NSW implications for all changes** of trustee

There is a specific provision of the New South Wales and ACT Duties Acts which require that, in order to qualify for the stamp duty exemption where a change of trustee is occurring, the new trustee needs to be excluded as a beneficiary of the trust.

This means the trust deed needs to contain an express provision excluding any new trustee from being a beneficiary.

Advisers practicing in New South Wales or the ACT are usually acutely aware of that limitation being in most of their trust deeds and of the resulting need to look at who may have been a previous trustee to see whether any beneficiaries are excluded.

The issue comes up quite commonly because several of the popular online trust deed providers use trust deeds from Sydney law firms, meaning that even though the trust deed might be ordered online by an accountant in Western Australia or a lawyer in South Australia, if the deed provider is based in New South Wales, the deed they’re providing probably contains this exclusion without the adviser being aware of it.

There are two reasons we need to know whether the deed contains the exclusion.

Firstly, if we are changing the trustee and we appoint a new trustee who is a beneficiary of the trust, then that change of trustee may be invalid or it may trigger unintended tax or stamp duty consequences.

Secondly, we may have individuals who were previously a trustee of the trust and who at face value appear to be a beneficiaries, but who were actually excluded as a result of the clause.

For instance, if Mum and Dad were individual trustees but they subsequently retired and appointed a corporate trustee, even though they may be named as beneficiaries of the trust, the exclusion clause may have made them ineligible to receive income or capital distributions.

An exclusion like this can have an impact from a family law perspective and also from a tax perspective, if we have been purporting to make trust distributions to individuals thinking they were beneficiaries, not being aware of this exclusion hidden within the trust deed.

As usual, please make contact 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 David Bowie song ‘Changes’.

View here:

Stamp duty concessions for business succession: it is (not) just a game**

As we have touched on in previous View posts, each Australian state has a different set of stamp duty rules.

In a very general sense, the broad themes under each state’s legislation are similar.

As is often the case however the detail of particular provisions can provide quite stark contrasts.

This week, I had a timely reminder of the differences between states in relation to the stamp duty concessions available for the transfer of assets under a succession plan from (say) parents to their children.

Under the New South Wales legislation, there are a number of flexibilities with this concession, including (in certain circumstances) the ability to transfer assets out of a company into the individual names of the children of the shareholders.

In contrast, the Queensland legislation (which is in fact broadly modelled on the New South Wales legislation) has no equivalent exemption.

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 Regurgitator song ‘Black Bugs’.

View here:

Remember the days of the ‘old (school) law’ **

Following on from last week’s post concerning conflicts of law, a similar area of potential difficulty relates to where governments replace existing legislation with a new act.

For example, in many states of Australia, the state governments have removed the previous 'Stamp Acts' and replaced them with 'Duties Acts' in recent years.

In very simple terms, the new Duties Acts effectively replace the previous Stamp Acts in their entirety as and from a particular date.

Practically however there can often be difficulties with this approach.

Recently, for example, we had a situation where a client became aware of an historical transaction that, while not subject to duty under the current Duties Act, would probably have been subject to stamp duty under the relevant Stamp Act.

It appeared that the only reason duty had not been paid was because the relevant documentation had not been lodged with the Stamps Office at the time.

Even though the relevant Stamp Act has been repealed for over ten years, it became necessary to review the provisions of that Stamp Act in detail as well as various court decisions that we had otherwise assumed had been consigned to the history books.

** For the trainspotters, ‘Remember the Days of the Old School Yard’ is a song by Cat Stevens from 1977

Trust Cloning

A recent post focused on trust splitting as a useful tool to improve the administration and management of a discretionary trust http://blog.viewlegal.com.au/2016/03/trust-splitting-some-clarity-at-last.html

As has been widely publicised, trust cloning for family trusts was effectively abolished on 31 October 2008. Since 1 July 2016 trust cloning has been available for trusts that run businesses with an annual turn over of less than $10M – see http://blog.viewlegal.com.au/2016/04/tantalising-opportunities-for-trust.html (the $2M turnover test referred to there is intended to be $10M).

Interestingly, there are still situations when trust cloning might in fact be available, despite the tax concessions being removed on 31 October 2008.

Broadly, the main situations where we see trust cloning being used still are:

1. Where there is no capital gain in relation to the assets to be transferred;
2. Where the capital gains tax that would otherwise be triggered on the trust clone can be rolled over (for example, using the various types of small business CGT concessions or between testamentary trusts); and
3. Where the trust cloning falls within the CGT exemption available for unit trusts.

Generally, there will be stamp duty payable in relation to a trust cloning arrangement to the extent there is dutiable property, although there are areas where there may be a duty exemption, including –

1. In South Australia, for most transfers;
2. In Queensland, for all transfers;
3. In NSW, for business assets and land rich companies; and
4. In Victoria, for business assets.

Image courtesy of Shutterstock

Family court cases and the Stamps Office

Recent cases have explored various aspects of the Tax Office’s ability to access material lodged as part of family law cases.

The recent family law case of Kern [2014] FCCA 1108 provides an example of where the interest of a State based revenue office can be enlivened. 

If you would like a copy of the decision please email me.

The key components of the case here were as follows:

1. A couple who had a 9-year marriage were engaged in proceedings in relation to the division of matrimonial assets.
2. One of the assets related to some land that was gifted to the wife by her parents.  
3. Stamp duty was paid on the transfer at a value of $110,000.  
4. Evidence given by the wife to the family court was that the true market value of the land at the date it was gifted to by her parents was in the region of $150,000 and indeed, may have been closer to $200,000, particularly given that the final sale price for the land when it was subsequently disposed was $325,000.

While the family court accepted the wife’s arguments that she should receive a disproportionate share of the proceeds of the sale of the land due to the contribution that she made, it was also decided to refer the evidence to the Stamps Office for further investigation.

The family court has the inherent power to make a referral in situations such as this (i.e. effectively fraud) under the Evidence Act 1995.

While that Act does provide some protection for self-incrimination, that protection was not available in this case because:

     (a)  The wife provided the incriminating evidence of her own free will.
     (b)  The evidence provided was done so before a request for immunity was made.


Until next week.


Image credit: Des Daughter cc

Cascading testamentary trusts and stamp duty risks

With thanks to co-director View Legal Patrick Ellwood, today’s post looks at an estate planning approach that is often raised, namely the use of ‘cascading’ testamentary trusts.  The structure usually involves a single testamentary trust being established upon the death of one spouse, which then ends and ‘cascades’ into multiple testamentary trusts (usually one for each child) upon the death of the surviving spouse.

This strategy is intended to avoid the issues that can arise where clients ultimately want their children to receive control of separate shares of their estate, while minimising the potential burden for their spouse with the administration of multiple trusts while they are alive.
Previous posts confirm that there should be no tax consequences of the cascading trust approach, for example see Do ‘cascading’ testamentary trusts cause a tax problem and Taxation consequences of testamentary trust distributions - Part II.

Although the ‘cascading’ trust structure can be useful in some circumstances, it is vital to consider the risk that stamp duty will normally apply on the transfer of assets from the original testamentary trust to the separate trusts for the children. The stamp duty rules are different in each jurisdiction, however will usually be around 5% of the value of the assets being transferred.

An alternative approach is to establish a single trust on the death of the first spouse, and ensure the terms of that trust are broad enough to allow capital distributions to be made to other trusts.  This means that, if the stamp duty cost can otherwise be managed, the trustees can ‘split’ the assets of the trust into separate trusts at the appropriate juncture by way of a capital distribution.

A further alternative is to simply establish multiple testamentary trusts on the death of the first spouse and ensure the trustee of each trust (normally the surviving spouse) is empowered to administer all trusts as if they were a single trust.  This approach generally provides the most flexibility and ensures there will be no unnecessary stamp duty costs.

The perceived complexities of using multiple trust are normally not significant if the same trustee acts as trustee of each trust certainly no more complex than (say) 2 individuals owning a house, which is obviously very common.

Until next week.

Image credit: sarahgb cc

Stamp duty on changes of trustee

One issue that is coming up increasingly regularly is changing trustees of either family trusts or self managed superannuation funds.

Generally, there are no tax consequences on the change of trustee for any form of trust (including a superannuation fund).

In each Australian State, there are also provisions that provide a stamp duty rollover on the change of trusteeship.

Care must always be taken however to review at least two issues from a stamp duty perspective.

Firstly, care must be taken to ensure that the correct state law is being applied. There can be complications in this regard where a trust is setup under one jurisdiction, but it has substantial assets in another state.

