Tuesday, October 20, 2020

‘The Vibe’, family trusts and family law (part 2)

View Legal Blog ‘The Vibe’, family trusts and family law (part 2)

Last week's post considered some of the key issues in relation to the Family Court's ability to access assets of a trust.

The decision in Harris & Dewell and Anor [2018] FamCAFC 94 provides more context to the approach of the court in this area. As usual if you would like a copy of the case please contact me.

In summary, the factual matrix was as follows:
  1. A unit trust was established about 5 years before the start of the relevant relationship.
  2. The husband and husband’s father were the sole shareholders in the corporate trustee of the unit trust (the father owning 67%, the husband 33%). Although the husband was for many years a director of the corporate trustee, he had retired from this role some years before the trial, replaced by his solicitor. The solicitor was however accustomed to acting in accordance with the husband's wishes.
  3. At trial the husband’s father was the sole unit holder of the unit trust (and the husband had never owned any units), although it was assumed that the husband would inherit the units on his father's death (the father was aged 99 at the time of the trial).
  4. It was concluded that the level of control held by the husband over the trust was clearly significant.
In holding that the trust was not an asset of the husband (although it was taken into account as a financial resource) the court confirmed as follows:
  1. Property of a trust can be treated as property of a party only where evidence establishes that the person or entity in whom the trust deed vests effective control is the ‘puppet’ or ‘creature’ of that party.
  2. Control of itself is not sufficient to deem trust assets to be the property of a party to a relationship. Instead, what is required is control over a person or entity who, by reason of the powers contained in the trust deed can obtain, or effect the obtaining of, a beneficial interest in the property of the trust.
  3. In other words, the spouse must have an actual ‘lawful right to benefit from the assets of the trust’.
  4. Here, despite the extensive control held by the husband, he did not have the ability to guarantee benefit of the assets to himself - that right at all times rested with the husband's father.
  5. In a sentence, the trust was not the husband's alter-ego nor a device used by him for his sole benefit.
Therefore, the assets of the trust were not property of the husband for the purposes of the settlement proceedings with the former wife.

** for the trainspotters closely behind Dennis Denuto and his vibe principle is the refrain ‘tell ‘em they’re dreaming’.

Tuesday, October 13, 2020

‘The Vibe’, family trusts and family law (part 1)**

View Legal Blog ‘The Vibe’, family trusts and family law (part 1)**

Previous posts have referenced the legal principle known as ‘The Vibe’, as developed by the legendary Australian movie ‘The Castle’.

In an arguably analogous decision the family law case of Romano & June [2013] FamCA 344 is relevant. As usual, if you would like a copy of the decision please let me know.

The case was complex and the judgement took over 19 months to be issued by the court following completion of the trial and ran to almost 100 pages in length.

It is important to note that the court held that the husband was not being honest about many of his arguments concerning the trust. Furthermore, several of the witnesses whose evidence the husband also relied upon (for example, close friends and colleagues) was also held not to be honest.

One, of many examples, listed in the case of the courts view of the husband is best captured in the following extract -
“I am quite satisfied that the husband’s resignation as a director of [British Virgin Island company] X1 and several other companies, after the commencement of these proceedings, was effected not for the reasons advanced by the husband and those of his witnesses who gave evidence about the matter, but so that he could not be required to obtain access to any of the records of the companies that directors lawfully have access to. That he did so resign after being put on notice by the solicitors for the wife that he should not do so gives me added cause for such satisfaction, on the balance of probabilities.”
Briefly, the factual matrix was as follows:
  1. the relationship was around 16 years in length (9 years of marriage);
  2. there were no children of the union;
  3. the husband had set up a family trust some years before meeting the wife as part of a number of entities, including (for example) a company the husband was deemed to control (despite having no legal ownership) in the British Virgin Islands, that was set up around the time the husband was advised to (and did) move to Monaco (apparently for tax planning purposes);
  4. at all relevant times the husband was one of two directors of the corporate trustee of the trust and a primary beneficiary of the trust; and
  5. the husband however was never an appointor of the trust, nor a shareholder of the corporate trustee.
In rejecting the husband's argument that he did not control the trust (and was merely a potential beneficiary of future distributions), the court confirmed:
  1. while the husband did not have legal control of the trust, he did have effective control;
  2. the husband deliberately looked to avoid being in legal control of the trust, while in reality regarding the assets of the trust as his; and
  3. given the level of control the husband exercised over the trust assets, it was appropriate to include them as assets of the marriage and available for division in the property settlement.
The key aspect of the court's reasoning is arguably best captured by the combination of its assessment of the husband's lack of honesty and the following extract from the judgement
“The question whether the property of the trust is, in reality, the property of the parties or one of them.... is a matter dependent upon the facts and circumstances of each particular case including the terms of the relevant trust deed ... [Here the] husband’s actual control would allow him to cause those assets to be appointed to himself or his wife along with his and her right to due consideration constitute property of the parties.”
** for the trainspotters Dennis Denuto and his need no introduction.

Tuesday, October 6, 2020

Trusts structuring checklist - part III**

View Legal Blog Trusts structuring checklist - part III

The last two posts have each mentioned seven key issues that should generally be considered whenever establishing or amending a discretionary trust deed.

Set out below are a further seven issues that should generally be taken into account:
  1. If there is an appointor, is the role automatically terminated on certain events (for example death, bankruptcy)?
  2. If the appointor ceases to act, do their powers pass to anyone else, and if so, who?
  3. If there is more than one appointor, must they act jointly?
  4. Is the appointor a beneficiary of the trust?
  5. Will the trust own more than one asset class?
  6. For an existing trust, has there been a pattern of income or capital distributions to at risk individuals associated with the trust?
  7. For an existing trust, have there been variations to the deed following establishment that impact on the overall control of the trust?
** for the trainspotters, a classic song from Led Zeppelin album ‘III’, namely ‘Immigrant song’.

Tuesday, September 29, 2020

Trust structuring checklist - part II

View Legal Blog Trust structuring checklist - part II

The post last week mentioned seven key issues that should generally be considered whenever establishing or amending a discretionary trust deed.

Set out below are an additional seven issues that should generally be taken into account:
  1. Does the trustee effectively/practically control the trust in an unfettered way?
  2. Does the trustee exercise its powers independently or are they controlled or subject to approval by any other person/entity?
  3. Is the trustee a beneficiary of the trust?
  4. Can a beneficiary or a class of beneficiaries control the actions of the trustee?
  5. Can beneficiaries be removed or added, and if so by whom?
  6. Is there any risk that the trustee may be seen as simply the ‘alter ego’ of some other person?
  7. Does someone (e.g. an appointor, guardian, principal) have the power to unilaterally change the trustee?
** for the trainspotters, a classic song from Prince album ‘Hits (Vol. II)’, namely ‘Raspberry Beret’.

Tuesday, September 22, 2020

Trust structuring checklist - vol I**

View Legal Blog Trust structuring checklist - vol I

Over the years we have developed a checklist of some of the key issues that should be considered whenever establishing or varying a discretionary trust.

Obviously, the relevance of each issue depends on the exact circumstances of the client and over this and the next two posts, each of the 21 issues in our non-exhaustive list will be summarised.

The various issues are not listed in any particular order of priority and the first seven items on the checklist are as follows:
  1. Who is the trustee of the trust?
  2. If the trustee ceases to act, do their powers pass to anyone else, and if so, who?
  3. Is the trustee an individual or a company?
  4. If the trustee is a company, who are the directors?
  5. Is there a default distribution of the income and capital of the trust to certain beneficiaries?
  6. Does the trust deed restrict the range of beneficiaries who can receive income or capital distributions?
  7. Does the trustee need consent/approval of any other person for distribution?
** for the trainspotters, a classic song from George Michael album ‘Listen without prejudice (Vol. 1)’, namely ‘Freedom 90’.

Tuesday, September 15, 2020

Read the deed … another one (bites the dust)**


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.

The following case study falls under the mantra ‘Read the Deed’.

Here, the factual scenario centred on a standard family trust.

However, when I say ‘standard’, I should put an asterisk. This is because we thought it was standard and the accountants that had sent the job in to us had been operating for about 10 years on the basis that it was a ‘standard’ family trust.

Under the trust deed, there was a principal (often also referred to as an appointor). In other words, there was a person who had the right to hire and fire the trustee.

As is well understood, in some trust instruments where there is a principal or an appointor, there is then under the power to vary a requirement that that principal or appointor consent to any purported variation before the trustee is permitted to proceed with the proposed variation.

Here, arguably, re-enforcing the assumption that the deed did seem to be a standard family trust, pursuant to the variation power, the principal was not required to consent to any variation.

Importantly, there was a variation that had been done about 12 years ago, which was two years before the current accountant became involved. Under the variation, there was the nomination of a bucket company. In other words, the nomination of a corporate beneficiary to help cap the tax rate at 30 cents – a standard strategy.

As part of a review and updating of the trust deed, we, in conjunction with the accountant, actually sat down and read the entire trust instrument.

What we discovered was that the second to last clause in the deed, buried with the general powers (for example, powers about the power to lend, the power to invest), was a clause that had a nebulous title of ‘Further Provision’.

The Further Provision clause was said to apply in relation to any exercise of the power to vary that resulted in the nomination of a new beneficiary.

The clause mandated that the trustee must obtain the principal’s consent before relying on the variation power.

The relevant deed of variation however did not have the principal’s consent. There was therefore 12 years of distributions to the bucket company, and every single one of those was void for the failure to comply with the trust instrument.

The only real solution, with the aid of hindsight, is to ensure in the future, always - read the deed, read the deed, read the deed, read the deed.

As always thanks to the Television Education Network for the video content here.

** for the trainspotters, the title here is riffed from the Queen song ‘Another one bites the dust’.

Tuesday, September 8, 2020

Can(‘t) explain Family Constitutions?**



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.

In relation to the classic form of family constitution, there is no legal enforceability of the terms of the document.

One clear advantage of this is that there are therefore definitely no transaction cost issues with entering into a family constitution.

This is because the document is simply a memorandum of understanding, a statement of intent, a handshake agreement, a best wishes or best endeavours arrangement, but nothing else.

In other words, there is no change in legal ownership of any assets.

Thus, there is no stamp duty triggered.

Similarly, there is no tax event triggered.

It is simply a non-binding arrangement that doesn’t actually have any other legal impact.

Some families therefore rightly ask – “Why is there any need for approaches such as umbrella trusts, trust splitting, trust cloning, and related ideas? Let’s just keep it simple with a family constitution. We may not even get any professional involved in drafting it up because we can download one off the Internet. Let’s just make it up as we go along, and really, as long as the communication levels are there, we don’t need anything else.”

This said, our experience is that for many families, even when they are confident that the informal approach will succeed, they have a mantra of ‘in times of peace, prepare for war’.

In other words, if the family is robust enough to be able to have the critical discussions and get a non-binding family constitution in place, that’s the exact type of family that should build on the positive platform, go to the next level, and get legally binding arrangements in place as well.

As always thanks to the Television Education Network for the video content here.

** for the trainspotters, the title here is riffed from the Who song ‘Can’t explain’.

Tuesday, September 1, 2020

Assessing the validity of a will: the (key factors) to have on your list**

View Legal Blog Assessing the validity of a will the (key factors) to have on your list

Recent posts have considered some of the key issues in relation to assessing testamentary capacity.

One case often referred to due to its detailed explanation of the key factors the courts take into account when assessing the validity of a will is Bailey v Bailey (1924) 34 CLR 558. As usual if you would like a copy of the case please contact me.

The key factors listed are as follows:
  1. The onus of proving that an instrument is the last will of the will maker is with the party propounding it.
  2. The court must determine the validity of the will on the balance of the whole of the evidence.
  3. The proponent can discharge the onus by establishing a ‘prima facie’ case.
  4. A prima facie case is one which, having regard to the circumstances established by the proponent’s testimony, satisfies the Court that the will is the last will of a free and capable will maker.
  5. It is the capacity of the will maker’s mind, not body, that is relevant.
  6. The quantum of evidence sufficient to establish validity of a will always depends on the circumstances of each case. Relevant factors may include:
    1. the simplicity or complexity of the will, its rational or irrational provisions and its exclusion or non-exclusion of beneficiaries;
    2. the exclusion of persons naturally having a claim upon the will maker’s estate;
    3. extreme age or, sickness of the will maker; and
    4. existence of any person having motive and opportunity and exercising undue influence, then taking a substantial benefit under the will.
  7. Once the proponent establishes a prima facie case of sound mind, memory and understanding with reference to the particular will, then the onus of proof switches to the party challenging the will.
  8. To displace a prima facie case of capacity and due signing, mere proof of serious illness is not sufficient; there must be clear evidence that undue influence was in fact exercised, or that the illness of the will maker so affected their mental faculties as to make them unable to validly dispose of their property.
  9. The opinion of witnesses to the signing of the will as to the testamentary capacity of the will maker is usually of little weight on the direct issue, as the court must decide based on the facts, not opinions.
  10. Where instructions for a will are given some time before its signing, it is the capacity as at the date of giving the instructions that is most relevant.
** for the trainspotters, the title here is riffed from the Hall & Oates song ‘Your kiss is on my list’.

Tuesday, August 25, 2020

And another (new) perspective** on assessing testamentary capacity

View Legal Blog And another (new) perspective on assessing testamentary capacity

Recent posts have considered some of the key issues in relation to assessing testamentary capacity.

Another case that provides an informative perspective on the key issues is Carr v Homersham [2018] NSWCA 65. As usual if you would like a copy of the case please contact me.

The decision confirms that there is a presumption of mental competence that arises in relation to any will that is rational on its face and is duly executed.

The presumption is only displaced by circumstances which raise a doubt as to the existence of the deceased's testamentary capacity at the time the will was signed.

Relevantly, the existence of an 'insane delusion' under which the deceased laboured does not of itself preclude a finding of testamentary capacity if the delusion had no effect upon the will. Helpfully, the case confirms the key factors that are relevant in this regard as follows:
  1. It is insufficient to demonstrate the absence of testamentary capacity to prove that the deceased acted on a material mistaken belief in making their will.
  2. Instead, for a mistaken belief to rise to the level of a 'delusion' which affects the validity of the will, there must at least be a high degree of irrationality in the belief.
  3. Ordinarily, evidence will be required that there has been an attempt to reason the deceased out of the belief, such that the deceased's adherence to it suggests that the deceased has a mental disorder or deficiency precluding the deceased from comprehending and appreciating 'the claims to which they ought to give effect'.
  4. Generally, the circumstances must be such that it can be inferred that the deceased was wedded to a mistaken belief, irrespective of its truth. If that is not the case, the belief is likely to be no more than a mistaken view, the holding of which cannot be inferred to reflect on the deceased's mental competence.
Applying the above principles to the factual matrix of the case it was held:
  1. A mere mistaken belief is not sufficient to invalidate a will. Instead, there must be an element of irrationality such that an inference can be drawn that the deceased has adhered to the belief regardless of evidence demonstrating its falsity.
  2. If the mistaken belief is one that the Court can infer the deceased could have been reasoned out of by the presentation of evidence of its falsity, its origin in a mental deficiency will not be able to be inferred.
  3. The fact that the deceased suffered from dementia, was not inconsistent with her retaining testamentary capacity at the relevant time. While it was clear that the deceased's memory difficulties were at least in part reflective of that disorder, there was no evidence indicating that the existence dementia impacted on the deceased's mistaken belief that was in issue in the case. 
** for the trainspotters, the title here is riffed from the Panic at the Disco song ‘New Perspective’.

Tuesday, August 18, 2020

Assessing Testamentary Capacity: A further (+ deeper)** lesson

View Legal Blog Assessing Testamentary Capacity A further (+ deeper) lesson

Last week’s post considered some of the key issues in relation to assessing testamentary capacity.

A case that provides an interesting further insight into the issues that should be considered is Roche v Roche & Anor [2017] SASC 8. As usual if you would like a copy of the case please contact me.

Relevantly, the decision confirms that, as with many other 19th century common law principles governing the legal effect of mental illness, the statements in Banks v Goodfellow (see the links in last week’s post that provide a summary of this case) no longer fully reflect modern medical knowledge.

That is, it is now recognised that there are a broad range of cognitive, emotional and mental dysfunctions, the effects of which are difficult to identify precisely or delineate from the exercise of ones ‘natural faculties’ and the reasoning capacity of a ‘sound’ mind.

What this means in a practical sense is that the rules as to assessing testamentary capacity must recognise and allow for the natural decline in cognitive functioning and mental state due to old age.

While the rules in the Banks decision therefore still provide a useful starting point, the courts also acknowledge that many wills are made by people of advanced years.

In these situations, slowness, illness, feebleness and eccentricity will sometimes be apparent. However, the presence of these factors is not ordinarily sufficient, if proved, to disentitle a will maker of the right to dispose of their property by will.

** for the trainspotters, a classic song from The Church album ‘Further, Deeper’, namely ‘Miami’.

Tuesday, August 11, 2020

Case Study: Assessing** Testamentary Capacity

View Legal Blog Case Study Assessing Testamentary Capacity

Earlier posts have examined the 12 general rules that should be used when assessing the testamentary capacity of a will maker, as usual, please let me know if you would like access to this content.

The decision of Ruskey-Fleming v Cook [2013] QSC 142 provides an interesting further example of the issues that should be considered and as usual if you would like a copy of the case please contact me.

The case involved an application to court by Ms Ruskey-Fleming (the will maker's daughter) to confirm the validity of the deceased’s 2007 will. The deceased’s son claimed that his father did not have testamentary capacity to execute the 2007 will and that an earlier document, made in 2000, should be treated as the last will.

Importantly, the 2007 will made greater provision for the daughter compared to the 2000 will.

The court reaffirmed the test outlined in Banks v Goodfellow (1870) LR 5 QB 549 as the starting point for assessing testamentary capacity. It was also confirmed that this test needs to be adapted to reflect modern life, particularly in relation to how financial affairs are now managed.

It was held that a will maker does not need to know the details and value of every single asset they own in order to prove that they have testamentary capacity, particularly where share portfolios are involved. What is important is that the will maker is aware generally of their assets and value.

The court found that the testator did not have testamentary capacity in relation to the 2007 will as he:
  1. suffered from confusion and disorientation over a lengthy period of time which was evident from medical records and MMSE test results;
  2. could not correctly answer the solicitor’s questions in relation to the number and identity of his children and grandchildren;
  3. was not aware if he had previously executed an enduring power of attorney;
  4. was not able to provide the solicitor with details about his assets and their value; and
  5. could not provide a reason for why he was changing his will – which would favour the daughter over the son.
** for the trainspotters, the title here is riffed from the No Doubt song ‘Artificial Sweetener’.

Tuesday, August 4, 2020

Cloudbusting** - Incapacity and invalid wills – a 101 reminder

View Legal Blog Cloudbusting - Incapacity and invalid wills – a 101 reminder

Last week, we had to look at a relatively interesting question concerning a series of wills that had been made by someone who died recently.

Due to evidence on the death certificate, the validity of the most recently will has been called into question because of a lack of capacity (namely, long term dementia).

