Case Study – Young Parents Die

The facts

Daniel and Jennifer were high school sweethearts who met again in their mid-twenties and never stopped their romance. They married within 12 months of meeting again, and worked on their careers for a few years, also buying a house. Jennifer is a nurse and Daniel works for a software development company but has an idea to develop his own mobile phone application. In their early-thirties, they have two boys within 18 months of each other, Callum and Cameron.

The next few years continue in a whirlwind and Callum and Cameron are soon in primary school. Daniel did develop his own mobile application, and made a substantial sum of money from that, which they invested. Additional income continues to trickle in from continued app sales, and they use this income for treats and toys for themselves and their boys.

The family does almost everything together. Jennifer limits her shifts as a nurse to a few during the week, so that she can either do the school drop off or pick up. Daniel can do a lot of his work from home, so he works flexible hours and is able to help with the boys when Jennifer is working. They spend every weekend together, either with the boys’ grandparents, or getting outdoors and visiting various places within driving distance. They want their boys to have as broad an experience as possible, to try as many things as they can, and to appreciate diversity of cultures and places. They are planning a four-week trip overseas with the boys in the coming months, around South-East Asia and one week in Samoa.

when parents die

Rarely do they do anything alone together without the boys, but a few weeks before their big trip overseas, Daniel books a romantic stay in the heart of the CBD for them both. He plans an expensive dinner out, and then books tickets to a theatre. His parents are able to take the boys for the weekend. They are both eager when they drop the boys off the Daniel’s parents place before heading into the city for their adult weekend. But after dinner and on their way to the theatre, they are walking across the street at an intersection and a horrific accident happens. A  woman runs a red light and ploughs straight through the pedestrians crossing the street. The driver was travelling at about 40km/hour, which is not excessively fast, but it does a lot of damage. Daniel and Jennifer took the brunt of the force, holding hands as they crossed the street. They both died within days of the accident.

The driver was not drunk, but it didn’t matter. She was charged with dangerous driving occasioning death, manslaughter and other back-up charges. No penalty could bring Daniel and Jennifer back, though.

Scenario 1

Despite Daniel and Jennifer loving each other and their boys deeply, they failed to do any planning for their future in the event that such an accident happened. They had never prepared a will, had not appointed guardians for their children, and had not thought about life insurance or other structures that could make the future easier for their spouse and children.

Without wills, they had not appointed guardians. Daniel’s parents had the boys when Daniel and Jennifer died and kept them with them until the funeral. At the funeral, Jennifer’s parents tried to discuss future plans for the boys with Daniel’s parents. Daniel’s parents refused to make any commitments and refused to bring the boys around to Jennifer’s parents for a visit. As the months passed by, Jennifer’s parents were desperate to see Callum and Cameron, but Daniel’s parents continued to refuse — Daniel’s parents had always secretly thought that Jennifer came from a poor family and they didn’t want to associate with her except that their son married her. This was now their chance to bring the boys up how they wanted to, and they decided to refuse any access to Jennifer’s family. At wits end, Jennifer’s parents seek advice from a family lawyer and decide to seek Parenting Orders so that they can have access to Callum and Cameron, and so that the boys can spend some overnight time with them.

The family law proceedings for Parenting Orders are bitter, and Daniel’s parents raise many unfounded objections and allegations about Jennifer’s parents. This resulted in long affidavits filled with tit-for-tat attacks on each other, and large legal fees. Jennifer’s parents are granted some interim orders for the boys to spend time with them during the day once a fortnight. When they attend, they are miserable. The boys are aware of the legal proceedings and miss their parents dearly. They want to see Jennifer’s parents — their Pop and Ma — but they have been made to feel guilty, like they are doing something wrong. They withdraw into themselves, away from both sets of their grandparents, and will only talk openly to each other. The family court orders a psychologist to do a report on Callum and Cameron, and the report is damning on the situation, and suggests that Callum and Cameron need significant psych assistance to try to undo the guilt and grief they are feeling. The legal battle goes on, as neither Daniel’s parents or Jennifer’s parents will accept the recommendations.

