Tuesday, May 23, 2017

Seven dwarves, pizzas for the homeless and pre-chopped broccoli florets** – taking the detail to a whole new level

Following last week’s post, where I mentioned that, particularly in New South Wales, it is often the case that trustees are expressly prohibited from being beneficiaries of discretionary trusts there were a number of questions relayed to me. Thank you also for the suggestions as to what hair product Van Halen would have likely demanded at the height of their fame in the mid 1980s (see – Brown M&Ms, invasion by aliens and when trust beneficiaries aren’t beneficiaries).

The key reason the ‘trustee can’t be a beneficiary’ prohibition is so prevalent in New South Wales is that under the stamp duty laws there, in order for a trustee to be permitted to be appointed (particularly where there is a change of trustee of a pre-existing trust), that trustee must not be a potential beneficiary of the trust.

Obviously, there are a range of asset protection related issues in this regard as well. At the centre of these issues is the fact that a trustee is directly liable for misadventures of the trust. As a general rule, the maximum value of a trustee company from time to time should never be more than a nominal amount – ie $2. A trustee company receiving distributions as a corporate beneficiary will breach this rule immediately.

Importantly however, many trust deed providers that offer deeds nationally, will incorporate the prohibition on a trustee being a potential beneficiary, even for trusts that do not otherwise have any connection with New South Wales.

This prohibition will often be weaved into a trust instrument in a less than obvious manner. Unless there is a pedantic approach to reviewing the terms of a trust deed the prohibition will be missed.

In summary – yet another example of the importance of the mantra ‘read the deed’.

As mentioned last week, our upcoming webinar ‘Trust Horror Stories’ will have many case study examples highlighting key issues to be aware of with managing trusts.

Find out more here - https://viewlegal.com.au/product/webinar-trust-horror-stories/

Watch the promo video below.

** for the trainspotters, the author of the theme song of ‘Trainspotting’, being ‘Lust for Life’ (see - https://www.youtube.com/watch?v=jQvUBf5l7Vw) Iggy Pop allegedly had a contract rider requiring seven dwarves, pizzas to give to the homeless, and pre-chopped broccoli florets (to make them easier to throw away). Again there is a prize for anyone who can share a more unique list of riders.

Tuesday, May 16, 2017

Brown M&Ms, invasion by aliens and when trust beneficiaries aren’t beneficiaries

In preparing for the upcoming View webinar ‘Trust Horror Stories’ (see details below) we had a timely reminder of the mantra to ‘read the deed’.

The read the deed mantra is analogous to the famous contract rider of rock band Van Halen requiring M&Ms in their dressing room; with all the brown ones removed.

Originally thought to be the very definition of an outlandish group of prima donnas, the truth was all about the detail – if Van Halen ever saw brown M&Ms on arrival at a venue they were on notice that the venue operator did not sweat the detail.

On more than one occasion they used the existence of a brown M&M as cause for cancelling a gig; or perhaps more bluntly, telling the venue to go ‘Jump’**.

Contract lawyers have long been renowned for a similar technique when crafting ‘force majeure’ provisions and randomly including events such as inability to complete a contract due to invasion by aliens or abduction by unicorns to flush out those who are not checking every line.

In the trust deed example we had this week, a trustee company had been distributing income from a trust to itself as a corporate beneficiary (ie to cap the tax rate at 30%).

Aside from the asset protection issues that can arise from using a corporate trustee as a corporate beneficiary, the other main issue to consider was whether the company could in fact be a beneficiary of the trust – in other words did the deed include the trustee as a beneficiary.

As is quite often the case with trusts established in New South Wales (in particular), in this instance, the trustee was in fact expressly excluded as a potential beneficiary of the trust. See the following post for a more detailed analysis of this aspect of many trust deeds –

Read the deed - another reminder re invalid distributions.

The invalid distribution, which unfortunately had been made over a number of years, meant that a range of quite complex issues arose in relation to the trust, with a multitude of tax, trust law and accounting issues needing to be addressed. The solutions available for each issue were, at best, problematic.

As mentioned, our upcoming webinar ‘Trust Horror Stories’ will have many case study examples highlighting key issues to be aware of with managing trusts.

Find out more here - https://viewlegal.com.au/product/webinar-trust-horror-stories/

Watch the promo video below.

** for the trainspotters, one of Van Halen’s most popular songs is ‘Jump’ – see - https://www.youtube.com/watch?v=k8LdRJqjjRM and there is a prize for anyone who can confirm the list of contract riders for hair product.

Tuesday, May 9, 2017

Murphy’s Lew

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/SSpp06IM5j4

As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
The case study here is a relatively famous case, or at least a case about a relatively famous person, being Solomon Lew, the high profile retailer.

