The BFG Report

Welcome to the 2017 Autumn Edition of the BFG Report

Can your Will be challenged?

Yes it can, but only in certain situations. While most people try hard to strike a fair balance when they write their Will, sometimes there may be people who are unhappy with how the estate has been divided and decide to challenge it.

There are two main types of ‘challenges’ in relation to a Will: challenging the validity of the Will itself and claiming for ‘family provision’. A claim for family provision occurs when a challenger believes they should have received money or assets to provide for their ongoing welfare. They can claim at court that a provision should have been made for them. This is the most common type of challenge.

Challenging the validity of a Will

This can occur when:

• the strict legal requirements for the creation of a valid Will have not been followed.
• the Willmaker did not have ‘testamentary capacity’, meaning they didn’t have the mental capacity to understand the effect of making a Will, the extent of their assets and an appreciation of who could be possible beneficiaries.
• the Willmaker was subject to ‘undue influence’, but this is very hard to prove.

Challenging the lack of family provision

Separate legislation in each State and Territory allows certain family members or eligible persons to make a claim for provision out of your estate.

Can you prevent challenges to your Will?

Not entirely. However, you can certainly take steps to minimise the likelihood of claims being made but to do this you need to use a qualified legal professional. Some of the ways to reduce the likelihood of your Will being challenged are to:

• ensure your Will complies with the formal requirements of the law, including the correct signing of the Will.
• ensure any suggested lack of testamentary capacity is dealt with when the Will is made so there is evidence available, if necessary, that supports your ‘capacity’.
• ensure you are freely making your Will, without any undue influence.
• consider any possible claim under the family provision legislation and minimise not only the chances of a claim being made, but also the chances of a claim being successful.

Investment Market Review – Quarter Ended 31 December 2016

Asset Class – Australian Shares
1 year is 11.8% p.a.
5 year is 11.6% p.a.
10 year is 4.4% p.a.

Australian shares rose 4.9% in the December quarter. The strongest performing sector was financials, with a gain of 10.8%, followed by utilities with an increase of 7.8%, the energy sector climbed 7.4% and materials increased by 7.2%. The financials sector led the market higher as investors moved into cyclical sectors following a rise in bond yields and commodity prices. Iron ore and West Texas Intermediate crude oil prices appreciated 41% and 11% respectively, helping the materials and energy sectors post strong results. Sectors that performed poorly included health care, declining by 8.8%, telecommunications which fell 4.3% and the consumer discretionary sector which lost 2.9%. One major reason for the poor performance of the health care sector was a large decline of 55.9% in Sirtex Medical Ltd after they announced weaker than expected sales growth.

Asset Class – Listed Property Trusts
1 year is 13.2% p.a.
5 year is 18.5% p.a.
10 year is 0.3% p.a.

The A-REIT sector declined 0.7% during the December quarter. The sector once again underperformed the general market as global bond yields continued to move higher. This was partly due to expectations of increased government spending and lower taxes in the United States following the election of President Trump. Property shares generally suffer from increasing rates because of the drag on earnings, but A-REITs often have inflation-linked leases, thereby delivering a degree of protection in terms of the rents they receive. Despite the recent pullback, the sector still appears expensive on an historic, relative and absolute basis.

Asset Class – International Shares
1 year is 9.3% p.a.
5 year is 19.1% p.a.
10 year is 5.4% p.a.

International shares performed strongly during the December quarter despite another period dominated by political events — the most notable being the US Presidential election. Financial market investors revised their expectations for government spending and tax policy in the US following the election and this was an important factor driving share valuations, the increase in government bond yields and the appreciation of the US dollar. The S&P 500 gained 3.3%, the FTSE 100 rose 3.5%, the German DAX 30 was up 9.2% and the Nikkei 225 climbed 16.2%. The MSCI World Index in Australian dollar terms increased by 8.3% in the December quarter. The European Central Bank left the deposit rate unchanged at negative 0.40% but decided to continue the current level of monthly asset purchases of €80 billion until the end of March 2017, after which there will be a reduction to €60 billion per month until the end of December 2017. The US Federal Reserve increased the federal funds rate by 25 basis points to a target range of 0.50 — 0.75% at its December meeting. The decision was widely anticipated because data had been increasingly supportive of an interest rate increase.

Asset Class – Fixed Interest
1 year is 2.9% p.a.
5 year is 5.0% p.a.
10 year is 6.2% p.a.

In the US and Australia, long term interest rates rose more than short term rates, causing the yield curve to steepen. The US 10-year bond yield rose 85 basis points and the Australian 10-year bond yield rose 86 basis points. In the US, government bond yields moved higher as a result of the interest rate increase and because of expectations Donald Trump’s policies will include a significant amount of spending on infrastructure as well as tax cuts, thereby boosting economic growth and inflation. Australian bond yields were not immune and quickly followed the United States lead due to the high correlation between the two countries’ government bond yields.

Asset Class – Cash
1 year is 2.1% p.a.
5 year is 2.8% p.a.
10 year is 4.1% p.a.

The RBA left the cash rate unchanged at 1.50% during the December quarter. This was despite uncertainty regarding the strength of the labour market, concerns that inflation would remain low for some time and the weaker than forecast GDP growth in the September quarter. Rising oil prices and downside pressure on the Australian dollar as a result of the US Federal Reserve’s intention of raising rates two or three times in 2017 will likely cause the RBA to leave rates on hold during 2017.

Source: Morningstar

High Yielding Internet Savings Accounts

Financial Institution and Interest Rate

RaboDirect Bank – Rate 3.05% p.a.

ME Bank Online Saver- Rate 3.05% p.a.

ING Savings Maximiser – Rate 3.00% p.a.

Rams Saver – Rate 3.00% p.a.

Citi Online Saver – Rate 2.85% p.a.

BankWest – Telenet Saver – Rate 2.75% p.a.

Rates are subject to conditions and change.

Rates are correct as at 06/03/2017.