There are a number of things that may happen from here, however in very broad terms, if the most recent will is held to be invalid, then the will made immediately before the most recent will is the one likely to be submitted to probate.

If that immediately preceding will is also shown to be invalid because of a lack of capacity, then the court is required to keep going back through previously made wills until they find one that does not fail on the basis of the incapacity issues.

The above approach assumes of course that the previous wills can be accessed, and the court can ultimately satisfy itself that a valid will was made at a time when capacity was not in doubt.

If the court is unable to satisfy itself, the default position is that the intestacy rules apply.

** for the trainspotters, the title here is riffed from the Kate Bush song ‘Cloudbusting

Tuesday, July 28, 2020

The Blues Brothers** Trust case


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.

One of the most interesting family law trust cases is what I refer to as The Blues Brothers case, otherwise known as Morton and Morton.

In this case, there were two brothers, the Blues Brothers as I call them.

They were both shareholders of the corporate trustee. They were both directors of the corporate trustee. They were the two primary beneficiaries and joint appointors of the trust. The trust itself owned the bucket company 100%. The bucket company’s two directors were the two brothers. You’re likely starting to see the pattern.

Brother one busts up with his wife. His wife says, “He is the 50% owner - all day every day he is 50%. Therefore, I get half of his 50% end of story.”

The court said, “No, he’s not 50%. Because he has no casting vote, because he is an equal appointor, equal shareholder, equal director, he’s received broadly equal distributions, he’s not 50%. He is a 0%.” Therefore, the assets of the trust were protected.

Some will argue here, “Hang on Matthew, that’s quite unique, we’re not always going to be able to set up with 2 siblings.” Agreed and understood. But if you’re looking at wider succession of a family unit and protection of intergenerational wealth, we believe the principles from The Blues Brothers case are seriously important to have in mind.

As always thanks to the Television Education Network for the video content here.

** for the trainspotters, a classic song from the Blues Brother today, ‘Gimme some lovin’.

Tuesday, July 21, 2020

Over (it)** insurance and buy sell arrangements

View Legal Blog Over (it)** insurance and buy sell arrangements

There were a number of enquiries following last week’s post, and in summary, the answer to a number of these queries was that before implementing the kind of strategy explored, care should always be taken to make sure that all of the commercial, legal and transaction cost issues are properly considered.

One question that is also worth exploring further is the appropriate quantum of insurance cover in this type of situations.

Obviously, while we do an extensive amount of work in this area, we do not actually provide insurance product solutions, and instead work with specialists in this area to help clients get appropriate strategies implemented.

The advice that we often give however is that for a variety of reasons, we prefer that wherever possible the parties involved look to maximise the level of insurance cover able to be obtained.

Obviously, this approach is subject to specialist advice in these circumstances and the ability for the clients to commercially justify the insurance premium, however some of the practical advantages with this approach that we see include:
  1. It reduces the need to uplift the quantum of insurance cover as circumstances change.
  2. It reduces the risk that in the future appropriate levels of cover may not be able to be accessed (due to health reasons).
  3. It guards against the risk that the underlying assets involved increases more rapidly than insurance protection is able to be updated.
  4. If structured appropriately, the excess insurance can also be used to facilitate other non-business succession objectives.
** for the trainspotters, the title here is riffed from the Dinosaur Jnr song ‘Over it’.

Tuesday, July 14, 2020

Why contracts beat (it) ** wills


During the week, in the context of reviewing a buy-sell deed, we had to provide advice about whether the terms of the buy-sell deed would overrule the provisions of one of the partner’s wills.

While there were a number of factors that may potentially impact on the answer to this question, in very simple terms, contractual arrangements will always override the provisions of a will.

As the buy-sell deed was crafted on the basis of option agreements, then the position was therefore that they would override any inconsistent provision of the will.

In the context of the buy-sell arrangement here, there were two individual partners who had implemented buy-sell arrangements.

For a combination of reasons (not least of which the ability to eliminate any stamp duty or tax on the transfer of the partnership interest on death), the parties agreed to implement wills whereby they would each gift their respective partnership interest to their co-partner on death.

The agreement to make these gifts however was predicated on the assumption that the exiting partner’s estate would receive insurance proceeds at least equal to (if not greater than) the market value of their partnership interests.

Option agreements were still put in place however to cover the partners against a range of risks, including:
  1.  a partner changing their will;
  2. the will of an exiting partner being challenged; and
  3. the insurance proceeds received being inadequate as compared to the market value at the date of death.
** for the trainspotters, the title here is riffed from the Michael Jackson song ‘Beat it’.

Tuesday, July 7, 2020

Happy New Year’s Day**! & some further reasons for the rise and rise of share sales

Happy New Year’s Day**! & some further reasons for the rise and rise of share sales

Last week’s post considered some key aspects impact of the introduction of the 50% general discount on business succession.

A further significant related transaction cost issue that has also changed over the last few years to further encourage purchasers to consider a share acquisition relates to the tax consolidation rules.

In particular, it was historically the case that in order for a purchaser to be able to claim depreciation in relation to the market value of the assets they had acquired, they needed to physically acquire those assets.

In contrast, if the shares in the relevant company were acquired, then there was no adjustment to the tax carrying costs of its assets.

In very broad terms, if a purchaser acquires shares in another company and that company becomes a member of the purchaser’s tax consolidated corporate group, then it is permitted to 'reset' the tax carrying costs of all assets of the company.

Although there can be a number of problems that arise with this resetting, in very general terms, the intention of ensuring that the tax outcome for a purchaser on a share sale as compared to an asset sale in what is otherwise an identical transaction are normally broadly achieved.

One last permutation worth remembering relates to where a purchaser is open to consider a share sale arrangement but wants to ensure that any historical difficulties with the company currently operating the business are quarantined to the maximum extent possible.

In these circumstances, it is often sensible for the vendor to suggest that a restructure be done before completion (often the finalisation of the restructure will be a settlement day condition precedent) whereby the assets of the existing company are 'rolled over' into a cleanskin company.

Obviously, there are a number of commercial, tax and stamp duty issues that need to be considered with this approach, however in many instances, it can deliver the precise outcome that each of the parties are aiming for.

** for the trainspotters, the title here is riffed from the U2 song ‘New Year’s Day’.




Tuesday, June 30, 2020

Keeping it real** on 30 June – the rise and rise of share sales

View Legal blogpost 'Keeping it real** on 30 June – the rise and rise of share sales ' by Matthew Burgess

Given that it is 30 June, it seemed like an appropriate day to focus on the impact of the introduction of the 50% general discount on business succession.

