What roles do ‘quasi-ownership’ arrangements play in succession planning

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘What roles do ‘quasi-ownership’ arrangements play in succession planning ?’ at the following link - http://youtu.be/oUcuYyRXZ_U



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

This is probably a really developing area in terms of what we've seen in recent times, because out of the GFC, the changes to trust law that many of us have experienced first hand in terms of the impact of relationship breakdowns and/or the intergenerational transfer that goes wrong; you find in many family scenarios they are effectively wanting to, if not fully rule from the grave, at least do a very good impersonation of it.

In that scenario, as much as we've spoken earlier today about secured loan arrangements and actually transferring assets down and securing those under a loan arrangement; a more ‘bespoke’ version of that is never having the asset leave the master trust in the first place and using tools such as letters of wishes or the way in which the trustee company constitution is crafted to allow the underlying beneficiaries to have indirect access to the assets, whether they be business assets or investment assets.

Beneficiaries will probably still have to meet KPIs in relation to their performance and running of those assets, but they never actually get the physical ownership or the legal control of them.

It may be overtime that beneficiaries do ultimately receive legal ownership or legal control, but for an interim period, which may last for many years, what this final form of structure does is effectively keep the assets within the initial master trust structure and really only have a synthetic or notional allocation of assets made, at a trustee level, for the underlying beneficiaries.

Until next week.

War stories

As many regular readers will be aware, examples are often used in these posts and our various seminar presentations based on client situations.

This said, unless the particular client scenario has gone through the court system (and is therefore publicly available information), we are always very careful to not base our examples entirely on any one particular client so as to ensure client confidentiality is maintained.

In this context then, we are also always supportive of any adviser that wants to use (and where appropriate embellish) case study examples that we may have historically shared when they are positioning concepts with clients.

Until next week.

Prohibitions on trust deed variations

As mentioned last week, we often find trust deeds have prohibitions on a trustee’s ability to vary the document.

Some of the issues to be aware of in this regard include:

1    Often variations can only be made with the consent of someone other than the trustee, for example an appointor, guardian or even the settlor.

2    In some cases, variations can only be made to the core (or trust) provisions of the deed, as opposed to the more general powers, which will usually limit the ability to vary the income provisions.

3    Alternatively, while powers can be added to a trust, a deed will sometimes provide that any existing powers cannot be varied – this can be particularly problematic where there is a desire to update the income distribution provisions.

4    There are countless other examples of restrictions on variations and indeed, we have come across deeds where there is a blanket prohibition on making variations to the deed, or at least on variations to particular clauses in the deed.

While there are often workarounds no matter what restriction is imposed, the fundamental rule to remember is that each and every deed must be read before embarking on a variation.

Until next week.

ATO reminder – read the deed

Following on from the recent posts about the ATO draft determination on resettlements (TD2012/D4), today's post is in effect a further reminder of an earlier post that focused on the catch phrase 'Read the Deed', again with thanks to co View Legal director Tara Lucke.

One of the key themes in the recent ATO determination is that a trust variation must be made within the scope of the variation power in the trust deed.

If a purported variation is made outside the scope of the particular variation power, the ATO has provided guidance that this may result in the termination of a trust (i.e. a resettlement for CGT purposes).

We are constantly encountering deeds that have significant limitations on the variation power, particularly with the regular amendments we are doing for clients of accounting firms to ensure that trust deeds are up-to-date for all recent changes in law.

Next week’s post will focus on some of the common variation prohibitions we come across.

Until next week.

More comments on ATO resettlements determination

As mentioned in the last post, the ATO has released a draft determination, TD2012/D4, in relation to resettlements.

With particular thanks to View Legal director Tara Lucke, today’s post focuses on the interplay of the draft determination with the ATO’s previous published position on resettlements – the Statement of Principles.

In summary, according to the determination:

1.        The ATO has withdrawn its Statement of Principles as of April 2012.

2.        The ATO accepts that although the Clark and Commercial Nominee cases were decided in perhaps slightly different contexts to many of the issues dealt with in the Statement of Principles, the conclusions reached in each of those two cases do have a broader application.

3.        Provided an amendment to a trust is valid at trust law and is in accordance with the terms of the trust instrument, CGT event E1 should not be triggered.

4.       The ATO will expect any deed of variation to be made in accordance with trust law principles and the particular requirements of the trust instrument in order for the amendment to be effective.

Until next week.