The challenges of modern estate planning

Speaking at the inaugural Financial Standard Best Practice Forum on Retirement Income, Tsovolos explained how the estate laws around self-managed super funds and discretionary family trusts is still evolving - largely because challenges only occur once the client dies and once a claim is made against the estate, which makes its way to court and isn't later settled out of court.

"You see a lot of clients with SMSFs and discretionary trusts who aren't aware of just how many ways a claim could be made against their assets once they pass," Tsovolos said.

He noted that claims can now be made by a spouse or person in a domestic relationship; a child; a whole or partial dependent who is a household member; a grandchild and household member; and finally, a person who was in a "close personal relationship" with the deceased at the time of their death: this can be two adults, not necessarily related, not married or in a de facto relationship, where both live together and one or each provides the other with domestic support and care.

That latter claimant, he added, will play an increasing role in family court disputes given Australia's ageing population.

Tsovolos noted the law also now stipulates that estates can "claw back" assets in cases where, in the three years preceding the client's death, a property transaction is made in instances where it can be demonstrated that said client could have acted to ensure "full valuable consideration" was provided.

For these reasons, he added, wills need to be prepared "basically like an affidavit," with a sufficient paper trail available to justify the deceased's wishes, and with consideration given for any potential legal challenges.

"Basically, you need the will to say that if little Johnny challenges the estate, this is how you deal with it," Tsovolos said.