The factual scenario involved a relatively standard family trust.

The initial catalyst for the difficulties was the so-called ‘entity taxation regime'. Under these rules, the idea was to effectively tax trusts as if they were companies.

Mr Lew received some strategic tax advice.

The strategic advice was to do this.

The first step was that the trust entered into an arrangement where an asset revaluation was done.

This basically uplifted the carrying value of all of the assets of the trust to market value and created a big gap, a dollar gap between the carrying cost and the actual market value. That ‘notional gain' was distributed as a capital distribution, down to relevantly one of the sons and one of the daughters of Mr and Mrs Lew, and their respective spouses.

Fast forward about 5 or 6 years, the relationships of both of the kids with their respective spouses ended at about the same point in time.

The former spouses and their lawyers looked at the documentation and argued based on the accounts, the amounts were at call loans made to the trust.

The Lews’ argued that the amounts were in fact gifted back into the trust.

If it was a loan, then that would have to be immediately repaid down into each couple’s hands and then those would immediately form part of the matrimonial pool.

Unfortunately, what the ‘correct' answer was is unknown because the matter settled out of court. In some respects however, it doesn’t even matter what the answer was.

The key point is that no one actually thought about the documentation with a lot of clarity.
The title of this post is a play on Murphy’s Law, which is an adage or epigram that is generally quoted as 'anything that can go wrong, will go wrong'.

Murphy’s Law is profiled together with over 100 other adages in my recently released business book 'Laws for Life'.

A link to your (free!) copy of this book is below -


Password: laws4life

Please delete any pre-populated password.

Separately, many of the themes in this post will be featured in our upcoming half and full day Estate Planning Roadshow being held in Brisbane, Sydney, Melbourne, Adelaide and Perth.

Download the brochure here.

Watch the promo video below.

Tuesday, May 2, 2017

Thank you + some context - #NowInfinity + #View

As has been circulated in a number of forums, we are very excited to confirm View’s strategic partnership with NowInfinity.

Thank you for the positive feedback received already.

View has been on a mission to revolutionise access to quality legal advice in a range of highly specialised areas - namely estate planning, structuring, tax, trusts, asset protection, superannuation and succession planning.

Amongst an array of innovations our platform was one of the first to provide 100% upfront fixed pricing with a service guarantee. We have passionately strived to develop products that provide collaborative pathways with other professionals, in the process creating over 90 online and automated legal solutions.

Leveraging technology has been the enabler in us creating a seamless ecosystem in these specialisations.

Indeed, it has allowed us to create an ‘and’, not ‘or’ platform. That is, we have been able to continue to deliver bespoke tailored solutions for high net worth individuals and business owners, while simultaneously using the knowledge we have gained to build a disruptive solution for the majority of the market.

The centrepiece of our success to date has been the support of the adviser network across the country, given that our entire model is founded on advisers facilitating each solution, only involving View where it is clear that we can add value on a wholesale or business to business basis.

Similarly, NowInfinity has been on a mission to profoundly change the way businesses are functioning, workflows are implemented and documents are created, stored, updated and managed across the entire financial services and related industries.

Founded at around the same time as View, NowInfinity already has an impressive track record of launching numerous cutting-edge products.

The opportunity to combine the two businesses and deliver holistic and integrated estate planning solutions we believe is compelling on a range of levels, particularly as it offers accountants, financial advisers and other lawyers a truly differentiated facilitated model.

More context about the combined platform will be provided in our upcoming half and full day Estate Planning Roadshow being held in Sydney, Melbourne, Adelaide and Perth (the Brisbane event was last week).

Download the brochure here.

Watch the promo video below.

Finally, for those who had not otherwise seen the press release confirming details of the combined group, under the heading ‘Powerhouse disruptors join forces: NowInfinity and View Legal’ it is set out in full below.

Two powerhouse disruptors – cloud-based document and entity management platform NowInfinity, headed up by fintech entrepreneur Amreeta Abbott, and groundbreaking law firm View Legal, headed up by innovator and recognised expert in estate planning and tax law, Matthew Burgess, have joined forces, merging the digital business units of each firm and forming a strategic partnership on legal services.

“The partnership and merger provide accountants and bookkeepers, financial advisers, SMSF specialists and adminstrators and legal firms with a whole new level of solutions,” said NowInfinity CEO, Amreeta Abbott. “It enhances the NowInfinity platform, enabling members to efficiently create, collaborate and manage specific governance and life events for their clients.”

Ms Abbott said View Legal is a well-recognised legal firm that truly understands what matters to end clients. “View Legal’s team of lawyers, their processes and their non-traditional approach will also make legal advice more accessible to NowInfinity members and inspire them with the confidence to offer cradle-to-grave advice.”

