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Investment Banking Institute
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Advanced Diploma of Financial Services
(Financial Planning) Estate Planning (AD2EP)
Assessment Booklet
Students if possible should complete and submit all responses to the assessments digitally on
the electronic Advanced Diploma of Financial Services Estate Planning Assessment
Booklet (‘soft copy’) provided. Students can copy this Microsoft Word file from the
AD2EPCD-ROM and:
1.
Save a copy of the Estate Planning Assessment Booklet to your computer.
2.
Change the file name to your Student Number provided by Investment Banking
Institute, for example, ‘AD2EPSMITH001DEC2009 Version1”.
3.
Deliver any re-submissions (if required) with changes with different file name and
version number, for example the second submission should be
‘AD2EPSMITH001DEC2009Version2’.
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Instructions
Students should work through the Course materials and the corresponding Assessment
Material carefully and at a comfortable pace.
Once you have completed all the responses (ie. Short Answer and Case Study) to the
Assessment Activities for Advanced Diploma of Financial Services Estate Planning, please
submit your completed Assessment Booklet by:
Investment Banking Institute
www.ibi.edu.au
Email: training@ibi.edu.au
“I affirm that all work submitted within the Assessment Booklet is my true and original work
unless otherwise credited”
“I also declare that by inserting my name and date at the top of each page of the
Assessment Booklet Students that all assessment submissions to the Investment Banking
Institute are a result of their own work”.
Student Signature
(if submitting electronically, please print name)
Date:
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Advanced Diploma of Financial Services
(Financial Planning) Estate Planning (AD2EP)
Assessment Booklet
Investment Banking Institute
www.ibi.edu.au
Student
Location
Date
Assessor
Module 1
Activity 1 - What is an estate?
1(a) What is an estate and why has estate planning become of increasing importance in
Australia recently?
1 (b) What types of taxes impact estate planning? Why?
1 (c) What are the 3 core elements estate planning strategies try to provide a solution for?
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Investment Banking Institute
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Activity 2 - Estate planning and wealth creation
a)
Why does estate planning and wealth creation advice sometimes conflict? Please
explain?
b)
Please provide 4 examples of potential conflicts of interest between creating wealth
and estate planning strategies?
1
2
3
4
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Activity 3 - Advisers in the Estate Planning process
Investment Banking Institute
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What other advisers, apart from a financial adviser, are involved with estate planning? Why and
what do these advisers do?
Activity 4 - Estate Planning Documents
What are the key documents in estate planning? Please list top 6 documents?
1
2
3
4
5
6
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Activity 5 - Six Steps of Estate Planning
Investment Banking Institute
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(a)
What are the six steps in the estate planning process and how are they different to the
steps involved with the financial planning process?
1
2
3
4
5
6
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Investment Banking Institute
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Activity 6 - Wealth Taxes – Death Duties - CGT
(a)
What wealth taxes still remain in Australia? Why?
(b)
How does CGT impact estate planning strategies?
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Activity 7 - SoA versus Estate Plan
Investment Banking Institute
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(a)
What is the relationship between a SoA and an estate plan? Are they the same thing?
Why/Why not?
Activity 8 - Tax Rulings and Estate Planning
Tax rulings are not law, but are binding in some circumstances.
How does this rulings system work in regards to estate planning?
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Activity 9 - Scope of Advice within Estate Planning
Investment Banking Institute
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What types of advice that falls within Estate Planning process?
Activity 10 - Estate Planning Legislation
What is the most important legislation for financial advisers in the estate planning
process other than “know your client” under section 945 of the Corporations Act?
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Activity 11 - Sources of Estate Planning Regulations
Please identify 6 sources of estate planning regulations
1
Investment Banking Institute
www.ibi.edu.au
2
3
4
5
6
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Activity 12 - Estate Planning Advisers
Investment Banking Institute
www.ibi.edu.au
A client is in the following situation:
•
invalid Will
•
$550,000 shortfall in assets to meet estate planning objectives
•
no binding nomination on superannuation
•
potential large CGT liability on death.
Who is the appropriate professional to deal with each of the client's issues? Why?
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Activity 13 - Estate Planning Process
What are the 6 steps of the estate planning process and how are they different to the steps of
the financial planning process?
Investment Banking Institute
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1
2
3
4
5
6
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Module 2
Activity 1 - Estate Planning Documents
Investment Banking Institute
www.ibi.edu.au
What are the 4 main estate planning documents generated as part of the process? Briefly
explain what they do in language that a average person in the street would understand?
1
2
3
4
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Investment Banking Institute
www.ibi.edu.au
Activity 2 - A Will
2 (a)
What happens when you die without a Will?
2 (b)
Which individuals can legally challenge a Will?
2 (c) Describe 4 events that can cause a will to be out of date?
2 (d)
What impact does divorce have on a Will in Victoria?
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Activity 3 - Challenging a Will
3 (a) In what circumstances can a Will be challenged or contested/challenged?
Investment Banking Institute
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3 (b) Who pays the legal costs associated with bringing the challenge and defending the
challenge?
3 (c) What are some of strategies that could be used to deal with possible challenges to a Will?
