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

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.

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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 -

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

Tuesday, April 4, 2017

The trust beneficiary, there never was

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 -

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

The case study that we will explore here involved a husband who was breaking up with his spouse.

The husband had been the sole trustee of the relevant trust from day one. We'll call him Mr Y. Mr Y was also the primary beneficiary of the trust.

The wife was trying to argue that Mr Y had received distributions overtime and therefore she was entitled to percentage share of the trust.

So a fairly standard analysis of a family trust in a family law dispute. We were called in because the wife’s lawyer had the hide to actually read the trust deed.

The trust instrument stated that in relation to the definition of primary beneficiary, in no circumstances could a primary beneficiary receive distributions, if at any time the person was a trustee.

So from day one, the provisions of the deed had meant that Mr Y was never in fact a potential beneficiary of the trust and yet he had received significant distributions over an extended period of time. A fundamental issue triggered simply because no one had actually read the trust deed.

Interestingly, this type of exclusion of beneficiary class is in virtually every trust instrument from a New South Wales trust deed provider. More problematically, this type of provision is actually used by countless other deed providers as well, whether they're based in New South Wales exclusively or whether they in fact are based in other parts of the country.

In this regard, we are excited to be presenting 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.

For your limited opportunity to access special early bird pricing for our Roadshow, download the brochure here.

Watch the promo video below.