All of Daniel and Jennifer’s assets were jointly owned. Their superannuation appointed each other as the beneficiary, but they did not appoint alternative beneficiaries. Because they died intestate, their estate is subject to the relevant State legislation. Because Jennifer was the younger of the two, she is deemed to have died second. All the jointly held assets are transferred to her name and form part of her estate. Her superannuation fund decides to pay her fund and death benefit into her estate. Because Daniel does not have anything in his estate, and because his superannuation company becomes aware of the legal battle for the children, they require a superannuation proceeds trust to be established for the boys before they will release any funds. As there are no appointed guardians of the children, and no legal personal representative for Daniel’s estate, the superannuation company either wants the respective grandparents to all be trustees by agreement, or they insist that the public trustee will have to be the trustee of the trust. Of course, the grandparents cannot come to any agreement, so the State Trustees set up the superannuation proceeds trust to receive the funds, and they administer the investment until Callum and Cameron are 18 years old.

Under intestacy laws, Jennifer’s estate will go equally to Cameron and Callum. They will inherit their share of the estate once they are 18 years old. Jennifer’s parents apply for Letters of Administration to administer the estate on behalf of the boys. The Supreme Court asks further questions about the guardianship arrangement for the children, since the guardian for a minor beneficiary would usually be the one to make the application, so Jennifer’s parents have to go through the process of detailing the battle in the family court for the Parenting Orders and that guardianship is currently in dispute. Luckily, they are granted administration. The estate comprises of the house, the substantial investments from Daniel’s mobile app, and other bank account and employment benefits that are paid out.

Callum and Cameron grow more and more sullen as they get older. They are bitter with their family, they hate themselves, they no longer speak to each other, and they have become fairly withdrawn from mainstream society. Callum, the elder of the two, starts associating with anti-social groups in his mid-teens and starts binge drinking and using recreational drugs. Cameron goes the other way and becomes a recluse, and lives almost exclusively online. They are unable to form any bonds with their family or grandparents at all.

At the age of eighteen, Callum inherits his half of the superannuation, and his half of the estate that has been managed well by Jennifer’s parents. It is a substantial amount for an eighteen-year-old boy. He ends up attracting a group of people leaching off his money, and using drugs. He overdoses and dies by the age of twenty-two.

Cameron inherits the remainder of the estate when he turns eighteen. He buys himself a house and invests the balance, and lives as a recluse through his online avatars rather than engaging with the world. He doesn’t need to work a traditional job. His online activities bring him some income, and his investments bring him the rest. He orders his clothes and food online and they are all delivered to the house. He has no reason to leave the house, and is very unwell physically and psychologically. He does not live the life that his parents would have wanted for him.

Scenario 2

Daniel and Jennifer had been given free Will Kits when they took out life insurance over the phone with one of the insurance companies advertising on TV. They had followed the instructions and completed the wills pretty well — they were signed and witnessed properly, so they were valid.

They had appointed each other as executors, and their respective siblings as alternative executors in the event that they both died — Jennifer’s sister Jane, and Daniel’s sister Dianne. They both appointed Jennifer’s sister Jane as the guardian for their children in the event that they both died. They left everything to each other in the first instance, and they left their entire estates to Callum and Cameron if they both died, once Callum and Cameron reached the age of twenty-one years.


All of Daniel and Jennifer’s assets were jointly owned. Their superannuation appointed each other as the beneficiary, but they did not appoint alternative beneficiaries. Because Jennifer was the younger of the two, she was deemed to have died second. All the jointly held assets are transferred to her name and form part of her estate. Her superannuation fund decides to pay her fund and death benefit into her estate. Because Daniel does not have anything in his estate, they require a superannuation proceeds trust to be established for the boys before they will release any funds. As the appointed guardian for the boys, Jane is required to set up the trust and be the trustee until the boys reach the age of eighteen years. Because the superannuation doesn’t form part of Daniel’s estate, there is no requirement for it to be held in trust until the boys reach twenty-one in accordance with his will.

Jane takes the boys into her care. She has two children of her own, and lives with her husband in a normal suburban house. Her parents come to see them a couple of times each week, and Jane often takes the boys to see Daniel’s parents for a Saturday lunch. She also makes sure she invites them to any school awards and sports days.

Jennifer’s entire estate is transferred to Jane to be managed until the boys reach twenty-one, and she also manages the superannuation proceeds trust.

Jane decides to use the proceeds from the estate to buy her and her husband a bigger house. She is certain that Jennifer wouldn’t have wanted her boys to be sharing a room with her children, so they move into a large five-bedroom house. Because the boys are orphans, she also wants to make sure that they have a nice holiday every year. She uses the proceeds from the estate to pay for a holiday for all of them to northern Queensland or Western Australia every year. She doesn’t want them to feel like they’re missing out, so she gives them $50 per week pocket money, and they are generally given a fairly light reign discipline-wise. Jane and her husband believe that children need to make their own mistakes, rather than being given boundaries.

Jane is well-meaning, but Jennifer and Daniel certainly would not have meant for the boys’ inheritance to have been used in the way that Jane has. They wanted their boys to respect money and grow up knowing how to save. They also wanted the boys to have well-defined boundaries, to have a curfew, and to put school work before anything else. Jane didn’t know any of this.

Callum inherits his portion of Daniel’s superannuation at eighteen. He buys himself a brand new car straight away, and lives life up at clubs for a while. Because of his partying, he doesn’t do very well in his final year of high school and doesn’t get a university placement. He decides to buy himself a carpet-cleaning business, which he pays too much for and then doesn’t seek appropriate advice about how to pay himself, pay tax and market the business. The business goes broke within 12 months, and he is pursued by creditors. He loses his part of the superannuation inheritance to creditors of the failed business. Because there is no gift-over clause in the Will Kit wills that Daniel and Jennifer prepared, Callum can call on his inheritance earlier, despite him not having reached the specified age of twenty-one. Immature, he calls on his inheritance, and legally Jane cannot prevent him, so she hands over control to him. To avoid bankruptcy, Callum uses his inheritance to pay off all his debts, plus interest and legal fees of various creditors, along with his own legal fees. Callum is left with very little, and ends up working stacking shelves in Office Works.

Cameron has always been quieter and more careful. He inherits the rest of Daniel’s superannuation when he reaches 18 years, but other than buying a new car himself, he puts the rest into his iSaver account. He does reasonably well in his final year at high school and gets into a computer science course at university. Instead of working to pay for his fees and books and other expenses, he continually dips into his iSaver account. He continues to live at home with Jane, so at least he doesn’t have to pay rent. Cameron graduates from university about the same time as he turns twenty-one and inherits the rest of Jennifer’s estate. One of his good friends in his computer science course has been on at him for years about them starting their own cloud software company. When Cameron inherits the rest of his money, his friend convinces him to back their new company. Cameron bankrolls the start-up, and most of his capital soon disappears in office rent, computer equipment and high wages that they are paying themselves. The capital is gone before they have produced any software, and they start the hard search for venture capitalists.

Scenario 3

Daniel and Jennifer had done comprehensive family wealth legacy planning with a solicitor a couple of years before they are killed. They had appointed Jennifer’s sister Jane and Daniel’s sister Dianne as joint executors. After going through a process of writing out all their parenting values, and then compiling instructions to the guardian for their children, they determined that none of their family members would bring their children up in the way they would want. They spoke to their best friends, Dane and Jemima, who were honoured and accepted the appointment as guardians as soon as they were asked. Dane and Jemima have three children about the same age as Callum and Cameron. They promptly ask if Daniel and Jennifer would agree to be guardians for their children, and this is also agreed.