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Activity 4 - Without a Will (intestacy)
2 (a) What happens when you die without a Will?
Investment Banking Institute
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2 (b) Under the Victorian Intestacy Regulations, how are the assets of an estate distributed
when there is no spouse or issue (children)?
2 (c) Under the New South Wales Intestacy Regulations, how are the assets of an estate
distributed when there is no spouse or issue (children)?
2 (d) Under the South Australian Intestacy Regulations, how are the assets of an estate
distributed when there is no spouse or issue (children)?
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Activity 5 - Assets excluded in an estate?
Investment Banking Institute
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(a)
What are 3 different types of assets that are not included in an estate? Why
(b) Why are assets held by the testator as joint tenants not included in the assets of their estate?
What is a right of survivorship?
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Activity 6 - Parties to a Will
Investment Banking Institute
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(a) Please create a list of parties to the creation of a will?
(b) What can cause a Will to become invalid or out of date?
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Activity 7 - Assets of an Estate
It is important for a financial adviser to understand and identity which assets fall within the
estate.
Investment Banking Institute
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Are the assets owned by a company part of a client’s estate? Why/Why Not?
Would that make any difference if your client owned all the shares in the company are owned
by your client?
Are the assets owned in an unit trust part of a client’s estate? Why/Why Not?
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Activity 8 - Power of Attorney
What is the purpose for creating a power of attorney?
Why is a power of attorney so important?
Investment Banking Institute
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Please describe the 3 types of powers of attorney?
What is the difference between a general power of attorney and a specific power of attorney?
Who can be appointed as a grantor and what legal requirements must they satisfy?
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Activity 9 - Enduring Power of Attorney
What is an enduring power of attorney?
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What are the benefits of an enduring power of attorney?
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Activity 10 - Guardianship
Investment Banking Institute
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Can the Family Law Courts change a legal guardian under a Will?
A guardian appointed under a will valid and binding. Why?
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Activity 11 - Guardianship
Investment Banking Institute
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Why is it important for parents to appoint a guardian?
Activity 12 - Guardianship
Does the surviving parent of a divorced couple have an automatic right of guardianship of the
child? Yes/No Why?
What needs to be undertaken to enable the nominated guardian to be legal binding?
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Module 3 - Assessments
Activity 1 - Passing on Assets
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Name the three ways in which personal assets can be passed on?
What is the key difference between a JT and TIC co-ownership arrangement?
Identify 3 types of contracts in which personal assets can be passed on?
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Activity 2 - Personally held Assets
Investment Banking Institute
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What is the difference between an asset that is personally held and an asset that is not
personally held? Please provide 3 example of assets not personally held?
Peter Mac buys a new motor car from Leanne and signs the contract Peter Mac Pty Ltd. Is the
motor car a personally held asset? Why? Why not?
Peter Mac buys a new motor car from Leanne and signs the contract Peter Mac Pty Ltd as
trustee for the Mac family trust. Is the motor car are personally held asset? Why? Why not?
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Activity 3 - Co-Ownership of Personally held assets
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What 2 ways an asset can be co-owned?
How to determine whether an asset is held as a joint tenancy or as a tenancy-in-common ?.
Explain how each type of co-ownership has implications for estate planning?
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Activity 4 - Severing a Joint Tenancy
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Provide 2 examples why a person would sever a joint tenancy arrangement?
Activity 5 - CGT Implications
What are the CGT implications of a client holding assets in joint tenancy? What impact does
severing a joint tenancy from a CGP perspective?
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Activity 6 - Benefits of Joint Tenancy co-ownership
What are some of the advantages of owning an assets in a joint tenancy arrangement?
Investment Banking Institute
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What are some of the disadvantages of joint tenancy arrangement?
What are the advantages of holding assets in a tenants in common arrangement?
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Activity 7 - Assets of a Company – Assets of the Estate
Investment Banking Institute
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Can the assets of a company pass through to a will? Why/ Why not?
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Activity 8 - Assets of a Trust - Assets of the Estate
Investment Banking Institute
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Can the assets of a discretionay trust pass through to a will? Why / Why not?
Can the units of a unit trust pass through to a will? Why / Why not?
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Activity 9 - Assets Passing by Contract
Identify and describe 3 types of assets that can be transfered
out of a partnership and company into an estate
ii.
into a partnership or company out of an estate?
Investment Banking Institute
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i.
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Module 4 - Assessments
Activity 1 - What is a trust
Investment Banking Institute
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Define what you think a trust is?
What are the different forms of trust?
Activity 2 - Elements of a trust
What key elements and roles are required for the creation of a trust?
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Activity 3 - Inter vivos trust and a testamentary trust
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What is the difference between an intervivos trust and a testamentary trust?
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Activity 4 - Death of Trustee
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What happens to an intervivos trust when the decision maker dies?
Activity 5 - Discretionary trust
What is a family discretionary trust?
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Activity 6 - Unit Trust
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What is a unit trust?
Activity 7 - Why trusts are used
Why are trusts used?
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Activity 8 - Taxation of Minors
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Outline the operation of Div 6AA as it relates to the taxation of minors?
