Tuesday, September 27, 2016

Trust Splitting and Kennon v Spry


Earlier posts have looked at various aspects of the leading family law and trust case of Kennon v Spry – see -

Impact of the Spry decision on trusts

Spry - one year on

As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers some related practical issues in relation to this case in a ‘vidcast’ at the following link - https://vimeo.com/148843224

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

The trust split that took place in Kennon v Spry was probably the fundamental thing that meant the whole structure and intended strategy fell over.

After the separation with his wife, Dr Spry took steps to split the trust or segregate the assets of what was in the initial family trust and create four separate sub-trusts for each of the four daughters of the relationship.

Dr Spry did that effectively, in the court’s view, as a way to mean that not only did he not have the assets, so that he could be subject to giving them up to his wife, it also meant that his wife didn’t have them either.

Essentially it was his way of saying to the family court ‘catch me if you can’.

Where the court landed was that they effectively ignored the attempted trust split.

While it might have been effective for tax purposes, while it might have been effective for stamp duty purposes, while it may have even been effective from an estate planning perspective, it was done after the relationship had broken down.

Although there were a myriad of other factual issues that called into question the way Dr Spry conducted himself, the court effectively simply ignored the trust split.

What that meant in a practical sense was that all of the assets that had otherwise been given to the control and benefit of the four daughters of the relationship were returned back into the head trust and the control of that trust was deemed to be solely with Dr Spry.

Once the court had gone through the unwinding of the estate planning exercise, or what was argued to be an estate planning exercise, once all that was unwound and all the assets were back up under the main trust, it was then quite easy for the court to say that trust was under the sole direction and coercion of Dr Spry. Therefore, those assets could then be administered under the terms of the family court order and pass entirely to the benefit of the wife.

Tuesday, September 20, 2016

One of a kind pricing app launched


Following the successful recent relaunch of the 7 'Tinder-ised' View Legal apps (in areas such as estate planning, business succession and SMSFs, see the previous post - Tinder-isation of the law, we have now developed and launched another Apple and Android app.

The new app is unique in the legal marketplace and provides a guaranteed fixed price in relation to over 23 adviser facilitated estate planning (’AFEP’) solutions.

The View AFEP Pricing App can be downloaded via the following links –
  1. Apple – https://itunes.apple.com/us/app/afep-pricing/id1133858018?mt=8
  2. Android – https://play.google.com/store/apps/details?id=view.legal.pricing&hl=en
Estate planning is the process of ensuring wealth is dealt with, after death, as intended, while minimising the impact of challenges against the arrangements and costs such as stamp duty, tax and administration expenses.

The AFEP Pricing App is designed for advisers to confirm the upfront fixed price for a range of estate planning adviser facilitated solutions.

If you would like us to consider the appropriate package for your client’s circumstances based on a detailed review of the relevant background material, you can also submit a free review via our website at https://viewlegal.com.au/estate-planning-free-review/

All 8 of the View apps can be downloaded via our website – see - http://viewlegal.com.au/download-our-latest-apps/

Tuesday, September 13, 2016

Family Provision Applications and Notional Estates

As mentioned in a number of recent posts, one of the ways in which a disgruntled beneficiary can challenge a person's will is by making an application to the court for further and better provision from the estate.

Historically, in all Australian jurisdictions, courts have only been able to make further provision for a beneficiary out of the assets that directly form part of the deceased’s estate.

In New South Wales however, special rules have been implemented that allow the courts to make orders in relation to assets that do not in fact form part of a deceased’s personal estate.

In many respects, the rules are analogous to the bankruptcy legislation in that will makers who take steps to remove assets from their personal name leave those assets exposed to be 'clawed back' into the estate for the purposes of family provision applications made within 3 years of the date of their death.

While the rules apply to anyone living in New South Wales at the date of death, they also potentially apply where the will maker has any assets connected with New South Wales (including shares in companies whose registered office is located there). While there have to date been very few cases that have applied the notional estate provisions, we are seeing an increasing number of clients implementing specific strategies to reduce the risk of the rules applying to their estate plan.

Tuesday, September 6, 2016

Challenging a Will under a Family Provision Application

A recent post listed the five main ways in which a will can be challenged – see - Ways to contest a will

One of the aspects listed was the ability to challenge a will due to the will maker’s failure to make adequate provision for certain beneficiaries.

The laws underpinning family provision applications are often referred to as an example of the courts applying 'The Vibe', as popularised in the classic Australian movie 'The Castle' -see - The Castle (1997 Australian film) and It's the constitution. It's Mabo. It's justice. It's law. It's the vibe....

Certainly family provision applications are by their very nature extremely subjective and therefore often turn almost entirely on the court's interpretation of the factual matrix.

This said, there are a number of key components to a family provision application, including:
  1. Before a person can make an application for further provision, they must be within a defined category set out under the legislation:
    1. Generally, children (including adult children), current spouses or anyone that is financially dependent on the will maker are able to make an application for further provision;
    2. There are other potential categories other than those listed above including in certain situations, stepchildren and de facto spouses (even where the will maker is also lawfully married);
  2. The test then applied by a court is to determine whether a person within the defined category has received adequate provision from the will maker’s estate for their proper maintenance and support, as determined by the court in its discretion;
  3. If a court determines that adequate support was not provided, it then can make such further provision as it again determines in its discretion; and
  4. One of the key aspects of family provision applications is that generally it is only the assets that form part of the will maker’s personal wealth that can be reallocated by a court.

Tuesday, August 30, 2016

The One-Day Trust


Earlier posts have looked at various aspects of the mantra ‘read the deed’ – see -

Another reminder to ‘read the deed’

ATO reminder – read the deed

Read the deed - another reminder re invalid distributions

As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers some related practical issues in relation to the read the deed mantra in a ‘vidcast’ at the following link - https://vimeo.com/145349504

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

This case study involves a family trust deed produced by a reputable deed provider – or at least a well-known deed provider, producing a deed in 2009.

This particular deed provider had adopted a ‘schedule’ approach. That is, in the back of the document, they had a schedule. Under that schedule, they listed a number of key things. For example, they had the date of establishment, the trustee, the principal and the beneficiaries.

They then had the vesting date.

A further reminder - this is a well-known provider, with a well-known accounting firm, with a high net wealth client.

The date of establishment of the trust was listed in the schedule as 28 June 2009.

The vesting date was listed as 29 June 2009.

That is they had created a one-day trust.

This trust deed came to us 2015 as the client wanted to do a trust split and we said ‘we need to read the trust instrument’.

Ironically we had trouble getting a copy of the trust instrument.

For some weeks we only had a photocopy of the undated document, however we held firm that we really needed to see the entire document, with the schedule completed. When we finally got the stamped trust deed and completed schedule our entire advice was one sentence – that is ‘do you realise your trust ended over six years ago. What are we going to do about this?’

Tuesday, August 23, 2016

The continuing saga of how many powers of attorney it takes to create authority


In one of the LinkedIn discussion groups I am a member of, the issue was raised recently about what documents are required when someone has assets or spends time in more than one state around the country.

The issue is particularly prevalent in communities near state borders. However it can potentially arise in any situation. Indeed, the issue can also arise across international borders.

Our view, which seems to align with the general consensus of those regularly advising in this area, is captured succinctly in my earlier post – see How many powers of attorney does it take to create authority?

Interestingly, the post from 2011 flags the ‘ongoing push' to have uniform succession laws across Australia. In the five years that have passed since that post, most would agree no progress at all has been made in this area.

In adopting the approach recommended in the earlier post of preparing a document in each jurisdiction that a person has significant assets or spends significant time, it is generally seen as best practice to include ‘duplication acknowledgement' wording.

Some example base wording in this regard is as follows:
  1. For the avoidance of doubt I confirm that I have executed an Instrument Appointing an [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian] pursuant to the [#insert relevant state act] ('the [#insert state acronym eg NSW] [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian]’) for any matter that requires signing by an [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian] duly appointed by the laws of [#Insert state eg New South Wales].

  2. By this Power of Attorney for personal and health matters ('the [#insert state acronym eg QLD] [#Name of medical EPA in relevant jurisdiction eg Power of Attorney for personal and health matters]) I appoint my Attorneys in respect of any personal or health matter not strictly required to be signed by an [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian] appointed by the laws of [#Insert state eg New South Wales].

  3. To the extent there is any inconsistency or overlap between the [#insert state acronym eg QLD] [#Name of medical EPA in relevant jurisdiction eg Power of Attorney for personal and health matters] and the [#insert state acronym eg NSW] [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian], the [#insert state acronym eg NSW] [#Name of medical EPA in relevant jurisdiction] is to prevail and the [#insert state acronym eg QLD] [#Name of medical EPA in relevant jurisdiction eg Power of Attorney for personal and health matters] is to be modified (and its operation suspended to that extent only) for such time as the [#insert state acronym eg NSW] [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian] remains in existence.

  4. In all other respects the [#insert state acronym eg QLD] [#Name of medical EPA in relevant jurisdiction eg Power of Attorney for personal and health matters] shall apply and remain in force.
Image courtesy of Shutterstock

Tuesday, August 16, 2016

ASIC Records and Trust Ownership


In the early 2000’s, the ASIC started requiring shareholders to disclose whether they owned their shares on trust.

The particular question on the ASIC records is 'are the shares owned beneficially?'

We regularly see situations where the ASIC records do not reflect wider accounting, tax and trust records.

Strictly, the inaccurate ASIC records are a breach of the law. More problematically however, where ASIC records do not reflect what is otherwise being argued for tax or asset protection purposes, it can place clients in an unnecessarily difficult position.

There are a number of mechanisms to correct ASIC records, in some cases without any penalty, so whenever inconsistencies are identified, we recommend proactive steps be taken to update ASIC records immediately.

It is important to note however that there can often be a trade off between adopting the simplest alternative to making ASIC records accurate and the best practice approach in relation to tax planning and asset protection. Similarly, the late fees of a best practice approach can also be prohibitive.

Image courtesy of Shutterstock