Reference no: EM132975395

CLIENT FILE NOTE Meeting Attendance

Background

• Terri Brady (client) and her father George Hoskin (client), and accompanied by Steffi Rhodes (financial planner for George and Terri) have approached you, a lawyer with expertise in family law and wills and estates, for legal advice as to their current situations. The clients have agreed to waive any conflict of interest so that you can advise them both.
• Terri (48 years old) and Kane (42 years old) have been married for 7 years. Terri has one child (Amos 20) from a previous de facto relationship and Terri and Kane have two biological children (Roberta 12 and Alexis 9). Amos is financially dependent on Terri and currently lives in the family home.
• The last six months have been particularly difficult for Terri and Kane's marriage. Six months ago, Terri was diagnosed with a rare neurological disorder with no cure. At the time, Terri was given 12-36 months to live, and the disorder will render Terri incapable of taking care of herself. Three months ago, Terri confessed to Kane that she wasn't happy in the marriage, and was having an affair with Tony, a hospitality worker, self-confessed party animal and father of an adult child, and further that they had been engaged in an "off-again on-again" relationship for the past year. Kane was devastated, packed his bags, took his household contents and left the family home. A short time later, Tony moved in and began solely relying on Terri for financial support (Tony was recently made redundant and future job prospects on the Gold Coast are slim).
• Terri and Kane are currently seeking counselling, but from Terri's perspective, the marriage is over and Terri wants a divorce. There have been no discussions around property settlement, but they have agreed that Terri will remain primary care giver (as that is each child's preference), and that Kane has contact rights in relation to Roberta and Alexis. They have also agreed that Kane will be the children's primary care giver when Terri dies or has incapacity.

Financial Information

Terri provided a table of what she believed to be the assets and liabilities of the couple:

Family Home at 7 Baylor Crescent, Ashmore, Gold Coast Joint Owner $1,000,000
Loan on Family Home Joint Owner $500,000
Bank Accounts - National Australia Bank Terri $5,000, Kane $15,000
Superannuation Terri $370,000, Kane $325,000
Life Insurance (policy held inside super) Terri $700,000, Kane $500,000
Household contents Kane $15,000, Terri $20,000
Jewellery Terri $25,000
Shares Kane $20,000
Motor vehicles Kane $35,000, Terri $20,000
Credit Card Joint $15,000

• Terri works for her father, George (75 years old), a successful property developer. Terri presently earns $50,000 per year working three days per week. In fact Kane and Terri met while Kane was working on a construction site as a foreperson - Kane currently earns $110,000 per year. Both salaries are exclusive of super. Terri is also a beneficiary of a trust [GH Enterprises Pty Ltd as trustee for the George Hoskin Family Trust ('Family Trust')], which holds an extensive share portfolio ($5 million). On his accountant's advice around asset protection (George has been married three times), Terri is the sole director and shareholder of GH Enterprises, and the sole appointor of the Family Trust. Under the terms of the trust deed, the appointor role passes to the 'Legal Personal Representative' on the appointor's death or incapacity.

Two additional notes:

1. Terri received $200,000 from George, which was used as a deposit to purchase the family home. George's intention was that the payment was an interest-free loan, although Kane believes it was a wedding gift. There is no documentation to support either position.
2. The Family Trust has made a series of 'paper' or 'book entry' distributions to Terri each financial year, with the money then reinvested to purchase more shares on behalf of the Family Trust. Terri pays tax on these distributions and they are recorded as 'loans advanced by Terri to the Trust' in the books of the Family Trust, which is presently $150,000.

Estate Planning documents

• When they got married, Terri and Kane approached the Public Trustee of Queensland and had free wills prepared and executed, in which the assets they owned passed to their married spouse, and they appointed each other as sole executors and trustees. Terri and Kane also had enduring powers of attorney prepared and executed (personal and financial matters) in which they appointed each other, with the authority for making financial decisions effective immediately. They do not have Advance Health Directives in place. In terms of superannuation, there are non-binding death benefit nominations in favour of each other. Terri and Kane selected non-binding death benefit nominations because they wanted flexibility in who would benefit from their super.
• George's current will (prepared using a 'Do It Yourself' kit) provides that his estate assets will pass to his three daughters who survive him-Terri, Katrina (35 years old) and Claire (39 years old) in equal shares, who are all children of George's first marriage to Kathy, who has since passed away. George has no other children, has settled all financial affairs involving his past marriages, is currently not in a relationship and has no future intentions of having a relationship. All three daughters are joint executors of George's estate, which is valued at $6 million. Both Claire and Katrina are happily married, financially independent and have two children each. George has a great relationship with his daughters, and the daughters get along very well. George has a binding super death benefit nomination in favour of the Legal Personal Representative of his Estate.

Client Needs and Concerns

• Terri and George are not particularly concerned about tax minimisation for estate planning (George has his own well paid accountant). For George, who has a congenital heart condition, his sole concern is to ensure that Terri's share of his estate assets are passed to Terri's children. This means George does not want Kane, Tony or any of Kane's or the children's future spouses to attain any of his estate assets, or gain any interest in the Family Trust.
• For Terri, she is happy to financially support Tony while she has capacity, but does not want to distribute any of her assets to Tony. In respect of Kane, Terri wants to keep the family home for the benefit of the three children and for Kane to have the right to occupy the property until Alexis turns 25 or all the children have left the family home (whichever happens first). At that time, Terri wants the family home to be sold and the proceeds distributed to the children and Kane 50/50 after repayment of George's loan. Overall, Terri wants to maximise her assets for distribution to the children only when they reach a certain age, and that the use and distribution of the assets is "fair and equitable" between the three children. Terri would also prefer that decisions about her health and well-being are not left to Kane, Tony, the kids, or George.

Legal advice

Please prepare a letter of advice which follows this structure:

Question 1. A short introductory paragraph (100-120 words) which refers to your recent client meeting and sets out the purpose, scope and structure of the letter. DO NOT restate the clients' financial position, but DO summarise the client's estate planning objectives, based on your understanding of their needs and concerns.

Question 2. Explain and analyse the risks (in terms of consequences) associated with separation, divorce, incapacity and death (Terri), and death only (George), which may undermine the achievement of the clients' estate planning objectives. Apply the clients' current circumstances as part of your explanation and analysis. Current circumstances is a collective term used to describe the clients' background, financial situation and estate planning documents (see client file note).

Question 3. Explain, analyse and evaluate solutions for achieving the clients' estate planning objectives. This includes (but is not limited to) key provisions of estate planning documents that may remove or minimise the risks you have identified. Remember as a lawyer, you can be specific about the solutions. Apply the clients' circumstances as part of your explanation, analysis and evaluation.

Question 4. A short concluding paragraph (80-100 words) which summarises the next steps for the clients - (e.g. consider the solutions, further info required, future meeting involving lawyer and other professionals with client, client to make decision etc.).