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’.

The Blues Brothers and protecting family trust assets

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 - https://youtu.be/kOMhiXHR-5A

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

The case of Morton & Morton (email me if you want a copy of the decision) is one we often refer to as the Blues Brothers’ case.

The structure was a corporate trustee where there were two shareholders. Those two shareholders were brother 1 and brother 2.

The percentage share that they each had was 50%. The two brothers were the two directors. There were two primary beneficiaries, being the two brothers. You might start to see a pattern with this one.

There were two appointors – again, brother 1 and brother 2. The one point of distinction was there was one bucket company, so one corporate beneficiary. That bucket company was owned by the family trust itself.

Brother 1 was busting up with his wife. Her argument was ‘everything is 50-50 here. Clearly, my husband is entitled to 50% of the trust assets because he’s got 50% of the control, got 50% of the appointorship, got 50% of the shareholding, got 50% of the distributions.’

‘My husband is entitled to 50% of everything and therefore I'm entitled to a percentage share of his 50%.’

The court said no. The court said because all relevant aspects are 50-50 for each brother, then this is in fact analogous to each brother effectively having 0%, because it was the same as nothing. Thus, the assets of the trust were protected.

Ultimately, the Blues Brothers case is a really important decision. It is a decision that should give everybody confidence that structured properly, trusts can be a very powerful instrument in the context of matrimonial breakdowns.