Once this threshold issue has been resolved, the exact provisions of the relevant stamp duty legislation need to be considered. While each state has similar provisions, there are differences. One example in this regard is that in New South Wales (among other things), any new trustee cannot be a potential beneficiary under the terms of the trust.

Until next week.

Read the deed - another reminder re invalid distributions

A structure diagram of the trust in Harris v Harris [2011] FamCAFC 245 

For those that do not otherwise have access to the Weekly Tax Bulletin, the article from last week extracted below.

Practitioners will be aware, from many previous articles in this Bulletin (and elsewhere), of the critical importance that trust deeds should be read before making any distribution of income or capital. While the "read the deed" mantra should be indelibly etched in practitioners' minds, regular reminders of the dangers of not doing this are not out of place.

One example of a family law case of Harris v Harris [2011] FamCAFC 245 where the range of potential beneficiaries was critical was profiled in our article at 2012 WTB 39 [1586].

In that case, the trial judge in a family court matter noted that the recipient of trust distributions (being a company), who was being challenged, was not in fact an eligible beneficiary of the relevant trust. If the company had been simply nominated as a potential beneficiary, then the distributions would have most likely been valid.

A more common example of where difficulties with invalid distributions arise, however, relates to where particular potential beneficiaries are in fact expressly excluded by the trust deed. The most common example in this regard is the exclusion of the trustee, be that the current, former or even a future trustee, from being a beneficiary of a trust.

These types of clauses are often found in deeds prepared by New South Wales advisers. This is primarily because s 54(3) of the Duties Act 1997 (NSW) limits the nominal duty exemption for a change of trustee to trust deeds that contain provisions ensuring that:

1. none of the continuing trustees remaining after the appointment of a new trustee are or can become a beneficiary under the trust; 
2. none of the trustees of the trust after the appointment of a new trustee are or can become a beneficiary under the trust; and 
3. the transfer is not part of a scheme for conferring an interest, in relation to the trust property, on a new trustee or any other person, whether as a beneficiary or otherwise, to the detriment of the beneficial interest or potential beneficial interest of any person. 

An example of a clause adopting an approach that ensures access to the stamp duty relief is as follows:

"The Trustee for the time being of the Trust can not be a beneficiary of the Trust. None of the continuing Trustees remaining after the retirement of a Trustee is or can become a beneficiary under the Trust, and none of the Trustees of the Trust after the appointment of a new Trustee is or can become a beneficiary under the Trust."

New South Wales is the only Australian jurisdiction that has this type of restriction on accessing the duty concessions for a change of trustee and, understandably, clauses drafted in this manner are extremely prevalent with deed providers or lawyers based in New South Wales.

In many instances, however, there may in fact be no other connection with New South Wales for anyone associated with the trust.

The risks created by this drafting approach will, therefore, often be less than obvious. Anecdotally, there would seem to be an increasing number of situations where invalid distributions are being discovered that stretch back over many years and involve significant levels of invalid distributions.The exact ramifications of this type of situation will depend on a range of issues, including how any default provision under the relevant trust deed is crafted. This said, an embracing by all advisers involved with the administration of the trust of the mantra "read the deed" would avoid the issue ever arising in the first place.

Until next week.

A further reminder – read the deed

As regular readers are aware, there have been numerous posts highlighting the importance of reading trust deeds and recently we had (yet another) reminder.

Many advisers would be aware that, particularly for deeds established in New South Wales (due to the stamp duty rules there), there is often a prohibition on any trustee, and in some instances any former trustee, being a beneficiary of a trust.

The example that came up again recently (it seems to be one that comes up every few weeks) involved an individual trustee of a standard family discretionary trust. That individual trustee was also the sole primary beneficiary and sole appointor.

While there were potential issues from an asset protection perspective that we were reviewing, the more fundamental concern was that under the trust deed the trustee was specifically prohibited from ever receiving any income or capital distributions. A brief review of the balance sheet of the trust showed that substantial distributions had in fact been made to the trustee as primary beneficiary over a number of years.

There are now a myriad of issues that the trustee and his adviser are needing to work through, not least of which being how to address the enquiries of the lawyers for the trustee’s former spouse who are alleging a breach of trust and what steps will need to be taken from a tax perspective in relation to the various years in which invalid distributions have taken place.

