Our culture at Green Taylor Partners requires us to go beyond completing your tax returns.
Our vision includes “being proactive in providing innovative solutions to our clients”.
In pursuit of this vision, our traditional tax client interview checklist includes a number of additional questions, totally unrelated to tax.
This checklist has been developed over the years as critical matters came to light as we work with our clients to make their lives better.
In the last week, I have undertaken a couple of tax interviews which have really reinforced the need to ask these really important non tax related questions.
In most cases, matters raised in these questions fall into Steven Covey’s 7 Habits of Highly Effective People “important but not urgent” quadrant – which effectively means that despite it’s importance to the lives of those concerned, it’s not urgent because the potential circumstances have not occurred that would cause any immediate pain/suffering.
Now, firstly, to the questions that had consequences in this week’s interviews:
Young man in mid twenties in a defacto relationship. Just moved into a newly constructed home. The home is in joint names.
Asking the questions below revealed:
This led to the next issue – a Will does not normally address the proceeds of any super. This is generally a responsibility of the super fund trustee, unless he has a valid Binding Death Benefit Nomination (BDBN) in place. He was unsure whether he had one of these – I suggested that I was very confident that he wouldn’t have one and suggested that he check with his fund. And his partner do the same.
Without a valid BDBN in place, you or your trustees have no control over where the super death benefit goes to – it’s entirely up to the trustee who will consider all factors. In this case, it would most likely go to his partner, being the only financial dependant under current regulations.
We then discussed the tax implications of the death benefit. If it was to go to his partner, it would be totally tax free. However, if he executed a BDBN and was to go to someone other than a financial dependant eg mother, brother or sister, then the death benefit would be subject to tax. Therefore the amount of death cover may need to be more, depending on the tax consequences on death.
Thus the discussion with his partner as to what was to happen to their respective shares of the house would determine how much life insurance would be needed by them and how their respective BDBNs should be worded.
In summary, a relatively short tax interview became a lot more complex, with many issues covered – and a client with a long list of things to do!
Client in their fifties, married.
The question was not do you have Wills (as I know they have them) – but have they been reviewed in recent years. The answer was no. I suggested that they at least review them as circumstances to change eg beneficiaries, assets etc. It’s important to recognise that certain events in life may or may not have an impact an existing Will. For example, marriage will render a Will invalid however divorce doesn’t. These were not factors in this case.
They are also going on an overseas trip later this year. The question – do you both have Enduring Power of Attorney (EPA) documents in place. Their answer was no. I reinforced the need to have properly executed EPA documents in place as this enables the appointed person/s to act in their place should they become incapacitated or otherwise unable to make financial decisions on their behalf – or it has been said – sometimes not dying is worse than dying if you are not in a position to make decisions on your own behalf. There have been terrible circumstances where a partner has become incapacitated which then prevented individual and jointly held assets form being adequately dealt with.
We also discussed the need for a Medical Power of Attorney (MPOA) – which is one person who can make important medical decisions for them in the event of them not being capable of doing so. We agreed that these needed to be prepared as well, at the same time the Wills are reviewed and EPAs prepared.
One further point on the MPA – up until recent years, you were able to have two people to act under the MPA. This was changed such that now you can only have one. This means that many who may have had one prepared some time ago may find them now to be invalid. I recommend that you should review these if you have previously had one prepared to ensure that it is still valid.
Another interesting week – who said accounting was boring??