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Activity 9 - Testamentary Trust
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Why are testamentary trusts used?
Activity 10 - Law of perpetuities
What does the rule mean?
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Module 5 - Assessments
Activity 1 - Capital Gains or Loss on Death
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What is the general rule that applies to change of ownership of post-CGT assets, on death of a
person, to their legal personal representative or to a beneficiary?
What are the exceptions to the above general rule?
What is the CGT treatment of post-CGT assets passed on a tax-advantaged entity or to a nonresident?
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Activity 2 - CGT Events
List the six (6) CGT events.
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When are capital gains for Collectables and Personal Use assets generally disregards?
What are the differences in CGT treatment of capital losses between Collectables and Personal
Use assets?
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Activity 3 - Determining CGT Cost Base
Investment Banking Institute
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What is the CGT cost base for recipients of an asset acquired by the deceased before 20
September 1985 (pre-CGT)?
What is the CGT cost base for recipients of an asset acquired by the deceased after 20
September 1985 (post-CGT)?
For the purposes of the 12-month ownership test, when is the recipient deemed to have
acquired the asset if they became a beneficiary before 21 September 1999?
When does the recipient have the option of using the indexation method for calculating capital
gain?
What is the CGT treatment of assets passing to a non-resident beneficiary?
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Activity 4 - Calculating Capital Gains Tax – Beneficiary
What are the CGT consequences of these transaction?
Peter Smith acquired a property on 14 November 1998 for $226,000. Peter Smith died on 6
August 1999 and left the property to Leanne Smith.
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Leanne Smith then sold the property on 6 July 2006 for $440,000. The property was not the
main principal place of residence for either Peter or Leanne.
Please show the calculations for Leanne’s capital gain.
Please show calculations and include explanation of CGT methods used.
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Activity 5 - Calculating Capital Gains Tax
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Trisha is involved in a car accident and suddenly dies on 13 October 2000 leaving an
investment residential property worth $500,000 that she bought on 12 October 1999. The
property had other incidental costs of $50,000. Peter Cole was appointed executor of the estate
under Trisha’s Will.
When the property was transferred to Peter Cole as executor, any capital gain or capital loss
were disregarded. After all the debts and tax of the estate have been paid, Peter Cole transfers
the residential property to Trisha’s beneficiary, Joe Smith, and pays a conveyance fee of $5,000.
As the land is transferred to a beneficiary, any capital gain or capital loss is disregarded. Joe
Smith then sells the property on 15 March 2006 for $750,000 and incurring costs (including
real estate agency fees.) of $5,000.
Please calculate Joe Smiths’s capital gain.
Please show calculations and include explanation of method(s) used.
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Module 6 – Assessments
Activity 1 - Date of death return
Investment Banking Institute
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What is the time period covered by the “date of death return” for a deceased person?
Which party is responsible for lodging the date of death return for the deceased person?
What is the tax treatment of any accumulated losses of the deceased person at the date of
death?
What is the tax treatment of income and deductible expenses derived after the date of death?
What is the tax treatment if there are any HECS debts owed by the deceased person?
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Activity 2 - Beneficiary Entitlement To Income
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Identify 3 types of assessable income for a deceased estate?
What are 3 types of typical tax deductible expenses for a deceased estate?
What does presently entitled mean?
What is a “legal disability”?
What needs to occur prior to an executor can lodge a trust tax return for the deceased estate?
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Activity 3 - Tax Return for the Deceased Estate
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What specific type of tax return does an executor need to lodge with the ATO for a deceased
estate?
If a beneficiary is not presently entitled to the income of the deceased estate, which party pays
the tax liability on behalf of the beneficiary?
If no beneficiary is presently entitled to the income of the deceased estate, what tax rates are
applied by the ATO and over what period of time?
Which part is responsible for the tax liability if a beneficiary is presently entitled and not under
legal disability? What tax rate applies?
Which party is responsible for the tax liability of a non-resident beneficiary? What tax rate
applies?
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Activity 4 - The Executor
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What considerations does a willmaker need to undertake when appointing an executor?
What steps need to occur if the sole executor dies before the willmaker?
What are 4 main obligations of an executor?
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Activity 5 - Grant of Probate
What is a grant of probate?
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What documents are required to secure a grant of probate?
When is a grant of probate not required? Provide 3 examples
What is Letters of Administration? When does it occur?
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Module 7 – Assessments
Activity 1 - Small Business Succession Planning
Investment Banking Institute
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What is business succession planning and why is it important?
What is a buy/sell agreement?
What are key terms of a buy/sell agreement?
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Activity 2 - Small Business Succession Planning
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What is regarded as the best form of buy/sell agreement? Why?
What are the funding options for a buy/sell agreement? Why?
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Activity 3 - Small Business CGT Concessions
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What are the 4 small business CGT concessions?
What are the basic conditions to qualify for the small business CGT concessions?
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Module 8 – Assessments
Activity 1 – Beneficiaries suffering from physical disability
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What factors need to be considered with beneficiaries suffering from physical disabilities?
Activity 2 - Disclaiming an Inheritance
Why would a person disclaim an inheritance?
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