Crisp (apples)** and orders

The concept of a 'Crisp order' takes its name from the decision of Crisp v Burns Philp Trustee Company Limited [NSWSC, 18 December 1979, unreported].

In that case, a widow who was granted a mere right of residence in a home under her husband’s will challenged the provision as inadequate.

The court decided to allow the former matrimonial home to be treated as if it were an ‘accommodation fund'. This meant that the widow could use the entire value of the home to help meet her accommodation needs for the balance of her life.

In other words, on request, the executor of the estate was required to use the capital value to purchase alternative accommodation for the widow, such as a smaller house, entry into a retirement village or a nursing home.

Ultimately, Crisp orders are intended to provide a form of flexible life interest to a surviving spouse to ensure that they have access to appropriate accommodation until their death.

Any capital remaining following the death of the surviving spouse will then generally pass as originally anticipated under the will of the person whose estate was originally challenged.

The post next week will list out some of the key factors normally taken into account by a court before granting a Crisp order.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the classic song ‘My favourite things'.

Check out the Julie Andrews version here:

A 101 tip on changing (everyday)** trustees

A regular theme in previous posts is how critical it is to ensure that the provisions of a trust instrument are followed precisely when taking steps in relation to the trust.

The SMSF related case of Moss Super Pty Ltd vs. Hayne [2008] VSC 158 is one example of this principle, in the context of a change of trusteeship.

In summary:

1. As is becoming increasingly common, there were issues around the rightful controller of the SMSF following the death of one of the members;
2. The surviving member purported to change the trusteeship of the SMSF, so that a company of which she was the sole shareholder and director would be appointed;
3. The trust deed set out the process by which a change of trusteeship could take place and specifically required the ‘founder’ to appoint any new trustee;
4. While the sole director of the new trustee company was also the founder, she did not in fact sign the change of trustee documentation in the capacity as founder;
5. In other words, while she signed as the sole director of the new trustee, there was no provision where she also signed under the founder role; and
6. Critically, the court found that, as was the case here, legal structures are created where individuals had multiple roles to play, the requirements around those roles must be respected and complied with.

In many respects, the decision reflects a number of analogous situations in the context of family trusts including the case of re Cavill that has been featured previously.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** for the trainspotters, the title today is riffed from the Culture Club song ‘Changing every day’.

Listen hear (sic):

(running) and continuing confusion** with fees paid via an SMSF

One issue that arises relatively frequently is whether certain kinds of expenses can be paid by an SMSF.

Previous posts have touched on this issue.

Having recently reviewed one adviser's material on them joining a new licensee group, it was interesting to see that part of the confusion with the rules in this area, particularly for financial advisers and risk advisers, undoubtedly is because of the relatively vague standards that most licensees seem to impose.

In this particular situation, the licensee rules provided that advisers could charge an SMSF for all advice that was either product related or strategically relevant to that particular SMSF.

In turn, the rules stated that charging the SMSF for any other advice that is not so related will potentially breach the sole purpose test and was therefore prohibited.

Unfortunately, the vagueness of the rules under this type of approach can make it difficult for advisers and clients alike to make decisions in relation to areas such as binding death benefit nominations and wider estate planning documentation, and until there is clearer guidance from, for example, the Tax Office, there is likely to be continuing uncertainty.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** for the trainspotters, the title today is riffed from the Radiohead song ‘Anyone can play guitar’. View hear (sic):

Gift and loan arrangements – patently** not patentable

Following on from posts over the last few weeks concerning gift and loan back arrangements, a question has been raised as to whether the arrangement is proprietary or exclusive to any law firm.

In a word, the answer is: no.

The key case in this regard is Grant v Commissioner of Patents - [2006] FCAFC 120.

In this case the court considered the patentability of the following steps in relation to an asset protection method for protecting an asset owned by an owner, namely:

1. establishing a trust;
2. the owner making a gift of a sum of money to the trust;
3. the trustee making a loan of said sum of money from the trust to the owner; and
4. the trustee securing the loan by taking a charge for said sum of money over the asset.’

In other words a gift and loan back arrangement.

The court confirmed there was no novelty in the steps. Rather they were best described as a business system or method.

In concluding the approach was not patentable the court confirmed as follows:

“It has long been accepted that "intellectual information", a mathematical algorithm, mere working directions and a scheme without effect are not patentable. This claim is "intellectual information", mere working directions and a scheme. It is necessary that there be some "useful product", some physical phenomenon or effect resulting from the working of a method for it to be properly the subject of letters patent. That is missing in this case.”

As usual, please contact me if you would like access to any of the content mentioned in this post.

** for the trainspotters, the title today is riffed from a line in The Talking Heads song ‘Mr Jones’.

View a seriously bizarre music video here:

Took out a loan**? – what does this exactly mean?

Following on from posts over recent weeks concerning gift and loan back arrangements, a question has been raised as to what in fact is a loan.

In theory the definition of a loan should be simple, however it has over time caused some level of debate.

This said, the leading decision is generally accepted as the case of Federal Commissioner of Taxation v. Radilo Enterprises Pty Ltd (1997) 34 ATR 635. In this case it was confirmed that:

1. A loan involves an obligation on the borrower to repay the sum borrowed.
2. It is a simple contract whereby one person ('the lender') pays or agrees to pay a sum of money in consideration of a promise by another person ('the borrower') to repay the money upon demand or at a fixed date.
3. The promise of repayment may or may not be coupled with a promise to pay interest on the money so paid.
4. The essence of the transaction is the promise of repayment.
5. Ultimately therefore, a loan is a payment of money to or for someone on the condition that it will be repaid. Thus it is clear that an obligation to repay forms an integral and indispensable characteristic of a loan.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Black Rebel Motor Cycle club song 'Took out a loan’.

Listen here: