Tuesday, June 25, 2019

Tinder-isation + simplification of the law

As mentioned in a previous post 'gamification' has become expected across all aspects of our lives. This was part of the reason for us in ‘tinder-ising’ each of the View apps on both Apple and Android.

Based on adviser feedback, our latest app release now allows access to all 8 of the View apps, through a ‘master app’.

The 8 apps are as follows:

1) estate planning;

2) self managed superannuation funds;

3) estate admin;

4) business succession;

5) memorandum of directions;

6) directors duties;

7) binding death benefit nominations; and

8) adviser facilitated estate planning fixed pricing.

Each app generates a free white paper or template legal document.

The ‘View Apps’ App can be downloaded below:

1) Apple

2) Android

All View apps can also be accessed via our website.

Tuesday, June 18, 2019

Don’t ask me (why)** would a trust have made a family trust election?

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.

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

Why would a trust have made a family trust election?

Historically, primarily an election would be made because there are franking credits that are flowing through the trust.

In particular, if there are more than $5,000 worth of franking credits to be claimed, then you can't actually access them unless you've made a family trust election. This would be the main reason, and by far, in our experience, the most relevant one.

The other reasons include that there are losses or bad debts. It is infinitely easier to satisfy those rules with an election in place.

The last main reason is ‘because’ ... and that’s not a scientific term.

That's a term that ends with ‘because’.

There's nothing that actually comes after the because.

It is so easy to make these elections. You just tick the box and it's done. Our sense is that many accountants went through, particularly in the late 2000s, and made elections without any thought at all, and it was because.

When the election is then reviewed as part of an estate planning exercise, and we think this is going to come up more and more as part of the 328-G provisions, the conclusion will be ‘we don’t know why we've made that election and it's more restrictive than we need it to be’.

There might therefore be a planning opportunity for a trust that has made a family trust election that is later viewed as inappropriate.

In particular, under 328-G, it should be possible to transfer business assets across to a new trust that will not need to have made a family trust election.

** For the trainspotters, the title today is riffed from PiL’s song of the same name, from 1990.

Tuesday, June 11, 2019

Super death benefits and conflicts of interest: Guilt is a useless emotion**

As mentioned in last week’s post, arguably, the highest profile decision in relation to the obligation of a legal personal representative (LPR) to avoid creating a conflict of interest is the decision in MacIntosh.

The decision in Brine v Carter [2015] SASC 205 provides another example of the key issues that need to be considered by LPRs, who are also potential beneficiaries of a superannuation death benefit. As usual, a link to the decision is here.

In summary, the factual scenario was as follows:

1) The deceased appointed his de facto partner and three children from an earlier relationship as his LPR.

2) The de facto made an application for the superannuation death benefits to be paid to her directly, as opposed to the estate.

3) If the superannuation proceeds had been paid to the estate, the three children would have been entitled.

4) For a period of time prior to the death benefit being paid, the de facto partner withheld details of the superannuation death benefit from the three children.

5) Importantly however, by the time the super fund trustee exercised its discretion, the three children were aware of all relevant information concerning the death benefits and had themselves made an application for the death benefits to be paid to the estate.

6) It was held that this was a critical point, that is, the other LPRs had effectively consented to the de facto making her individual claim by themselves making a claim on behalf of the estate in full knowledge of all relevant circumstances.

While the decision of the superannuation fund to pay the entitlements to the de facto ultimately was upheld, a number of key principles were explained by the court, including:

1) Where an LPR seeks payment of a death benefit to themselves personally (i.e. not to the estate), they will be in a position of conflict, unless the will expressly permits the conduct.

2) Where there is no express provision waiving conflict, an LPR should renounce their position before taking any active steps to seek personal payment of the death benefit.

3) Alternatively, the LPR can seek the consent of all other LPRs (if any).

4) In seeking the consent of the other LPRs, there is no obligation to also receive consent from each beneficiary under the will.

5) Complications will likely arise where there is a sole LPR. In that instance, if they choose not to renounce their role, there would be an obligation to receive the informed consent of each potential beneficiary.

Ultimately, the decision is yet another reminder of the importance of a holistic approach to every estate plan.

** For the trainspotters, the title today is riffed from New Order’s song of the same name, from 2005.

Tuesday, June 4, 2019

The View** on workarounds to avoid the McIntosh decision

As mentioned last week, the McIntosh case was concerning given that the son’s apparent objective of providing for his mother was not achieved.

While there are obviously a number of issues in relation to this case, three critical steps that could have been taken are as follows:

1) To the extent that they were available, binding nominations could have been made to the mother personally (in this regard, non-binding nominations had in fact been made nominating the mother solely).

2) With the aid of hindsight, the mother should not have applied to administer the deceased estate. This would have relieved her of any duty to act in the best interests of the estate and therefore she could have proceeded to make the application for superannuation benefits to be paid to her personally without her actions being challenged.

3) The son should have made a will at least appointing his mother as executor (this would have potentially meant that she did not have any conflict of interest as the son would have been deemed to have been aware of the potential when making the nomination). Ideally, the will would have also nominated the mother as the sole beneficiary of the estate – thereby meaning that even if the funds were not paid to her directly, she should have ultimately received them in any event.

Next week’s post will consider another case which further informs the key issues in this regard.

** For the trainspotters, the title today is riffed from The Church’s song of the same name, from 1985 (and no, View was not named after this song …).