Over the past four years, NowInfinity has delivered huge cost efficiencies via data automation and systems integration. “This has been magnified by the recent release of the NowInfinity Entity Management Suite, which provides corporate compliance, including ASIC lodgements; trust management and SMSF Compliance.”

Similarly, View Legal has created a disruptive and innovative way to offer legal services, with a particular focus on tax and estate planning by, amongst other things, introducing a fixed pricing model, actively collaborating with other professionals and creating an array of online and automated solutions.

Ms Abbott said that together, NowInfinity and View Legal will continue to innovate with the objective of delivering technology and services that underpin the rapid and required change within the accounting, financial advice and legal industries.

“First cab off the rank will be a new estate planning solution designed to eliminate the traditional barriers that have previously limited end-to-end client advice between accountants, financial advisers and lawyers,” she said.

Director of View Legal, Matthew Burgess said, “Leveraging technology to allow advisers to facilitate client solutions is the centrepiece of the View platform. Our partnership and merger with NowInfinity, the leading provider in this space, is exceptionally exciting and exemplifies the true meaning of synergy.”

About NowInfinity
NowInfinity is a technology company with a progressive and dynamic cloud based documentation and entity management platform solution with features enabling rapid company formation with ASIC, compliance tools and legal document templates for entity establishment and management. The solution is used by accounting, bookkeeping, financial advice, SMSF specialist, super administration and legal firms. It provides users with legal templates, entity registers, corporate compliance administration and fee management, SMSF compliance, trust management, document collaboration and data integrity via its integrations with but not limited to, ASIC, XERO, Microsoft Dynamics, salesforce.com, Class and electronic signatures – DocuSign.

About View Legal
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, with guaranteed up front fixed pricing replacing timesheets, entirely virtual office space replacing fancy city premises and active collaboration with advisers nationwide replacing the incumbent silo mentality.

Monday, April 24, 2017

They're 18, they’re beautiful and they're no longer ‘yours’

One regularly asked question in estate planning is ‘do my kids need estate planning documents?’.

The one word answer is – absolutely.

The more detailed answer to provide some context is as follows:
  1. Assuming a person otherwise has mental capacity, they are entitled to implement estate planning documents on reaching the age of majority (i.e. 18 years). 
  2. The main exception to this rule is that a married person may implement estate planning documents, even if they have not reached the age of majority. 
  3. If a person has reached the age of majority, but does not have estate planning documents in place, an array of complications can arise. 
  4. If the person dies, then their estate will be administered in accordance with the intestacy rules (previous posts have looked at various aspects of these rules, for example see How do the intestacy rules work? and What happens to assets in the estate if a person dies without a will?.
  5. Invariably, the intestacy rules trigger a ‘triple whammy’ – significantly more costs, significant time delays and often a distribution that does not reflect the wishes of the deceased. 
  6. Where a young adult loses capacity, the adverse consequences for the family can in some cases be even more traumatic than a person dying intestate. 
  7. In particular, without an enduring power of attorney, it is essentially a government department that has the default right to make the decisions on behalf of the incapacitated person. 
  8. While there is a statutory process that allows interested parties (for example, parents of the young adult) to have themselves appointed, this again invariably causes a ‘triple whammy’ of increased costs, increased delays and the risk that the preferred people are not in fact appointed. 
Unfortunately, we have seen a myriad of horror stories involving young adults without any estate planning arrangements in place, for example:
  1. A 21-year-old who died with over $1 million in assets. These assets were as a result of being a member of multiple superannuation funds that she had joined working in a range of casual positions during university. Each fund had automatic insurance, regardless of the member balance, that totalled over $1 million. 50% of these entitlements went to the lady’s estranged father whom she had not even spoken to for over 15 years. 
  2. A 19-year-old man who had been gifted over $300,000 by his parents to help acquire his own unit. On his death the unit passed to a lady who claimed to be his de facto, but whom the parents had never in fact met. 
  3. An 18-year-old man who was left stranded in an incapacitated state in Spain following an accident at the ‘running of the bulls’. As his parents were not appointed as his enduring attorney, they had no legal authority recognised by the Spanish authorities. 
As a separate comment - the popularity of recent posts leveraging pop references has been used again, with a song, the most popular version arguably recorded by Beatle’s drummer Ringo Starr ‘You’re sixteen, you’re beautiful and you’re mine’ - see https://www.youtube.com/watch?v=8ainB6qnWBI

Finally, many of the themes in this post will be featured in our upcoming half and full day Estate Planning Roadshow being held in Brisbane, Sydney, Melbourne, Adelaide and Perth.