Since its introduction (and certainly with the various evolutions of the small business capital gains tax concessions), we have seen an ever-increasing number of merger and acquisition transactions take place by way of share sale.

Historically, many (if not all) of these transactions would have taken place by way of asset sale.

Due to the difficulties with accessing the various tax concessions when assets are sold by a company, the attractiveness of a share sale has become significant.

The additional issue in this regard can often be that the share sale will legitimately avoid any stamp duty consequence, which is still in some states not the case in relation to a business sale.

One of the key ramifications of the increased number of share sales is that many vendors will actively embark on a 'vendor due diligence' exercise.

Broadly, this involves, sometimes many months before any sale transaction is entered into, the vendor prepares a complete set of due diligence material from its own perspective.

Such an approach can help to significantly reduce the overall costs and risks that might otherwise be associated with a share sale transaction.

Next week’s post will further explore two other key aspects to consider in relation to share sale arrangements.

** for the trainspotters, the title here is keeping it very real by being riffed from a line in the Hannah Montana song ‘Let’s get crazy’.

Tuesday, June 23, 2020

Have I lost you?** - Lost company constitutions

View Legal blogpost 'Have I lost you?** - Lost company constitutions ' by Matthew Burgess

Previous posts have considered the key issues in relation to lost trust deeds (let me know if you want access to any of these). A related issue that comes up regularly is the loss of other essential documents, and in particular, the constitutions for companies.

In most instances, the ramifications of losing a constitution for a company (or as they were formally known the 'memorandum and articles') are normally not as problematic as with the case with discretionary trust deeds.

This said, we would always normally recommend that, if possible, at least a copy of the constitution be located, and particularly for older companies, this can often be achieved via the microfiche records retained by the ASIC.

As many advisers will be aware, up until around the 1990s, all company constitutions had to be lodged with the ASIC on registration of a company.

Where no copy can be found, there is also a process available to adopt a replacement constitution, however some difficulties (particularly from a tax perspective) can arise in this regard if there is uncertainty as to the rights attaching to the shares on issue in the company.

** for the trainspotters, the title here is riffed from the Supremes song ‘Have I lost you’.

Monday, June 22, 2020

Excepted trust income changes for testamentary trusts: the numbers** and details matter


The one (very key) change to the excepted trust income rules this week for distributions to minors via testamentary trusts is shown by the redline version of the legislation passed this week attached.

The redline version shows what the final rules state, as compared to the exposure draft ... thankfully the wacky approach originally to make two thirds of the rules turn on the "Commissioner’s opinion" was removed ...

** For the trainspotters, the title of today's post is riffed from the Kraftwerk song ‘Numbers’.

View here:


Tuesday, June 16, 2020

What I am** and should I be the appointor?


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.

The Richstar case has featured in many previous posts. As usual, if you would like access to those posts, please contact me.

In terms then of who should be an appointor, despite what Richstar says, which was that the appointor is highly critically important from an asset protection perspective, that’s not actually the law. Richstar has been rebutted. Therefore, we would argue that in the ordinary course, it does not matter who the appointor is.

Now as with all trust areas, I would argue there is an exception to that general rule.

The exception to the general rule is do not set your client up to fail unnecessarily.

Therefore, you want to have at least two other things on your list when you’re looking at an appointor I would argue at the bare minimum.

Point number 1, make sure that embedded into the trust instrument, there is an automatic disqualification of the appointor if they commit any act that allows the court to look at the act. By crafting the provisions that way, you do a couple of things.

First, it sets the rules of the game before the trust is even started. It’s therefore almost impossible for anyone to argue that that was some sort of inappropriate strategy because it was there from the very start.

The second thing is that if any court comes in, the bankruptcy court, the family court, etc., before they come in, the deed self-executes and makes sure that the appointor is automatically removed.

The next point is just thinking about who you actually want as your appointor. Maybe it isn't the smartest thing to have the at-risk individual. Not because of itself is going to cause the trust assets to be exposed, but why even raise a question when you can actually avoid the issue.

The one thing I would flag on that is that having a non-at-risk person as appointor can be a lot easier said than done. The appointor has the ability to hire and fire the trustee in its complete discretion.

The person needs to be someone you can completely trust in order to deliver that role in a way that actually is going to align with what the people behind the trust are actually striving for.

As always thanks to the Television Education Network for the video content here.

** for the trainspotters, the title here is riffed from the Edie Brickell song ‘What I am’.

Tuesday, June 9, 2020

This is how to do it** - To disclose or not to disclose trusteeship?

View Legal blogpost 'This is how to do it** - To disclose or not to disclose trusteeship?' by Matthew Burgess

The issue of whether the existence of a trust relationship should be disclosed to third parties, including banks and Titles Offices is one that comes up regularly.

The strict position from a trust law perspective is that the existence of a trust relationship does not need to be disclosed.

This said, there are a number of other factors that often need to be taken into account, including the following:
  1. the Tax Office, in relation to superannuation funds, is of the view that the existence of a trust relationship should always be disclosed;
  2. in some jurisdictions (New South Wales is a classic example), it is in fact not possible to disclose the existence of a trust on Titles Office records;
  3. from an evidentiary perspective (for example, if the Tax Office is querying the way in which assets are held), it is often of significant benefit to have the trust arrangements supported by third party documentation;
  4. where the trust instrument is lost, disclosing the trust and lodging a copy of it with a third party can often prevent significant costs and administrative difficulties that otherwise arise when a trust instrument cannot otherwise be located; and
  5. finally, however, the non-disclosure of a trust relationship can be commercially important from a privacy perspective.
** for the trainspotters, the title here is riffed from the Katy Perry song ‘This is how we do’.

Tuesday, June 2, 2020

Mine, all mine** - Trustees and SMSF borrowing arrangements


Over the last couple of weeks, the posts have focused on the various issues that arise in relation to having the one company act as trustee for multiple trusts.

One area of the law where the ability to have the same company act as trustee for multiple trust relationships is prohibited is in relation to the limited recourse borrowing arrangements that self-managed superannuation funds can enter into.

Briefly, we confirmed to an adviser recently that in relation to these types of borrowing arrangements:

(a) the need to have a separate bare trust is driven by the requirement under section 67A of the Superannuation (Supervision) Industry Act that the borrowing arrangement relates to a ‘single acquirable asset’, meaning a separate trust must be established for each acquisition; and

(b) the bare trust needs to have a different trustee to the super fund because under trust law, if the sole trustee is also the sole beneficiary, the trust ‘merges’ and ceases to exist.

