure that the Court does not reject the application.

It is strongly recommended that you meet with a solicitor to discuss you options prior to applying for probate.

How we can help you

 JHK Legal can help ease the burden of being a personal representative during the difficult times and ensure that the strict requirements of the probate process have been carried out, if necessary.

If you have any questions or concerns about the following, please give us a call and we would be happy to assist:

  1. Compiling a list of the deceased’s assets and liabilities and determining how the deceased’s property is held;
  2. Reviewing the Will of the deceased;
  3. Determining whether a grant of probate is required and/or recommended in the circumstances;
  4. Making an application to the Court for probate or letters of administration;
  5. Assist in the administration, distribution and finalisation of the estate.

Call JHK Legal on 07 3859 4500 and have a chat about how we can assist you.

Written by Simone Wilson

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