Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirkby. Welcome aboard everybody. There is a subject I have wanted to do on the show for a long time and it's about wills and estate planning and inheritance. Now stay with me here. It's only human if you were to say not today, no thank you, because that's a problem that all investors have. They don't want to deal with this until they have to. But one of the things we see again and again is it's so
important actually to be across this. Now. I've been trying to find a way to get this issue on the show in a way that you'd find interesting, and fortunately I've come upon somebody and something Inherits Australia is an operation which involves a man called Chris Hill, and he has done a marvelous exercise by keeping tabs on the most interesting cases in the land basically and what we
learn from them. And most recently he watched the Mushroom murders trial Aaron Patterson, of course, who's now been convicted of three murders, one of the biggest cases of the year. And what's fascinating of course is that Aaron Patterson's quite wealthy and she received most of that wealth through inheritance, and there's also going to be consequences now that she's been found guilty for that wealth. So is the ideal man to have on the show this week, that's for sure.
Chris Hill of inherit Australia, How are you? Thanks for coming on?
Very good, Thank you, James, and good morning or good afternoon to our listeners.
Great to have you on, Chris. And first of all, you know, hats off from making the most averted dimension of investment interesting on this issue as well, very few things are more interesting than the Mushroom murders trial, which has been a gigantic story here all around the world. Now, one of the things I just wanted to ask you, Aaron Partison, it turns out, first of all, is quite
a wealthy woman, largely due to inheritances. Could you explain what is it she inherited and what was her situation VISI vie in inheritance and wills.
Yeah, and this all came out in the testimony that we heard, I think it was on the first of May at court. She inherited about two million dollars from her grandmother in two thousand and six. That was distributed over an eight year period from I think two thousand and seven, and then she also received an inheritance of about nine hundred thousand dollars in a beach fund property from her mother in twenty nineteen.
So I guess the.
Issue that's going to arise now that she has been convicted is what's going to happen with those inheritances as well, of course, as what is a sentence going to be.
So there's something in particular, isn't there that might necessarily come up and the trial or actly this mightn't come up in conventional general news coverage about this whole incident. But if you're wealthy basically, and you have assets, and you are convicted of murder, and in this case quite extraordinary three murders, then the estates linked with the victims of those murders they can claim against you, can they?
Yes, certainly so if we look at the victims of those estates, which is the beneficiaries of the deceased persons, they have a right to make a claim against Eron in this case for what we call wrongful death under the Wrongs Act in Victoria, Part three of the Wrongs Act.
So that's a compensation. That's a civil claim for compensation for the loss of income, loss of medical expenses, and other indirect losses as a result of it of losing their father, their mother, their brother, whoever that beneficiary is.
And the three estates of the three murdered unfortunate murdered people linked in the Air and Patterson case. Those the states can claim against Aaron Patterson's own assets, can.
They Yes, So it's a claim against her personally. It's a civil claim for compensation. And of course the issue that arises is if there's a judgment, as there inevitably will be in respect of each of those states, how that judgment can be satisfied and what assets of errands can be taken?
And do you think they will do this?
I think it's inevitable, right, It's a significant cases you've identified the wrongs that claims are easily broad because it's indisputable. Or you have to do is show that you are a victim of a person who commits a wrongdoing, and in this case, a convicted killer is a wrongdoer for the purposes of Yet.
I don't follow criminal cases very often, but I would imagine in most cases the perpetrator, the murderer doesn't have much money in many cases, but in this case it's mostly unusual, isn't it? She is wealthy by most standards? But also intriguing here, Chris, is the fact that her wealth, in turn is due to wills and inheritance, isn't it?
Yes, that's right.
It's inherited wealth that she's received directly or indirectly. And I guess the question that arises is to what extent could any court judgment seize those inherited assets? And that comes down to in many cases, whether she has a fully vested, beneficial and legal interest in those state assets or whether they're held in still held on a trust. The two thousand and seven estate for the grandmother, my understanding was that it was paid out over eight years. Yes,
so of course that's already expired. Now what she's done with that wealth? And I suspect that she's fed a lot of it on legal fees? But what if it's left of that wealth? I believe there were some loans as well that she made to help fund properties. Those loans would constitute assets, so to that extent, those assets could be seized as a result of a court order for any one of these wrongful desk claims.
So could the properties that she owns end up being sold to satisfy these claims. Yes, right, absolutely fascinating. I didn't know any of this. One of the things it highlights is there are many people, I'm sure where wills and inheritance are so important, but in the case of Aaron Patterson, it explains almost entirely her wealth, and it also explains what's going to happen next in relation to
that wealth. It's one of the things I suppose that the background being that Australia is a wealthy country and we have this enormous wealth transfer going on between generations. So you were telling me earlier about how the nature of wills is changing, how people are being more careful about what might go wrong in the future when they leave it will. I heard that one time that when you do will, most of the time what you hope will happen may not actually occur unless you add.
All these extras.
What are people doing these days that they used to do before to try and ensure that what they aim for and the will actually occurs in the fullness of time.
That's a good question because I think there is a growing trend in the community for people to put conditions on their wills for a number of reasons. There's a build up of wealth, particularly property wealth that's accumulated over a period of time that's significant when it comes to the value of an estate. We used to see, or we still see, migrant workers in sy Carlton that didn't have a lot of income in their life but had very valuable assets. Their properties appreciated so much that means
that there are states a lot larger. We're also seeing people now that have had more diverse relationships, blended families, multiple partners, children from different partners, same sex, and binary non binary. So we're seeing the complexity of the Australian society change and I think more people are looking at well, how do I make sure that my money gets into the right hands at the right time and doesn't get
lost by any other person or any other claim. And the trend is towards definitely using testamentary trusts, especially if there's more significant wealth, and more even more so restrictive trust or capital protective trusts where there's significant wealth.
So for someone who has no idea. What all these things mean. There's a will under trust? Is that how it works?
Yes?
So what we do in the case of a testamentary trust, we create the ability for a beneficiary to receive their share of the inheritance through a trust that's a connected to the will. In a more simple will, we just give them their inheritance. Right. So, if we circle back to Aaron Patterson, if she had received that money, if her mother had died today and just given it to her, that would be lost to her through any of these
wrongful death claims. Or to bring it into context, if I left my wealth, say to my son, and he got sued or he had a relationship breakdown, that wealth will get lost or get dissipated or caught up as part of a claim by creditor or claim by an ex spouse. The testamentary trust is designed to protect that wealth and to ring bark it or quarantine it if there's a relationship breakdown.
Okay, So the simple idea of just a will and the amount of money you hand it over, that's sort of fading into more complex structures that try to foresee complications down the track. Okay, really interesting, we'd be back in a moment. There's something else I really want to talk to, Chrispose And yes, Aaron Patterson is a fascinating case. And so is the case of the person who left a will on an iPhone note that was worth ten million dollars and what happened next. We'll be back in
a moment. Hello, and welcome back to The Australian's Money Puzzled podcast. James Kirby here with Chris Hill of Inherit Australia. And Chris is an expert in this area of wills and inheritance and as I mentioned, and as you can
see from segment one, I wasn't kidding. He has managed to make this area so interesting, which is an area that is front and center really in weather accumulation, but so many people avoid it for a variety of reasons, mostly because it's complicated, it's dry, and people don't want to think about the fact that they are going to die someday and they should leave a will behind. Now there was an extraordinary case, wasn't it, Chris Frecent Dave.
There was a person in New South Wales who left a will at the last moment on an iPhone note. This would be interesting anyway, the fact that there was a ten million dollar will made it twice as interesting. And then the will that was written of the iPhone notes, well, it ended up in court and it was contested. Could you tell us what happened?
Yeah?
In fact involved in a state worth thirteen million dollars, right, yeah. So the significance of it is the fact that in this case mister Pete Colin Peak left behind a state and he after his death he had a document called Last Will of Colin Peak that was found in the notes app of his iPhone that purported to leave the bulk of his fortune to a close friend and within
some lesser gifts to families. But there was a bit of dispute that arose between Colin Peake and his brother, who tried to argue that the note wasn't.
A testamentary instrument.
And this is probably a very recent case of a line of cases that were seeing the Robert Holmes of Court was one of those where people have not made a will or attempted to write a scribbled note somewhere as if it was a will, thinking that that's enough
to get over the line. But of course what happened here was that the court decided that the note did not constitute a testamentary instrument, wasn't valid to be an informal will, and in those circumstances, he died in test state, which means that he died without a will or a valid will. And the Succession Act in New South Wales dealt with how that estate should be divided, and it left the estate to his brother.
So just to clarify that the man who died and left this last minute with on his iPhone nose, the person he tried to end the money out didn't get it, and it was contested and the family actually got it.
That's right.
And because there was no children, no spouse, the intestacy, the Succession Act left the entire estate to the brother.
I found amazing. Wasn't so much this dispute. The disputes every day about money, and thirteen million is a lot on a wis, so it was.
A big dispute.
But what I thought was extraordinary was the court didn't have any problem with the fact that it was actually written on an iPhone note. That wasn't any a thing, was it. You can even a will on an iPhone note if you wish, it would seem yeah.
And that's because in New South Wales and in every state in Australia under the Irrelevant Succession Acts, there are provisions for what we call an informal will, and that can be a handwritten or typewritten note, or an email or a text, a video recording, or even an audio or a word document. The courts have considered different forms
of what we might call a potential testamentary note. Right, this happened to be unusual because it was on an iPhone, and so the courts have applied three key tests to these sorts of issues. The first thing, is there a document or a record? Well, of course there was, and that can be in any different form. We've seen notes on napkins. There have been cases where someone has attempted to make a testamentary on a napkin. Yes, and this has been sought to be admitted into evidence as an
informal will. So the court will look at the variety of media on which a written record is made and then they ask themselves, does the document or the note, or whatever the form of media is, even if it's an audio recording, purport to state the testamentary intentions of the deceased person. And the third question is does the decease intend this to be their last will? Right? This is their conclusive The court looks at a whole range of factors to decide that.
So very quickly the courts put to one side, follow was written on and then discuss conventional issues like intention. That all there were always the things around will. And I suppose people are writing less, aren't they? I mean, I write less than I ever did, and I could imagine in ten years time never writing at all. Why would I need to? Once upon a time you'd go
and interview somebody with your notebook. Now we'll just record it on my phone, just tip a button and there it is on a transcript, which is better than my writing. So the point I'm making is wills as we know them in this formal written document. It's probably going to become quite common that people leave videos or whatever, and they will stand up in court if the intention and the other legal aspects are good enough. Is that fair to say?
It's fair to say that the courts are more aligned to contemporary modes of communication.
Yeah, But it's.
A balancing act because the Wills Act and each of the states have a very rigid process for making a will and executing a will for it to be binding and valid, and so what they don't want to do is upset that formal process because you introduced a lot of risk of mischief being introduced, or fraud or abuse. I mean, you could have a video recording of somebody making a will, but someone standing behind them with a gun outside of the view of the camera.
So there's lots of issues.
But you're right, the courts will entertain more common modes
of communication like video or audio. But I think that certainly from our listener's point of view, having an audio recording with a written document like a will is going to be a lot more useful going forward, particularly when you want to explain why a will is drafted in a certain way, because we've seen recently cases where a court will want to look beyond the execution of it and ask did the will maker understand what they were signing?
And we saw that We've seen that in the New South Wales case last year where the court asked, well, yes, they signed it, they understand I all know what they were signing. So communications like video audio will augment written documents. But it's this fascinating trend that we're seeing.
Yeah, and the courts are actually, to my surprise, quite up to date there and allowing for it.
Okay, terrific.
Look, we'll take short break and there's something that I think everyone should know in the next segment. But simply if you think you inherit the super and there's no inheritance text in Australia actually most of the time for most people going to pay seventeen percent, we'll explain why. Hello and welcome back to The Australian's Money Puzzle podcast. James Kirby talking to Chris Hill of Inherit Australia. Chris,
I have a question from Bruce. Came in just about maybe the week before last and I said to myself, I'll keep this one up my sleeve for when we have you on the show. So this is from Bruce. He says, can you provide some clarification on the tax on inherited super. I used to be under the impression that if super was left to your estate then it would be passed on on text. However, recent podcast by you led me to doubt this. I asked my accountant and I ended up more confused than ever well, you
shouldn't be confused, Bruce. Now this is not advice, it's always information only. But tell me if I'm wrong here, Chris. There is no inheritance tax in Australia, Part A, Part B. If you inherit super, there are super.
Taxes, yes, all right.
First of all, I want to ask you, is Super becoming more important in your scene book?
Definitely? I mean we're seeing a build up in super. We're seeing the government's interest in super with this three million dollar division two nine six SEX, recognizing that that's another opportunity to grab more federal revenue. But it's part of the government's retirement incomes policy to encourage people to save for retirement. Of course, we have an aging population, so necessarily we have a buildup of money in the
superannuation environment and that's going to continue. So there's going to be a lot of wealth transfer on death with money coming out of super. And tax on Super is in the spotlight for many people.
In fact, I'd go as far as to say that it's for the vast majority of people most of the time, because tax jew on Super is due on what they call the taxable component. The taxable component is the bit basically, where you've got a concession compulsory super, that's most people super, isn't it. I mean, the vast majority of super that's rolling in at twelve percent SGC is compulsory, so most super will be due a seventeen percent tax. Why is there a seventeen percent tax on inheritance super?
I think to just correct any sort of assumption around that the tax applies depending on who is the recipient YEP of the super benefit on death. If it's a surviving spouse or partner, there is no seventeen percent tax.
Yeah, I should clarify that adult children, really, isn't it.
Yeah, we're really only considering probably the death of the last person in the superannuation fund, or if it's a single member fund, the death of the member and it's either passing to the estate or the children of the deceased member. In those cases, the tax impost arises in respective. As you say, the taxable amount, which is basically any money that you've put into a superannuation fund, including your super guarantee payments where there has been a tax deduction
claimed that forms part of the taxable amount. The tax free amount is basically money that you put into the superfund after you've already paid tax. That goes in tax free and it comes out tax free.
From the mast reside of people is taxable because they've got the concession. They don't even remember getting the concession or anything like that. But basically, by law, you must put twelve percent if your salary package into super that is concessionally treated. Yeah, and so in the future, let's just say there's a couple and as you say, if the super transfers from one person to the other, it's not tax. But if the last remaining person in the
couple then dies, typically transfers to their adult children. Those adult children will pay tax on most of the super most of the time.
Is that right? That's right?
With one technical point of difference is if they are a tax dependent okay, right, and this would only apply to children who have like a permanent disability or children who are under age twenty five.
Okay, but adult children being most people most of the time. Yeah, So Chris, why is there this tax?
Well, look at it all stemmed from I mean when Pulkating developed the tax system. You know, there was basically tax when you exited the system, that was all changed in I think it was around ninety ninety three with the introduction of the Super Innovation act Ors this Act, and the government decided to tax money going in tax at a lower rate concessional rate, tax it during the operation of the fund and tax it on exit to sort of compensate for the tax that they were losing at the end.
They wanted some money back for the favors they did you in the early days tax Mase.
Yeah, so you know they're basically saying to you, look, if we give you a tax benefit when you put money into the fund, we want some of that back when you die, as simple as that.
But the thing about nineteen ninety three when Keating created it was that it was only three percent of your package went in. Yeah, I was twelve, So if you think about it, it was four times more involved.
There is a way of avoiding that, of course, James, and that is if you pull the money out before you die.
Yes, you avoid the seventeen percent tax.
You can pull it out and put it back in, can't you and go do this ridiculous circular thing.
Yeah, it's a very popular strategy of recycling money out of your taxable amount and putting it back in as a tax free amount, and that's a common strategy, but obviously, with the contribution caps, for many people, if as you say, if most of their superbalances is in that taxable amount, it might take many years to be able to recycle that out.
So it's a recontribution strategy. And you basically, as you take it out once you are a certain age I think it's sixty to seventy five, you take the money out, it's tax free. You put it back in. Believe it or not, it's tax free. As you put it back in, it reduces the taxable amount. It reduces the amount of which you pay seventeen percent or at least your beneficiaries with in the future. Have I got that? Yes, right, in our absurdly complex, often contradictory and circuitous supersystem.
But you know what, the government's way of stopping that is introduced the total super balance cap, yes, which today is two million dollars. So if you've got over two million dollars, you can't put it back in.
Yeah, okay, yeah, yeah, yeah, it's a it's capped at that level. Very interesting, really really interesting. Thank you very much for coming on the show.
Chris. You're welcome, thank you. That was Chris Hill of.
Inherit Australia and I did say to you, I thought we could do a show on estates and wills and inheritance that wasn't dry, and that wasn't dry I hope.
Okay, very good.
Let's have some correspondents the money Puzzle at the Australian dot com dot au and just remember when you're sending in a question if you want to send in two or three at the same time. I noticed people are doing it more and more and it's very very good and it's great for the show. Okay, talk to you soon.