Tuesday, October 8, 2019

Storing up an inheritance** against family law claims


With thanks to the Television Education Network, today’s post considers the above mentioned topic in a ‘vidcast’.

As usual, an edited transcript of the presentation is below -

Bonnici v Bonnici was a family law case involving a 20-year marriage, where there was an inheritance received by the husband about six months prior to the separation.

The couple were together for 20 years, 19.5 years in, the husband receives a significant inheritance in his personal name and six months later he separated from his wife.

The wife argued that that inheritance that he received should be included in the pool of matrimonial assets available for division between the two of them.

The husband tried to argue the inheritance should be a financial resource only, because it was an amount that he received from his parents and wasn’t an amount that he and his wife had built up during the relationship.

The court held that an inheritance is not protected from family law proceedings just because it is an inheritance.

They said there might be instances where an inheritance is protected and is not available as a matrimonial property, but there would need to be some exceptional circumstances in order for that to be the case.

Therefore in Bonnici, that entire inheritance was included in the matrimonial pool, subject to the parties then making submissions about their respective contributions.

One of the factors which was relevant in Bonnici was that the wife argued (and the Court accepted) that she had actually contributed to the value of the wealth that was inherited by the husband, because the husband and wife had been actively involved in a restaurant business owned by the parents and she had made contributions to the success of that business for remuneration which was less than market value.

Her argument was that she had done unpaid work in the business and had also had homemaking duties while her husband contributed to the business.

One of the factors that the court considered when deciding that inheritance was matrimonial property was the fact that the wife had contributed to the overall value of the parents’ estate that passed to the husband and as a result, the inheritance was exposed in the family law proceedings.

** For the trainspotters, ‘storing up inheritance’ is a line from the Johnny Cash song ‘What is Man’.



Tuesday, October 1, 2019

Are there no limits** to an Attorney’s Powers?


Previous posts have looked at various aspects of powers of attorney, see for example:
  1. EPAs and conflicts of interest; and
  2. Incapacity and SMSF control.
A validly appointed financial attorney has extremely wide powers in relation to what they may do on behalf of the donor.

Following on from last week’s post there were questions raised about the limitations imposed on attorneys.

While the rules in each state are slightly different, generally speaking, an attorney is prohibited from doing any of the following on behalf of a donor:
  1. acting as a director in place of the donor – a directorship is a personal role and cannot be delegated;
  2. voting in government elections;
  3. signing affidavits in relation to information that is known only to the donor;
  4. marrying or divorcing a spouse;
  5. making a will on behalf of the donor; and
  6. entering into transactions where the donor’s interests conflict with the attorney's, unless the document appointing the attorney waives potential conflicts of interests. 
While most of the prohibitions on attorney conduct are clear, there remains some confusion about the ability of an attorney to implement or change a binding death benefit nomination for the donor’s superannuation entitlements.

Some of the key issues in this regard were also explored in an earlier post.

** For the trainspotters, ‘no limits’ is a line from the Bjork song from 2007, namely ‘Hope’.

Tuesday, September 24, 2019

The firm of ‘now’ – 5 things about the way you do the things you do**



Following on from recent posts, to give some insight to what we believe a ‘firm of the future now' looks like, 5 examples from our business that we have abandoned as compared to a traditional model are as follows:
  1. Guaranteed fixed pricing – the definition of a competent service provider is someone who can devise a scope of work and provide an upfront fixed price that they are willing to refund in full if the customer is not satisfied with the performance.
  2. ROWE – if you do not know what this is for, Google it or click here and join the movement.
  3.  Solution choreographed teams – we work with whomever and on whatever terms are best to achieve the client’s objectives.
  4. AAR – again, if you do not know what it is, Google it or click here, and embed it into your business today.
  5. Diversity of thought – when two people in business are constantly of the same opinion, one or more is irrelevant. It raises diversity in every sense of the word and arbitrary politically correct percentages become irrelevant.
** For the trainspotters, ‘The way you do the things you do’ is a song by the Temptations from 1965, The version I first heard was by Hall & Oates.

Tuesday, September 17, 2019

The time is now** for the firm of ‘now’ – 5 things not to do


Following on from recent posts, to give some insight to what we believe a ‘firm of the future now' looks like, 5 examples from our business that we have abandoned as compared to a traditional model are as follows:
  1. No Timesheets – with timesheets, all we ever focused on was what was chargeable – without timesheets, we now focus on what is valuable.
  2. No leave policies – leave policies are a hangover from the industrial age – it is time to move on.
  3. No individual budgets – while we certainly have team goals, these are never broken down into individual monetary targets. Our targets are aligned around our performance in the eyes of customers. If we get those right, everything else flows (including money).
  4. No performance reviews – again, a very poor hangover from the industrial age.
  5. No diversity goals – seeking to mandate minimum percentages of certain genders, cultures, religious beliefs or sexuality disguise much bigger problems with the underlying business model.
** For the trainspotters, ‘Time is Now’ is a song by Moloko from 2000.

Tuesday, September 10, 2019

What’s Your Story?** … Tax Sharing & Funding Agreements


Though originally designed to primarily assist 'the big end of town', the tax consolidations regime is available to any Australian company and often can be very useful for small to medium size business operators.

One of the key consequences of forming a tax consolidated group is that all of the members of the group are jointly and severally liable for the tax liabilities of the group as a whole.

If however, each member of the group signs a valid tax sharing agreement (TSA), then it is possible for each member of the group to only be responsible for a 'reasonable' portion of the Group's tax liability.

A TSA is generally seen as a document that should be in place whenever a tax consolidated group is formed.

Generally, a TSA will also set out how any member of the group can make a 'clean exit', ensuring that it will not bear any future liability in relation to taxes that arise once the entity has left the group, even where they relate to a period where the entity was in fact a member.

Often, a TSA will be implemented in conjunction with a tax funding agreement (TFA).

Due to the way in which the tax consolidations regime is structured, the head entity of a consolidated group is the one that is ultimately liable for the tax of the group as a whole.

In order to ensure that the head company has the funds to meet the tax liability, a TFA can be utilised to regulate the manner in which that funding is to occur, particularly with reference to relevant accounting standards.

While most consolidated groups in the small to medium enterprise space will (or at least should) implement a TSA, often TFAs are only utilised by larger tax consolidated groups, given that they are more mechanical and technical in nature.

** For the trainspotters, ‘what’s your story’ is a line from the Red Hot Chili Peppers’ song from their 1986 album Stadium Arcadium, namely ‘Tell Me Baby’.

Tuesday, September 3, 2019

2+2 made 5** … adding testamentary trusts by Court Order – a family law perspective


With thanks to the Television Education Network, today’s post considers the above mentioned topic in a ‘vidcast’.



As usual, an edited transcript of the presentation is below -

One very interesting decision was originally published as ADT v LRT and then the appeal, the appeal decision was released as GAU v GVT.

The case involved a mother who had a will that she’d signed giving a significant number of assets to her son in his personal name.

The son was going through divorce proceedings and the mother had lost capacity and was unable to change her will.

The Court was asked by the son to incorporate a testamentary trust into her will for the express purpose of protecting the son’s future inheritance from his matrimonial proceedings.

The inheritance was estimated to be about $5 million, which was significant in terms of the matrimonial proceedings if it was successfully excluded.

In the first instance (ADT v LRT), the Court said that they agreed the testator would have made the change if she still had capacity, but then concluded that it was inappropriate to interfere with Family Court proceedings and therefore refused to grant the order.

On appeal (GAU v GVT), the son was successful and the Court said that the will maker’s intentions were the critical test and there was no doubt she would have made the change if she still had capacity.

The Court said the Family Court proceedings were only relevant at the margins and it agreed to grant the order incorporating the testamentary trust into the mother’s will.

** For the trainspotters, ‘Two and two made five’ is a song by Ned’s Atomic Dustbin from 1992.


Tuesday, August 27, 2019

Legal Professional Privilege** in adviser facilitated estate planning


A question came up recently from a financial planning licensee about whether an adviser attending an estate planning meeting between a client and their lawyer inadvertently waives the client’s legal professional privilege over those estate planning discussions.

As mentioned in last week’s post, legal professional privilege protects communications between a client and their lawyer from third parties, if the communications are brought into existence for the dominant purpose of obtaining legal advice. However, legal professional privilege over communications between a lawyer and a client can be waived if the information is disclosed to a third party.

Broadly we confirmed that we do not believe legal professional privilege is particularly relevant in the context of most estate planning discussions with clients. In particular, the advice generally provided to the client in a meeting is unlikely to be of the nature that legal professional privilege would need to be claimed. Furthermore, the legal documents (i.e. the final wills and powers of attorney) themselves are not generally privileged.

Indeed, in an adviser facilitated estate planning scenario, the client will have, in most cases, already disclosed most (if not all) of the information that will be discussed in the online meeting to the adviser as part of the initial fact finding process before the lawyer commences the legal aspects of the estate planning exercise.

We therefore believe that the risk of any implied waiver of legal professional privilege by having a client’s adviser sitting through the online meeting with the client is low and it would be an unnecessary step looking to avoid having the adviser attend the online meeting.

As most readers will be aware, our strong preference is to have the adviser attend the meeting as, generally speaking, their insights about the appropriateness of the estate planning strategy for the client’s family and financial circumstances is highly valuable.

** For the trainspotters, last week I mentioned that ‘privilege on privilege’ is a line from one of my favourite privilege related songs, from the Church and their 1986 album Heyday, namely ‘Myrrh’. Based on further research, this song is not simply one of my favourite privilege related songs, it is the only decent song I can find, thus listen again.