Tuesday, September 5, 2023

Excepted trust income and ‘bare’** trusts

View Legal blog - Excepted trust income and ‘bare’** trusts by Matthew Burgess

A previous post has considered various aspects of the statement that ‘every will contains a testamentary trust’.

One example of where basic or 'bare' testamentary trusts exists includes where a gift is given to a beneficiary who does not have legal capacity (for example, because they are under the age of 18).

This was the factual matrix in the Tax Office private ruling mentioned in last week’s post, namely 1011602878465.

In particular –
  1. The beneficiary had received gifts of money which were invested on their behalf by their parent.
  2. The money had been sourced from several places, including money left to the beneficiary from a deceased estate.
  3. The money was held in trust by the parent in a bank savings account named '[Parent's name] in trust for [child's name]'.
  4. Under the terms of the relevant will, the child received a certain amount, which was to be paid to their parent or guardian to be held for the benefit of the child if the child was under 18.
It was held that the proportion of the interest income earned that would be 'excepted trust income' would be determined with reference to how much of the original amount invested into the bank account was sourced from the deceased estate, as compared to the amount gift from non-estate sources.

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** For the trainspotters, the title of today's post is riffed from the Cure song 'Bare’.

Listen here: