Tuesday, May 22, 2018

Deductible debt, trust cloning and 328-G rollovers

As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers the above mentioned topic in a ‘vidcast’ at the following link - https://youtu.be/S8gy1ZMhIzA

As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –

One factual scenario we have explored utilising the 328-G rollover concessions involves where there is an original trust and a cloned trust and the transfer of assets between the two trusts will satisfy all of the rules that need to satisfied.

If having setup the new trust, it goes to the bank to borrow money, it is necessary to analyse what that money is being used for to determine if any interest expense is deductible.

If the debt is to fund the acquisition of the business from the original trust, that is, the original trust is selling the business to the cloned trust, then the nature or the purpose of the borrowings is going to be income generating.

That is, the debt expense will be deductible.

The cash flow will be funds coming from a third party bank into the cloned trust, and then as part of the sale transaction, the payment is made to the original trust.

The cash received by the original trust will because of the 328-G provisions, be a tax free receipt.

At that point, the original trust can essentially make a form of ‘eligible termination payment’ to the ultimate controllers of the original trust.

Monday, May 21, 2018

myprosperity and View Legal partner to offer automated estate planning services

myprosperity and View Legal partner to offer automated estate planning services

myprosperity, Australia’s leading personal wealth portal, is partnering with Australian estate planning firm, View Legal to provide free, standard wills.

A personal wealth portal, myprosperity is a white-label desktop and mobile app that advisers and accountants can enable for their clients. The platform provides a consolidated, real-time view of a client’s entire financial world, thanks to live integrations with leading financial services providers.

When enabled by an adviser, myprosperity’s estate planning functionality will allow a client to generate a standard View Legal will and automatically populate the relevant data from their personal wealth portal, including all their assets and liabilities. This legally binding will is then stored on myprosperity, delivering greater utility through the portal.

Chris Ridd, CEO of myprosperity, said of the partnership “It’s estimated that nearly 50% of Australians will die without a will, and our own data shows that over 70% of myprosperity clients do not have an up-to-date will. Yet predictions say $2.4 trillion in wealth will be passed on over the next three decades.”

Ridd continued “View Legal are recognised experts in estate planning and their standard will is miles ahead of any equivalent that can be found commercially. By leveraging their expertise to provide a standard, pre-populated will, we’re helping our clients to achieve peace of mind and taking our first step towards redefining estate planning.”

Matthew Burgess, Founder of View Legal, said “Estate planning and wills especially haven’t changed much in the last hundred years. View Legal has a history of leveraging technology to solve complex legal issues like estate planning. Together with our technology partner, NowInfinity we’ve designed a technology solution that will break down some of the traditional barriers of entry that have resulted in so many Australians not having a valid will. To be able to share this journey with myprosperity is exceptionally exciting for us.”

About myprosperity
myprosperity is a cloud-based personal wealth platform that makes it easy for accountants and advisers to help their clients get their financial world – sorted. Available on desktop and as a mobile app, myprosperity is a whitelabel wealth portal that boasts live data feeds and digital doc signing, as well as budgeting, cashflow and goal setting tools for an integrated all-in-one approach to personal finance. Founded in 2011, the company is now the leading personal wealth platform in Australia, with over 550 adviser partners and 23,000 end users.

About NowInfinity & View Legal
NowInfinity is a leading financial technology company providing a raft of solutions for accountants, bookkeepers, financial planners, and lawyers. In collaboration with View Legal, NowInfinity can cover the myriad legal solutions required across all aspects of financial advice, compliance and structuring. The outcome of this relationship is a cost-effective proposition that empowers accountants, financial advisers and other advice practitioners to transform their client relationships, deliver better service, client centric outcomes – all the while saving time and money.

View Legal is built around the disruptive mantra of being a law firm that friends would choose. To achieve this vision, View Legal has fundamentally and radically revolutionised access to quality legal advice, in the highly specialised areas of structuring, tax, trusts, asset protection, business sales, estate and succession planning. Using technology as an enabler, View Legal has taken each of the tenets of the traditional delivery model – and turned them on their heads.

To learn more about this exciting collaborative arrangement as well as how myprosperity can assist you in creating lifelong engagement with your clients, be sure to attend the free myprosperity 2018 Roadshow commencing on 30th May, which will include more details about the estate planning product launch.

Media Contacts
Alice Chauvel, Marketing Manager, myprosperity - alice.chauvel@myprosperity.com.au; 0416 798 205
Tracy Williams, COO, NowInfinity – tracy@nowinfinity.com.au; 0437 647 937

Tuesday, May 15, 2018

PRENUPS VS. WILLS – winner takes all? **

View blog PRENUPS VS. WILLS – winner takes all by Matthew Burgess

Previous posts have explained the various aspects of binding financial agreements (often referred to as 'prenups').

On a number of occasions recently, we have had cause to review binding financial agreements in the context of wider estate plans, and in particular, have had to consider whether, in the event of a death of a spouse, the binding financial agreement takes priority or whether the will applies.

As is the case in many estate planning areas, the rule of thumb to remember is that the issue must always be reviewed on a case by case basis.

This said, generally, a prenup should at least expressly set out whether it is intended to apply on the death of either spouse.

Ideally, the document should be crafted in any event to complement the provisions of the estate plan.

In some situations the provisions can also regulate what should occur if one of the spouses seeks to challenge the provisions of their former spouse’s estate plan.