** for the trainspotters, the title here is riffed from the Portishead song ‘All Mine’.


Tuesday, May 26, 2020

Right by your side** - Commercial issues with trustees performing many roles

View Legal blogpost 'Right by your side** - Commercial issues with trustees performing many roles ' by Matthew Burgess

As mentioned in last week's post, it is possible for the same company to act as trustee for a number of trusts.

Such an arrangement should not change the indemnity position if a liability is incurred, however there are a number of commercial reasons that need to be considered before having the same company act as trustee for multiple trusts.

Some of the issues in this regard include:
  1. While the current legal position is that the assets of each trust will be segregated if a liability was to arise, this position in theory could be changed by future cases or legislation. For obvious reasons, most clients do not want their arrangements to become a test case.
  2. If litigation was to arise in relation to one trust, this would force the parties involved to change the trustee of the other trusts not otherwise subject to the litigation. This can be practically an unnecessarily difficult process that in some instances is actually challenged by the relevant creditors.
  3. The costs for maintaining separate trustee companies are relatively nominal.
  4. From an ease of administration perspective, having separate trustee companies for each separate trust can minimise the risk of confusion.
  5. From a land tax grouping perspective, separate trustee companies can, in some jurisdictions, provide a planning opportunity to reduce the overall tax rates that apply.
  6. If the company is acting as a trustee of a SMSF concessional ASIC annual fees are only available if the company performs this role solely.
** for the trainspotters, the title here is riffed from the Eurythmics song ‘Right by your side’.

Tuesday, May 19, 2020

Trustee companies and multiple plays**

View Legal blogpost 'Trustee companies and multiple plays** ' by Matthew Burgess

Previous posts have looked at various issues that arise in relation to trustee companies (let me know if you would like access to any of these posts).

One issue that comes up relatively regularly is the way in which the trustee indemnity provisions work where the same company acts as trustee for multiple trusts.

Briefly, the strict legal position is that the right of indemnity of a trustee is limited to the assets of the trust in relation to which the liability was incurred.

In other words, where a company is a corporate trustee for multiple trusts, a claim or liability in relation to one trust should not expose the assets of the other trust.

Practically however, if the trustee becomes insolvent it can be difficult to establish the beneficial ownership of particular assets to the liquidator’s satisfaction, particularly given some third parties such as ASIC and the NSW Titles Office do not record the name of the beneficial owner.

There are a number of commercial issues that arise in relation to the same company acting as trustee for multiple trusts and some of these will be considered in next week's post.

** for the trainspotters, the title here is riffed from the John Lennon song that has a line mentioning multiple plays, namely ‘Beautiful Boy’.

Tuesday, May 12, 2020

No purging** Non-lapsing interposed entity elections

View Legal blogpost 'No purging** Non-lapsing interposed entity elections' by Matthew Burgess

Last week's post highlighted the fact that in a practical sense, interposed entity elections (IEEs) are very difficult to revoke.

For example, the Tax Office has confirmed in an Interpretive Decision (ID2013/21 – as usual, let me know if you would like a copy of this decision) that IEEs remain in force even if the trust that is a subject of the related family trust election (FTE) ceases to exist.

In particular, where an entity makes an IEE in relation to a family trust to be within the family group of that family trust, it will be taken to be revoked where the FTE for that trust is revoked.

According to the Tax Office, where a family trust is simply wound up and no steps are taken before the wind up to revoke any FTE, then both the FTE and IEE continue to remain in force indefinitely.

This means that the penal rate of tax will continue to apply to the entity that has made the IEE for any distributions it makes outside the family group of the family trust that has been wound up.

While the ability to revoke an FTE is also relatively narrow, whenever considering the windup of a trust that has made an FTE, specific thought should be given to whether the FTE should be revoked before finalising the wind up.

** for the trainspotters, the title here is riffed from the Midnight Oil song that has a line mentioning elections, namely ‘When the generals talk’.

Tuesday, May 5, 2020

Revoking an interposed entity (in the year of) election**

View Legal blogpost 'Revoking an interposed entity (in the year of) election**' by Matthew Burgess

Arguably one of the more complex areas in relation to family trusts relates to interposed entity elections (IEE).

We have had a number of advisers contact us recently in relation to the exact way in which IEEs operate, and unfortunately, preferred distribution arrangements are often effectively prevented due to historical elections that, with the aid of hindsight, were arguably were unnecessary.

While there are some circumstances where an IEE can be revoked, at least in the situations we have looked at recently, the ability to access the revocation provisions is limited.

This is because, among other requirements, a revocation is only available where:
  1. It is done within 4 years of the original IEE being made.
  2. The IEE must not have been relied on at any time.
Next week's post will look at an Interpretive Decision from the Tax Office, which further highlights the restrictive nature of IEEs.

** for the trainspotters, the title here is riffed from the U2 song ‘Desire.


Tuesday, April 28, 2020

Mr Klaw (back)** - Cummins case and the bankruptcy clawback rules



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.

In terms of the timeline on the Cummins case, there was a long history here with no returns lodged. It’s going back literally decades. We’ve got a 1987 event where a house on Sydney Harbour goes into the wife’s name. No tax returns were lodged for many years in the lead up to 1987 transfer. In around the year 2000, he was about to retire. He was doing the work for a law firm and the law firm paid his bill, but short paid him to the extent of 48.5 cents. He wrote back and said hang on a second, i.e. I sent you a $100 bill, you only pay me $51.50, what's going on?

The law firm said, “Oh, Mr Cummins, (QC or whatever he was), yes, we will give you your other 48.5 cents when you give us an ABN.” Mr Cummins said, “What’s an ABN? They said you get that from the Tax Office.”

He rang the Tax Office and said, “I need one of these ABNs.” They said, “Okay, that’s fine. Give us your TFN and we'll give you an ABN.” Mr Cummins said, “What’s a TFN? I don’t know what you’re talking about.”

The suspicion is that at that point the Tax Office routed him back to the investigation division. By 2002, Cummins was in the middle of an audit because he hadn’t paid tax for decades. You do not need a tax file number if you never pay tax. That was what he had managed to do during his entire career.

Now if you get litigated against in 2002, four years from 2002 takes you back to about 1998. 1998 is a long, long way after 1987. The question was this. Was the Sydney Harbour property, which in the meantime had gone up in value quite significantly, exposed on Cummins going bankrupt?

Cummins’ argument you would guess was that no, outside the clawback period, I’m in the clear, yes, I’m bankrupt. But I don’t care about it because I don’t own anything in my name. What does it matter?

The court said no. The court said that you need to look at the main purpose that’s sitting around the 1987 transaction. The mere fact that the assessments had not actually issued back in 1987 when the transfer took place was held to be irrelevant.

The debt was still there. The fact that the tax debt hadn't crystallised, or Cummins didn’t actually know about it because the tax man hadn’t found him yet, was actually absolutely irrelevant. Cummins’ purpose at the time of moving the family home was to defeat creditors. Therefore, the whole transaction could be unwound because the 4-year limit only applies for transfers made when there are no known liabilities – if the liabilities (as here) are known, then the clawback period is unlimited.

As we understand it, it’s basically the only textbook of its kind in Australia that’s practically focused on how to deliver the asset protection piece. Very happy to give one of those away.

As always thanks to the Television Education Network for the video content here.

** for the trainspotters, the title here is riffed from the They Might be Giants song ‘Mr Klaw’.


Tuesday, April 21, 2020

EPAs and SMSFs – Bit like Generals and Majors**

View Legal blogpost 'EPAs and SMSFs – Bit like Generals and Majors** ' by Matthew Burgess

Following recent posts about attorney appointments it is important to also remember the special rules that apply in relation to self-managed superannuation funds (SMSF).

As is well understood, a superannuation fund is an SMSF where all members of the fund are trustees or directors of a corporate trustee – see sections 17A(1) and (2) of the Superannuation Industry (Supervision) Act 1993.

A super fund is also a complying SMSF where an EPA of a member is a trustee or a director for a corporate trustee in place of a member during any period that attorney has an enduring power of attorney (EPA) in respect of a member of the fund who themselves is unable to act (see section 17A(3)(b)(ii)).

In order for section 17A(3) to apply the person seeking to become a trustee or director needs to be appointed under an EPA of the member who cannot act. A general power of attorney will not be sufficient.

Practically, the only way in which an attorney under an EPA can act in the role as trustee for an SMSF is for the existing member to be removed from their role as trustee (or director of the corporate trustee as the case may be), and for the attorney under that member’s EPA to be appointed as the new trustee or director in place of the member.

In addition to satisfying the statutory provisions, the trust deed for the SMSF must also be complied with.

Importantly, the attorney for the member performs their duties as a trustee of the SMSF, or a director of the corporate trustee of the SMSF, pursuant to their appointment to that position, rather than as an attorney or agent for the member.

The Tax Office has detailed their views in this area in Self-Managed Superannuation Funds Ruling SMSFR 2010/2. As usual, if you would like a copy of this ruling please let me know.

** for the trainspotters, the title here is riffed from the XTC song ‘Generals and Majors’.

Wednesday, April 15, 2020

Who’s Zoomin’ who?** AKA when will AUS follow the Empire State of Mind** and allow estate planning documents to be witnessed via video?


Confirmation that estate planning documents may now be witnessed remotely … in New York …

While NSW has threatened to do the same in AUS (for a maximum of 6 months); query when (if ever) all states will roll this out.

The specifics of the New York rules (perhaps AUS legislators can copy and paste these?) are as follows:
  1. The person requesting that their signature be witnessed, if not personally known to a witness, must present valid photo ID to the witness during the video conference, not merely transmit it prior to or after;
  2. The video conference must allow for direct interaction between the person and each witness and the supervising lawyer, if applicable (e.g. no pre-recorded videos of the person signing);
  3. The witnesses must receive a legible copy of each signed page, which may be transmitted via fax or electronic means, on the same date that the pages are signed by the person;
  4. Each witness may sign the transmitted copy of the signed pages and transmit the same back to the person; and
  5. Each witness may repeat the witnessing of each original signature page as of the date of execution provided the witness receives such original signature pages together with the electronically witnessed copies within thirty days after the date of execution.
Reassuring I am sure for all #BigLaw lawyers that the transmission of the signed pages can be made by fax ...

** for the trainspotters, a double hit (given the Easter long weekend), firstly Aretha Franklin's tribute to Zoom and 'Who's Zoomin' Who'.

View here: https://www.dailymotion.com/video/x6qfe8


 ** the second instalment for the trainspotters, Alicia Keys 'Empire State of Mind' (Part 2).

View here: https://www.youtube.com/watch?v=tGwBPy4j8uo

Tuesday, April 14, 2020

Don’t wanna be the one?** - Corporate trustee appointing an attorney

View Legal blogpost 'Don’t wanna be the one?** - Corporate trustee appointing an attorney ' by Matthew Burgess

Recent posts have considered various aspects of attorney appointments.

Where a company is acting as trustee of a trust, it can appoint an attorney to act on its behalf as trustee of the trust, so long as the:
  1. constitution for the company permits attorney appointments; and
  2. the trust deed for the trust also contains a power for the trustee company to nominate an attorney.
The attorney appointment document should ideally specifically confirm that the:
  1. trustee company has power under the trust deed to appoint an attorney; and
  2. company, in its capacity as trustee for the trust, is appointing the attorney in accordance with the power.
** for the trainspotters, the title here is riffed from the Midnight Oil song that has a line mentioning corporate, namely ‘I don’t wanna be the one’.

Tuesday, April 7, 2020

Looking through (you)** - A sole trustee appointing an attorney

View Legal blogpost 'Looking through (you)** - A sole trustee appointing an attorney ' by Matthew Burgess

Following recent posts about attorney appointment, it is important to remember that a sole individual trustee of a trust can appoint their attorney/s under an enduring power of attorney to act on their behalf if they are unable to carry out their duties as trustee of the trust.

This approach is subject to the trust deed for the trust allowing this outcome.

An example of the relevant clause a trust deed should contain is as follows:

“The Trustee may authorise any person to act as its attorney to perform any act or exercise any discretion within the Trustee’s power including the power to appoint in turn its own agent, attorney or delegate.The appointment may be in respect of more than one delegate or severally and may include provisions to protect those dealing with the agent, attorney or delegate.”

An example provision that should be added to the enduring power of attorney is as follows:

“Whereas I am currently the sole trustee of ‘[#insert] Trust’ a trust established pursuant to the Deed dated [#insert], pursuant to the Trusts Act [#insert details of the relevant stat based Act] and of every other power and law thereunto enabling in the event of my inability for any reason either temporarily or permanently to carry out my duties as sole trustee, or as one of a number of trustees of the [#insert], then this enduring power of attorney operates and allows the attorneys named in this document to act as my attorneys in respect of my trusteeship of the [#insert].”


** for the trainspotters, the title here is riffed (read carefully) from the Beatles Album ‘Rubber Soul’ (Sole) and the song, ‘I’m looking through you’.

Tuesday, March 31, 2020

Powers of attorney – statutory v common (people)** law documents

View Legal blogpost 'Powers of attorney – statutory v common (people)** law documents ' by Matthew Burgess

Following the previous two posts a question has been raised about the need to comply with the state-based legislation in each jurisdiction when creating a general power of attorney, as opposed to an enduring power of attorney.

Broadly the position in relation to general powers of attorney is as follows:
  1. Each state has legislation setting out a statutory regime for making a general power of attorney;
  2. In addition to this statutory regime, there is at common law the right to make a power of attorney or otherwise delegate the rights of a principal to an attorney;
  3. Assuming the document creating the attorney appointment is properly crafted, a common law appointment of attorney will generally have more flexibility than a statutory document (which will often be in a standard pro-forma).
Enduring powers of attorney are not able to be made at common law and it is therefore necessary to rely on the statutory regime.

The reason that the common law does not support enduring powers of attorney is because a power of attorney terminates automatically when a principal loses legal capacity.

The common law treats a principal-agent relationship as a personal one. This means an agent has no authority to act on behalf of a principal if the principal themselves can no longer act.

** for the trainspotters, the title here is riffed from Pulp, ‘Common People’. 

Tuesday, March 24, 2020

The time is now** - Start date for an attorney’s powers

View Legal blogpost 'The time is now** - Start date for an attorney’s powers ' by Matthew Burgess

One of the questions that arose following last week’s post, that is often raised in estate planning is the timing for powers of attorney to commence operation.

In particular, often a donor will suggest that an attorney’s powers should not commence until some future date, for example ‘on loss of capacity’.

On a number of levels, perhaps counterintuitively, we usually recommend immediate commencement of attorney powers where permitted by law (typically in relation to financial appointments).

In some instances, powers are prohibited at law from commencing until the donor has lost capacity.

The reasons we recommend this approach include:
  1. The likelihood the documents may need to be used in other scenarios (such as during overseas travel, or during periods of short term, relatively minor incapacity such as routine surgery) – the effectiveness of the document is significantly compromised if only triggered by ‘complete, absolute and permanent mental incapacity’.
  2. Avoiding a debate as to exactly when the document has come into force – particularly in an emergency situation it can significantly undermine the utility of the document if there needs to be an analysis of whether a pre-condition to commencement has in fact been satisfied.
  3. As an easy rule of thumb test as to whether there should be (say) a co-attorney appointed – that is, if there are concerns about the powers starting immediately. This can often be at least partly due to concerns about the skills or trustworthiness of the persons nominated.
  4. There are a number of practical steps that can be taken to guard against inappropriate attorney conduct – for example, placing the original enduring powers of attorney in secured storage so that the attorneys are required to request copies before they can exercise their powers.
  5. Another practical protection is ensuring that the appointed attorneys do not sign to accept their appointment until they need to rely on it - the powers under an enduring power of attorney cannot be used unless the appointed attorney has signed their acceptance.
  6. Practically a further easy work around is appointing one or more additional co-attorneys – typically another family member, friend or trusted adviser to act jointly with the clients’ attorneys. This prevents a single ‘rogue’ attorney from acting inappropriately as all decisions would require two or more attorneys to act together.
  7. If there are still concerns about the attorneys acting inappropriately in light of the above points, the harsh reality is that this says more about the persons being considered than it does about the document commencing immediately – in other words the issue should be addressed by reconsidering who is being appointed to the role.
  8. Indeed, if there remain concerns about the integrity of the nominated attorney acting inappropriately, there may be in fact be wider concerns that need to be addressed – such as the attorney acting inappropriately after the donor has lost capacity or even fraudulently creating documentation to allow themselves to act, regardless of the donor’s intention.
** for the trainspotters, the title here is riffed from Moloko, ‘The Time is Now’.

Tuesday, March 17, 2020

Enduring powers of attorney – a hopefully not (failed) reminder **

View Legal blogpost 'Enduring powers of attorney – a hopefully not (failed) reminder ** ' by Matthew Burgess

While each state has different legislation in relation to enduring powers of attorney, one issue that has come up over the last few days, which is common to the rules in virtually every state, is the ability to appoint different people for financial related matters as compared to personal (or ‘guardianship’) matters.

Previous posts have considered various aspects of an advanced health directive (which is effectively the 3rd main component of the areas where you can appoint someone else to make decisions on your behalf).

Often, it will be the case that the people a client is wanting to entrust with their financial affairs will be different to those they wish to have make decisions in relation to personal healthcare matters.

Providing the documentation is crafted appropriately, there is no legal reason that different people cannot be appointed.

One practical issue that needs to be kept in mind however is that many of the personal health related issues will have at least a partial financial aspect to them.

For example, the decision as to the standard of nursing home care to be provided is ultimately as much a financial decision as it is a personal health care decision.

Unless there are compelling reasons to have different people appointed, therefore our default recommendation is that the same people are nominated in all roles.

** for the trainspotters, the title here is riffed from the New Order song, ‘Senses’.


Tuesday, March 10, 2020

Appointor (and a life of) succession **

View Legal blogpost 'Appointor (and a life of) succession **' by Matthew Burgess

Previous posts (including last week), have considered various aspects of an appointor or principal power under a trust deed.

In almost every estate plan involving a trust, it is necessary to consider the best way to appoint a successor appointor.

Predictably, the starting point in this process was to review the trust deed.

Often, the deed will permit the incumbent appointor to have their successor nominated under the will.

Generally, if available, a nomination under the will is the easiest and most commercially sensitive approach to take.

In other instances, for example, where there may be a challenge to the will, it may in fact be more appropriate to structure the appointor succession in a standalone document that sits outside the will.

Any approach is always subject to the deed, which are consistently inconsistent with the approaches available, for example:
  1. appointment via will;
  2. appointment via enduring power of attorney;
  3. automatic lapsing of the role;
  4. mandated succession embedded into the trust deed;
  5. no appointor or principal role in the first place;
  6. succession nominated by some other party (eg a ‘guardian’ or ‘nominator’);
  7. no provision in the deed at all as to what happens to the role and no rules as to how appointor might appoint a successor; and
  8. some combination of one or more of the above
** for the trainspotters, the title here is riffed from the Morrissey song, ‘My life is an endless succession of people saying goodbye’.