Until next week.

Rights to Occupy

Today's post looks at the creation of a life interest in a residential property under a will.

Traditionally, life estates were created where a will maker wanted to allow a particular beneficiary the right to reside in a property without gifting them it directly. 

For a myriad of reasons, the creation of a life interest is rarely appropriate as part of a modern day estate plan, and we generally see the use of either a specially crafted testamentary trust, or alternatively, a right to occupy as the appropriate approaches to use. 

Some of the reasons that life estates are no longer of particular use include:

1. A traditional life estate is very inflexible, particularly if the life tenant no longer wishes to reside in the property. 
2. Some of the reasons that the original property may no longer be appropriate include its size, geographic location or because of the level of care required for the individual (for example, they need to move to a nursing home). 
3. Often, will makers look to craft the life estate so that it ends on the life tenant entering into a new spousal relationship – the courts have been clear that such a restriction is likely to be struck down as void. 
4. There are a number of inflexibilities in relation to the way in which the life tenant and remainderman can interrelate – ultimately, it is often very difficult to end the arrangements other than on the death of the life tenant. 
5. There are significant adverse revenue consequences, both from a tax and stamp duty perspective, that can arise in relation to life estates. These difficulties are particularly detrimental if there is a desire to end the life estate before the death of the life tenant. 

Until next week.

Deferral of abolition of duty (again)

Image Credit: Brian Gurrola

The NSW Government has confirmed the indefinite deferral on the abolition of duty on unlisted marketable securities, mortgage duty on commercial properties and duty on transfers of business assets other than land to fund the Gonski education reforms.

These duties were, most recently due to be abolished on 1 July 2013.  Before then, the duties were due to be abolished on the introduction of GST in 2000 and on a number of occasions since then.  On each earlier occasion the proposed abolitions were deferred ‘temporarily’.

WA has also announced it will defer the abolition of duty on non land business assets (e.g. goodwill and statutory licences) indefinitely.

As with all other Australian states, other than NSW, WA abolished marketable securities duty and mortgage duty some time ago.

Until next week.

Why would a professional partnership incorporate?

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Why would a professional partnership incorporate?’. If you would like a link to the video please let me know.

As usual, a transcript of the presentation for those that cannot (or choose not) to listen to the presentation is below –

The number of answers to this question are probably only limited to the number of professional practices there are out there.  There are a range of reasons. 

Tax is one and we keep coming back to that, but that can sometimes be in the eye of the beholder from that perspective. 

We're seeing, certainly from a risk management perspective and asset protection and the credit crunch and everything else that’s going on and the changes to the bankruptcy rules in the recent past mean that everyone is much more aware that when things go wrong, it's very attractive to have your liability limited.  

Obviously, that’s probably the biggest advantage of an incorporated model. 

There's also I guess the sense from people talking about retaining key staff and the skills shortage that many professional organisations are facing these days that it tends to make sharing of equity a lot easier if you've got a true corporate model. 

That can sometimes be as simple from a perception viewpoint that a lot of times staff or key employees are much more aligned and find it much easier to understand a company setup as opposed to some sort of fancy trust arrangement or a service trust arrangement for that matter. 

Certainly, the transaction costs side of things, in terms of the hard costs, particularly stamp duty, in most states now, the concept of having to pay stamp duty on the transfer of listed shares is basically a thing of the past.  So that can be very attractive to people. 

The last main reason and perhaps this is touching on the perception side of it again, I think the corporate model from a governance perspective, it tends to be a lot easier for people to understand.  We've done a lot of work in this area and it is interesting that by becoming a director, and by having a board and by having shareholders and all of these sorts of more formal things, even though the deck chairs haven't really changed in the organisation, there seems to be an air of governance around the place that just wasn't there while they remained as a partnership.

Until next week.

What are some of the issues with a professional partnership ‘rolling over’ into a company structure?

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘What are some of the issues with a professional partnership ‘rolling over’ into a company structure?’at the following link - http://youtu.be/pIwVOyEAeBA



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

The rollover at face value is always the easiest way to go, because it removes one seriously significant transaction cost being the capital gains tax implications. The problem though is that when you dig a little bit deeper, that is a little illusionary at times, particularly for a group of individual partners rolling over to a company. The attraction of taking that style of rollover can be diminished by the fact that they will still individually own the shares in the company.

So if it's a standard rollover, for example a partnership to a company under Division 122B of the Tax Act, ultimately, the individuals would still actually own the shares in the company. What they will have done is taken away 100 cents in the dollar, if that’s the right way to say it, of income that they’ve historically been enjoying and replaced that with 70 cents in the dollar and an imputation credit or franking credit.

This can lead to a situation where people, having done a rollover are then looking to restructure again anyway. So effectively it's a double restructure because they'll want to divest themselves individually of shares and make those shares be owned via some sort of discretionary trust arrangement.

It can also lead into a range of other potential restructures, dividend access shares and these types of arrangements that certainly get away from the overall goal in the first place, which was to simplify arrangements and get true limited liability.

The other areas (and some of these touched on in other parts of today's program) that obviously need to be taken into account include that while there is no stamp duty on unlisted shares, there is certainly stamp duty in every state moving from an individual or partnership arrangement into a company arrangement. That's a significant transaction cost that cannot be avoided in any way, shape or form currently and needs to be paid upfront effectively to get yourself into the new structure. The other ancillary costs that go around an incorporation include issues such as payroll tax, which is inevitably a lot more expensive if you've moved into a company structure as opposed to remaining in a partnership structure.

Until next week.

What are some of the advantages of a professional partnership incorporating?

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘What are some of the advantages of a professional partnership incorporating?’. If you would like a link to the video please let me know.

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

The biggest thing I guess with incorporation is that, if only from a perception perspective, but in reality from many other perspectives as well, the ability to facilitate the entry and exit is significantly easier.

Probably the greatest example of that is in relation to transaction costs. In most Australian states already - and in those that haven't done it, it's not very far away – there has been the abolishment of stamp duty on the transfer of shares in unlisted companies.

So what that means in a very practical sense is that shares can be moved without any immediate transaction costs between current owners and future owners. That obviously significantly simplifies and reduces the transaction costs that would otherwise be involved.

Conceptually as well, the ability to create employee share type arrangements or have partial sell downs is significantly easier in a corporate environment than it has historically been in a trust environment, or if there's individual partners involved.

In relation to the stamp duty side of things, it is an important consideration to take into account. Basically every Australian state now has abolished stamp duty. Victoria and Tasmania actually led the way originally by abolishing stamp duty on transfers of unlisted shares. The only major Australian state now that hasn’t done it is New South Wales and the government has released a timetable that would see the abolishment of that duty very soon.

Until next week.

What are the stamp duty consequences of assets passing via testamentary trusts

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘What are the stamp duty consequences of assets passing via testamentary trusts?’ If you would like a link to the video please let me know.

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

One of the great difficulties in this area, and I think it's an often used phrase, is that in many respects, a lot of these issues, sort of you take one step forward and 2 or 3 steps backwards.

As much as we've touched on already, the great step forward in terms of legislative certainty around the way in which the Tax Office is going to interpret Division 128 from a capital gains tax perspective, conversely what we're seeing from a stamp duty perspective is almost the exact opposite.

So obviously, we still have a situation across Australia where every single state has different stamp duty tests and different stamp duty rules in relation to how they apply distributions under a deceased estate.

It can be said that in every jurisdiction there is certainly an alignment between Division 128 under the Tax Act for the transfer of assets from the will maker to the legal personal representative and from the legal personal representative down into a trust structure.

From there, unfortunately, it really does start to unravel quite significantly, because even in the states that historically allowed assets to be distributed out of an initial trust into a sub trust or out of an initial trust directly to an individual beneficiary, those states are starting to wind back from that position and we've got a situation for many clients where if they're going into the structure, the conservative and prudent advice will probably be that they should expect to pay stamp duty when ultimately taking assets out of the initial trust.

Now I guess that line of reasoning or line of argument needs to be counterbalanced against, and the discussion about whether in fact there will be dutiable property inside the trust; and to the extent that the assets are likely to centre around cash or managed funds or shares, then it may well that for many clients the fact that there's a potential stamp duty risk down the track is in fact irrelevant.

For any adviser working in this space, the ability to give complete signoff from a tax perspective is very much counterbalanced against the fact that from a stamp duty perspective there has to be seen to be a real risk moving forward that there will be double stamp duty potentially.

Until next week.

No removal of business duty in Queensland

Today's post summarises an important issue for anyone conducting business in Queensland.

In particular, the Queensland government has announced in its January 2012 interim budget, the deferral of its plan to abolish transfer duty on non-land Queensland business assets.

Broadly, business assets include goodwill, valuable contractual rights, trade debtors, plant and equipment.

The deferral is 'until the budget can accommodate the abolition' - which many commentators are assuming will be indefinitely.

The abolition had been scheduled from 1 July 2013, following the original aim to see it removed on the introduction of GST in July 2000.

As many readers will be aware, other jurisdictions have either abolished duty on non-land business assets (e.g. Victoria, Tasmania and ACT) or have scheduled to abolish it (e.g. New South Wales and South Australia from 1 July 2012 and Western Australia from 1 July 2013).

Until next week.

De facto death duty confirmation

As many will have seen, the lead article in Friday’s Financial Review confirmed that, as far as the Tax Office is concerned, payments made by a super fund, following the death of a member, will be subject to (at least) a 10% capital gains tax bill.

Tax is payable in these circumstances on the difference between the market value of the underlying assets of the fund and the cost base.

While some advisers have tried to adopt approaches to get around what is effectively a death duty, the conservative view as to the likely ATO approach has now been confirmed beyond doubt.

Depending on the exact circumstances of a client, there are still mechanisms to significantly reduce and/or eliminate the capital gains tax liability that might otherwise be triggered on the death of a fund member, however the announcement by the Tax Office further underlines the importance of ensuring a comprehensive, integrated and up-to-date estate plan.

For those interested in reading the full draft ruling, a link is set out below.

Until next week.

http://law.ato.gov.au/atolaw/view.htm?DocID=DTR/TR2011D3/NAT/ATO/00001&PiT=99991231235958

Business licences

The combination of the Bamford decision and the Tax Office’s attitude in relation to unpaid present entitlements have meant that we have spent a significant amount of time recently looking at optimal structures for business and investment purposes.

One approach that we have seen an increasing number of clients and advisers consider where a business is owned by a discretionary trust, is the licensing of that business to a trading company.

Obviously, there are a number of tax and stamp duty issues that need to be considered in relation to this approach.

A recent case however seems to confirm that at least in relation to the philosophical legal questions, this kind of approach is now available.

For those who are interested to learn more, a copy of the decision is at the link below. One of the most important paragraphs in the decision is number 42, which highlights the distinction between a goodwill licence and a business licence.

http://www.austlii.edu.au/au/cases/sa/SASC/2010/279.html

Until next week.

Important stamp duty changes in Queensland

For those advisers who provide guidance to trusts with assets in Queensland, relatively important changes have been announced to the Duties Act.
Previous posts have mentioned the difficulties surrounding corporate trustee duty, particularly in relation to the Commissioner’s discretion in determining whether it applies.

This discretion has now been removed.

Similarly, the discretion surrounding whether a trust is a 'family trust' and therefore able to get access to various concessionary provisions has also been removed.

At least on the face of the new provisions, it should be easier to implement rearrangements of family trusts (particularly in succession situations), however due to the vagaries of how many trust deeds are drafted, advisers will need to be extremely careful to ensure that any particular change does in fact comply with new rules.

It should be noted that the changes are only in bill form at this stage – in other words, they are not formally legislated as yet.

Until next week.

An estate planning tip

Following last week's post, an adviser contacted me to relay a critical issue to keep in mind whenever looking to move an asset (such as a family home) into the name of a spouse.

Broadly the chain of events was as follows:

1. An at-risk spouse moved the family home into her husband’s name paying a substantial stamp duty bill.

2. The husband subsequently died with a very simple 'I love you' will.

3. Under this will, all of the husband’s wealth passed back to the wife.

4. The wife then had to pay another round of stamp duty to move the asset into a family trust.

5. Aside from the double stamp duty bill (and the second bill was actually significantly larger than the first as duty was payable on 100% of the asset with no concessions available), the second transfer to the family trust has also meant that the house will probably be subject to capital gains tax on any subsequent disposal and the 4-year clawback period under the bankruptcy rules starts again from the date of the second transfer.

6. Both of these adverse outcomes could have been avoided if the husband had ensured testamentary discretionary trusts were established under his will.

Until next week.