Daniel and Jennifer set up comprehensive testamentary discretionary trusts for Callum and Cameron in their wills, and specify that they cannot control or have a say in the administration to their trust until their reach twenty-five years. They also sign binding nominations with each of their superannuation funds that their accumulated money and their death benefit are to be paid to their legal personal representative, so that their superannuation will be guaranteed to form part of their estate should they die.

Because Jennifer was the younger of the two when she and Daniel were killed, she is deemed to have died second. All the jointly held assets are transferred to her name and form part of her estate. Her superannuation fund pays her money and the death benefit into her estate. Daniel’s superannuation fund pays his balance and his death benefit into Jennifer’s estate as well, as it formed part of his estate and he left everything to Jennifer in the first instance. Jennifer’s entire estate, a substantial sum of over $1.6 million, is transferred to Dianne and Jane to administer. They seek financial advice and make a variety of diversified investments.

Dane and Jemima promptly step in when they learn of the accident, and take the boys from the care of Daniel’s parents who had them for the weekend that Daniel and Jennifer were killed. Callum and Cameron have spent lots of time with Dane and Jemima, particularly after the families grew closer when they discussed the issue of guardianship for their respective children. All the children know each other very well, and they create a loving and protective family around Callum and Cameron to support them through their grief.

Daniel and Jennifer had left comprehensive instructions to their guardians about things that were important to them in their own lives that they wanted their children to share, as well as parenting values on discipline, education, extra-curricular activities, sport and financial education. Their values closely reflect those of Dane and Jemima, so it is not hard for them to follow these instructions. But importantly, due to Daniel’s interest in computer programming, he wants both boys to participate in extra education in that area, or at least be given the opportunity. Jennifer also felt particularly strongly about the boys being good swimmers, and to be involved in water sports, so Dane and Jemima embrace this too and involve the whole family in these sports. 

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The trust that Daniel and Jennifer set up included provision to be made to the guardians to help with the financial upbringing of Callum and Cameron, so with Dianne and Jane’s joint approval, income is often released to Dane and Jemima to help with extra activities and expenses for Callum and Cameron. Dane and Jemima are not left out of pocket by bringing up Daniel and Jennifer’s boys. In fact, their whole family is richer for it in many ways, and Callum and Cameron exceed in school and social aspects of their lives.

Callum does well in his final year of school. He gets into sports science at university, and because he is eighteen years old, he deals directly with Dianne and Jane to have income released from the trust to him for university fees and books. Only expenses that Dianne and Jane approve jointly are paid for, so when Callum asks for them to buy him a new car, they let him down lightly and suggest that if he works and saves $5,000 then they will match that amount for him to buy something second hand. He does achieve this, and goes onto finish his degree with honours. He takes over control of his trust when he turns twenty-five years of age, and is mature enough to seek financial advice to continue investments. When he marries, he buys a house in the trust, instead of in his own name, and continues to reinvest income from the trust to grow his wealth. When he has children, to help pay for extra expenses, he is able to draw income from the trust in the name of his children (Daniel and Jennifer’s grandchildren), tax free up to $18,000 per annum (under the current adult marginal tax threshold). This significantly helps with the expense of raising children, and he is able to fund private school education for them.

Cameron also does very well in his final year at school, and gets into a double degree of commerce and computer science, following in his father’s shoes. One of his good friends in his computer science course has been on at him for years about them starting their own cloud software company. When Cameron comes into the control of his trust at twenty-five, after a few years of working hard for other people, he and his friend decide to start their own business. Cameron seeks financial advice, and decides that his trust can loan the new company some capital to start-up. A commercial loan arrangement is entered into, so that the new company will be required to repay it to his trust along with interest at 7%. Both Cameron and his friend continue to work in their regular jobs as they grow their company on the side, until it replaces their income and they can work on growing it full time.