Download the brochure here.

Watch the promo video below.

Image courtesy of Shutterstock

Tuesday, April 18, 2017

Don't believe the hype - trusts do protect assets

Previous posts have considered the true impact of arguably the highest profile decision in relation to trusts and asset protection, being the decision in Richstar (that is - Australian Securities and Investments Commission v Carey (No 6) (2006) 153 FCR 509). The most recent post is available here - Richstar – Another Reminder

More recently the decision in Fordyce v Ryan & Anor; Fordyce v Quinn & Anor [2016] QSC 307 has again reinforced that the reasoning in Richstar, at least as it relates to the ability to attack assets held via a discretionary trust, is at best questionable.

In particular, the case confirms succinctly as follows -

'It is difficult to accept as a principle of reasoning that a beneficiary’s legal or de facto control of the trustee of a discretionary trust alters the character of the interest of the beneficiary so that it will constitute property of the bankrupt if the beneficiary becomes a bankrupt.

To the extent that Richstar might be thought to support such a principle, it has not been followed or applied subsequently and it has been criticised academically.'

As set out in previous posts, there are numerous decisions now that reached a similar conclusion.

A selection of the subsequent cases is summarised below. If you would like access to the full copies of any of the decisions mentioned in this post, please email me:
  1. Tibben & Tibben [2013] FamCAFC 145 - The only ‘entitlement’ of the beneficiaries under the Deed of Settlement was a right to consideration and due administration of the trust: Gartside v Inland Revenue Commissioners; 
  2. Deputy Commissioner of Taxation v Ekelmans [2013] VSC 346 - The applicant relied on the decision in Richstar to contend that the cumulative effect of the role and entitlement of Leopold Ekelmans under the trust instruments amounted to a contingent interest in all of the assets of the trust, making those assets amenable to a freezing order as if the assets of Leopold Ekelmans. The Court found that the applicant could not in this matter rely on Richstar; 
  3. Hja Holdings Pty Ltd and Ors & Act Revenue Office (Administrative Review) [2011] ACAT 91 – notwithstanding that beneficiaries under a ... discretionary trust have some rights, such as the right to have the trust duly and properly administered, generally a beneficiary of a discretionary trust, who is at arm's length from the trustee, only has an expectancy or a mere possibility of a distribution. This is not an equitable interest which constitutes "property" as defined; 
  4. Donovan v Sheahan as Trustee of the Bankrupt Estate of Donovan [2013] FCA 437 - a beneficiary of a non-exhaustive discretionary trust has no assignable right to demand payment of the trust fund to them (and nor have all of the beneficiaries acting collectively) and that the essential right of the individual beneficiary of a non-exhaustive discretionary trust is to compel the due administration of the trust; 
  5. Simmons and Anor & Simmons [2008] FamCA 1088 – the court and parties referred to Richstar on a number of occasions and confirmed that a beneficiary has nothing more than an expectancy. 
As a separate comment - the popularity of last week's post leveraging a 1980s pop reference has been used again, perhaps with a slightly more obscure song, Public Enemy's 'Don't believe the hype' is linked here - https://www.vevo.com/watch/public-enemy/dont-believe-the-hype/USDJM0400011

Finally, many of the themes in this post will be featured in our upcoming half and full day Estate Planning Roadshow being held in Brisbane, Sydney, Melbourne, Adelaide and Perth.

Download the brochure here.

Watch the promo video below.

Image courtesy of Shutterstock

Tuesday, April 11, 2017

Money for nothing... Succession planning grants for Queensland farming families

The Queensland Government has recently announced the introduction of a new farm management grant which provides financial assistance to Queensland farming families wishing to review or update their succession planning arrangements.

On the basis that every family should in theory ensure they have comprehensive estate and succession planning in place the grant could be viewed through the lense of the iconic 1980's song - that is - money for nothing.

This said, the grant is however only available to Queensland primary producers (and their families) and can only be used to fund professional fees incurred in relation to the family’s estate planning arrangements and related succession planning issues.

The grant will cover 50% of the professional fees incurred by the family, up to a maximum of $2,500 per year. In other words, the total spend in any year will need to be at least $5,000 to maximise the contribution from the Government.

The availability of the grant will hopefully encourage more Queensland farming families to get their succession plans in order.

Ideally it may also encourage other State Governments to adopt similar incentives.

If you or your clients would like more information in relation to the farm management grant, please contact us.

In this regard, we are excited to be presenting our half and full day Estate Planning Roadshow in Brisbane, Sydney, Melbourne, Adelaide and Perth that will explore a range of planning opportunities in this space.

Download the brochure here.

Watch the promo video below.

Image courtesy of Shutterstock