** For trainspotters, ‘Winner takes it all’ is song by Abba from 1980, learn more here –


Image courtesy of Shutterstock

Tuesday, May 8, 2018

Half your age, plus seven

Matthew Burgess Half your age, plus seven

Many family lawyers will relay that there appears to be a disproportionate level of relationship difficulties where there is a significant gap in the ages of the spouses - hence the above quoted rule of thumb to ensure the age gap is no more than half you age, plus seven years, see - https://commons.wikimedia.org/wiki/File:Half-age-plus-seven-relationship-rule.svg

In Alderton v C of T [2015] AATA 807) the rule of thumb was breached by around 10 years (the de facto husband, Trapperton, was 42 to and the de facto wife, Alderton, was 18 when the relationship commenced).

Alderton was financially dependent on Trapperton.

For some years, a trust that Trapperton was trustee of made distributions to Alderton. Alderton had no knowledge of the existence of the trust nor that withdrawals from her debit card and online banking were in fact trust distributions.

After the relationship ended, a trust return was filed that based on the distributions caused an assessment for Alderton.

Alderton then, some years later, attempted to disclaim the income she had, unwittingly, received from the trust.

The Tax Office, and in turn the court, ignored the attempted disclaimer and Alderton remained liable to pay the tax assessed.

The fact that Alderton had no knowledge of the conduct or operations of trust was irrelevant as to her liability to pay tax on the distributions she had effectively been made presently entitled to.

As set out in earlier posts (see for example - http://blog.viewlegal.com.au/2014/10/some-ramifications-of-failed-trust.html) in order for a disclaimer to be made retrospectively, it must be done so within a reasonable period of time from the beneficiary first becoming aware of the relevant interest that they wish to disclaim.

The disclaimer must also be an absolute rejection of the gift. Here, although the disclaimer was likely made 'in time', Alderton had in fact used the funds distributed to her and was therefore unable to provide an effective disclaimer.

This conclusion stood despite the court questioning the 'discreditable' conduct of the trustee in taking advantage of Alderton's naivety.

Image courtesy of Shutterstock

Tuesday, May 1, 2018

Can trusts last forever now? **

As set out in an earlier post, and with thanks to the Television Education Network, today’s post considers the above mentioned topic in a ‘vidcast’ at the following link - https://youtu.be/iIjJGoq7L1c

As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –

Following on from an earlier post ((Don’t ask me) why do trusts have vesting dates? **) it is useful to understand that the majority of Australian jurisdictions decided that a life in being plus 21 years was too complicated. Instead, the rule was replaced with a statutory provision which allows up to 80 years as the maximum length of trust in Australia.

As mentioned in an earlier post, there are exceptions to this rule. In relation to discretionary trusts, the highest profile exception is in South Australia where the rule has effectively been abolished.

Another exception is in relation to superannuation funds.

Superannuation funds are simply a form of trust instrument, although a highly regulated form of trust due to the Superannuation Industry Supervision Act which imposes a whole range of specific rules.

In relation to the core of the underlying structure of a superannuation fund however, it is simply a trust structure. Importantly however there is no concept of an ending period. In other words, in theory superannuation funds can last forever.

There are obviously tax issues for self-managed superannuation funds meaning maintaining the structure indefinitely may not be a particularly smart idea. However in the context of trust vesting, superannuation funds are a clear and obvious exception to the vesting rules.

** For trainspotters, ‘Forever now’ is song by legendary Australian band Cold Chisel from 1982, learn more here – https://youtu.be/Hhnp3td-UHU

Tuesday, April 24, 2018

Does it get you where you wanna go … with a warranty (and indemnity)? **

Previous posts have considered various aspects of warranties and indemnities (see -What is a warranty?Indemnities).

Generally, the scope of recovery and damages that may be obtained will be greater where an indemnity is provided.

This is because an indemnity is effectively a promise to either reimburse or make good relevant issues if they arise.

Furthermore, indemnities:
  1. Do not require the person giving the indemnity to have actually caused the loss – in other words, regardless of how the loss arises, liability will be triggered. 
  2. Common law rules that normally limit the scope of liability, such as remoteness or an obligation to mitigate losses, do not apply in relation to indemnities. 
In contrast, a warranty only provides a promise that certain statements are correct. Practically this means:
  1. A party seeking to claim in relation to a breach of warranty must do so by seeking damages.
  2. The common law principles mentioned above of remoteness and an obligation to mitigate potential losses do apply. 
** For trainspotters, ‘does it get you where you wanna go ... with a warranty’ is a line from a song named ‘Days That Used To Be’ by Neil Young and Crazy Horse from their seminal 1990 album ‘Ragged Glory’ – listen here – www.youtube.com/watch?v=SQeM2yLSiss

Image courtesy of Shutterstock

Tuesday, April 17, 2018

View University launches with 6 courses in estate planning and trusts

At View, we are passionate about providing access to technical content across a range of formats, including traditional products, such as textbooks and seminars, together with online platforms such as webinars, smart phone apps and podcasts.

This week we are excited to officially launch 6 university level courses, namely –
  1. Introductory Estate Planning 
  2. Intermediate Estate Planning 
  3. Advanced Estate Planning 
  4. Trust structuring 
  5. Taxation of trusts 
  6. The 7 Steps to Success – Implementing View’s Turn-key Adviser Facilitated Estate Planning Platform
Each course is designed to be relevant for all advisers including accountants, financial advisers and lawyers, other than lawyers who have specialised in the trusts and estate planning space for many years.

With 35 discrete learning modules and over 15 hours of technical content in each course, including webinars, vidcasts, and technical papers, the university level courses are the first of their kind in the Australian marketplace.

For those advisers who can not self assess their professional development compliance, all courses have received accreditation from the Financial Planning Association (FPA), namely - accreditation number 008722 for over 60 hours .

To learn more about each course and View University more generally, see - http://viewuni.com/

For your chance to receive free access to a course, simply like or comment on this post on LinkedIn within the next seven days and we will randomly select one winner and contact you directly.