Leading gift and loan back case

Atia v Nusbaum: the leading case on gift and loan backs.

Other posts have dealt with various aspects of gift and loan back arrangements (see http://mwbmcr.blogspot.com.ar/2012/05/family-court-case-on-distinction.html and http://mwbmcr.blogspot.com.ar/2013/10/one-remedy-where-trust-distributions.html).

Arguably, the leading case in relation to gift and loan back arrangements is Atia v Nusbaum [2011] QSC044. As usual, a link to the full decision is as follows http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/qld/QSC/2011/44.html.

In summary the circumstances of this case were as follows:

1. Dr Atia (a cosmetic surgeon) entered into a gift and loan back style arrangement with his mother; 
2. when Dr Atia's mother subsequently called in the debt, Dr Atia argued that the loan and mortgage were not intended to be actually binding and were only a pretence to protect against situations where Dr Atia was sued professionally; 
3. in particular, Dr Atia argued that his mother was only calling in the debt secured by the mortgage because he had married his girlfriend against his mother's express wishes; 
4. the court found that all aspects of the legal documentation, including a deed of gift, loan agreement and registered mortgage, had been validly signed; and 
5. the court confirmed that the legal effect of the documentation signed was exactly as the parties intended it to be and there was no mistake or sham involved. This meant that Dr Atia's mother was allowed to enforce recoverability of the debt, and if necessary, exercise her rights under the registered mortgage. 

Until next week.

Super deed variations and resettlements

Confused about super deed variations?

Last week we had an adviser, probably quite rightly, question us as to why a superannuation trust deed could be totally revoked and replaced with a completely new document, while changes to a family trust deed tend to be extremely piecemeal.

The issue can be largely answered by reference to the Tax Office’s approach to resettlements.

Broadly, the Tax Office accepts that in relation to superannuation funds, a resettlement for tax purposes will never occur. Due to this approach (and stamp duty exemptions that apply in essentially every Australian state), most advisers recommend that when updating a superannuation trust deed, it is best to adopt a completely new deed.

In contrast, where updating a family trust deed, because of the risks associated from a resettlement perspective, it is usually best to only amend the provisions that are in particular need of being addressed.

Until next week.

Image Credit: sidibousaid cc

Double entrenching binding nominations

'Binding' nominations may sometimes be removed. 

In a recent post, we touched on the importance of reviewing a trust deed before making any superannuation death benefit payments.

The 'read the deed' mantra, which is so often used in the context of family trusts, is of similar importance in relation to self managed superannuation funds.

One particular provision to be aware of in this regard is that, even if a nomination (which appears to be binding) is embedded under the deed, unless the provision of that deed has a prohibition against amendment, the intentions of the parties may not in fact be achieved.

For example, the remaining trustees after death could elect to vary the deed (and effectively remove the binding nomination) before ultimately making a death benefit payment.

Until next week.

Death benefit nominations – read the deed

Read the deed.

Following on from recent posts concerning superannuation death benefit payments, I was reminded this week of the absolute importance of reading the superannuation trust deed before making any death benefit payment.

It is becoming more and more regular to see many people, as part of their overall estate plan, embedding their required superannuation distribution provisions into the superannuation trust deed. Where this is done, the fact that there might be other nominations, or even provisions in a person’s will, not be of any effect – rather the terms of the deed must be followed.

In a future post, I will touch on a related issue concerning binding nominations that are entrenched in superannuation trust deeds.

Until next week.