As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
The 328-G rules allow taxpayers to basically roll-over any otherwise taxable asset as part of the concessions. In other words, it is not just capital gains tax assets, it can be trading stock, depreciating assets, and assets on revenue account.
Any tax that would otherwise be triggered in these areas is ignored as part of the 328-G rules. However, the concessions only operate at a federal revenue level, and even then, not across the board.
For example, if you've got GST applicable, which invariably you will, because you'll be a small business turning over less than $2 million, you need to have a strategy to deal with that as GST is not exempted under 328-G.
Stamp duty, as it is state based, is not dealt with at all under 328-G, thus you will need to have a strategy to deal with that.
Land tax is not addressed.
Similarly, payroll tax and any other state taxes are not dealt with at all under the 328-G provisions.
As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
The case study here is a relatively famous case, or at least a case about a relatively famous person, being Solomon Lew, the high profile retailer.
The factual scenario involved a relatively standard family trust.
The initial catalyst for the difficulties was the so-called ‘entity taxation regime'. Under these rules, the idea was to effectively tax trusts as if they were companies.
Mr Lew received some strategic tax advice.
The strategic advice was to do this.
The first step was that the trust entered into an arrangement where an asset revaluation was done.
This basically uplifted the carrying value of all of the assets of the trust to market value and created a big gap, a dollar gap between the carrying cost and the actual market value. That ‘notional gain' was distributed as a capital distribution, down to relevantly one of the sons and one of the daughters of Mr and Mrs Lew, and their respective spouses.
Fast forward about 5 or 6 years, the relationships of both of the kids with their respective spouses ended at about the same point in time.
The former spouses and their lawyers looked at the documentation and argued based on the accounts, the amounts were at call loans made to the trust.
The Lews’ argued that the amounts were in fact gifted back into the trust.
If it was a loan, then that would have to be immediately repaid down into each couple’s hands and then those would immediately form part of the matrimonial pool.
Unfortunately, what the ‘correct' answer was is unknown because the matter settled out of court. In some respects however, it doesn’t even matter what the answer was.
The key point is that no one actually thought about the documentation with a lot of clarity.
The title of this post is a play on Murphy’s Law, which is an adage or epigram that is generally quoted as 'anything that can go wrong, will go wrong'.
Murphy’s Law is profiled together with over 100 other adages in my recently released business book 'Laws for Life'.
A link to your (free!) copy of this book is below -
Separately, many of the themes in this post will be featured in our upcoming half and full day Estate Planning Roadshow being held in Brisbane, Sydney, Melbourne, Adelaide and Perth.
As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
The case study that we will explore here involved a husband who was breaking up with his spouse.
The husband had been the sole trustee of the relevant trust from day one. We'll call him Mr Y. Mr Y was also the primary beneficiary of the trust.
The wife was trying to argue that Mr Y had received distributions overtime and therefore she was entitled to percentage share of the trust.
So a fairly standard analysis of a family trust in a family law dispute. We were called in because the wife’s lawyer had the hide to actually read the trust deed.
The trust instrument stated that in relation to the definition of primary beneficiary, in no circumstances could a primary beneficiary receive distributions, if at any time the person was a trustee.
So from day one, the provisions of the deed had meant that Mr Y was never in fact a potential beneficiary of the trust and yet he had received significant distributions over an extended period of time. A fundamental issue triggered simply because no one had actually read the trust deed.
Interestingly, this type of exclusion of beneficiary class is in virtually every trust instrument from a New South Wales trust deed provider. More problematically, this type of provision is actually used by countless other deed providers as well, whether they're based in New South Wales exclusively or whether they in fact are based in other parts of the country.
In this regard, we are excited to be presenting half and full day Estate Planning Roadshow in Brisbane, Sydney, Melbourne, Adelaide and Perth that will explore a range of planning opportunities in this space.
For your limited opportunity to access special early bird pricing for our Roadshow, download the brochure here.
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.
As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers some related practical issues in relation to gift and loan back arrangements in a ‘vidcast’ at the following link - https://youtu.be/hJy0OyOuLfE
As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
Having done the trust split, what you might look at doing is a gift and loan back. That is to say the trustee that sits over a split trust will arrange for assets that are equal to the underlying interest in the asset to be gifted into a brand new trust.
The new trust will generally be a stock standard family trust that's controlled by the relevant beneficiary.
If the split trust makes a capital gift of the underlying capital value, not the interest in the asset itself, then what is being gifted is the dollar value of the asset as a cash gift. It can be a promissory note, round robin of cheques or whatever it needs to be.
The funds are gifted into a trust that’s controlled by the relevant beneficiary. What the beneficiary then does is lends that money back into the split trust.
That is step 1 is the gift.
Step 2 is the loan.
But at the same time as that new trust is making that loan, it will also take a mortgage out over the underlying assets in the split trust.
Thus you have effectively synthetically moved all of the equity out of the split trust into a brand new trust, which is absolutely controlled by the relevant beneficiary.
Furthermore, there's no mortgage duty on a gift and loan back arrangement. In other words, you can do all of the gift and loan back arrangement without any transaction costs.
The beauty of the strategy is that it still maintains the integrity of the initial trust split, but gives each of the ultimate family members, no matter what might go wrong between the family at that split trust level, the ultimate ability to call in that debt. While they might actually have to sell the underlying asset at that point, they will still ultimately have the underlying equity where it needs to be (that is in their sole control).
As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers some related practical issues in relation to this case in a ‘vidcast’ at the following link - https://youtu.be/kUQ9F-Fwow8
As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
The case of Montevento Holdings was an estate planning exercise.
As seems to be the case quite regularly, dad died first. Under the estate plan for dad, he gave all of his shares in the trustee company to mum.
Then there was separately a principal power. The principal power being that whoever was the principal had the ability to hire and fire the trustee.
The principal power had two particularly key things in relation to it.
Firstly, the dad had amended the documentation to mandate how the succession of the principal role was to operate.
Namely, the succession was that it went to mum and then it went to mum’s legal personal representative (LPR).
The second point was that the principal could not be the trustee.
Dad’s approach was that he saw the trust as a ‘whole of family’ family trust. He apparently wanted it to be jointly controlled by the two sons.
So mum and dad had decided that under their wills they would give their shares in the trustee company to the two sons. However, mum under her will only put son #1 as her LPR.
Again, we go back to this mantra of reading the deed. Arguably here, no one had actually read the trust instrument.
So turn of events was this. Mum passes away. Yes, the shares go to the 2 brothers.
Son #1 reads the trust instrument, or probably his lawyer reads the trust instrument and says ‘you know what, you are the legal personal representative under your mum’s will, you are the principal of the trust, you may unilaterally decide who that trustee company is’.
‘The only thing you cannot do is you cannot appoint yourself as the trustee’.
Son #1 says ‘well, you know what, I'd like full control of this trust. I'd like to be able to take all the assets of the trust and do what I wish with them without having to refer to my brother who I don’t get on with’.
‘What I will not do is appoint myself as the trustee. What I will do is I'll set up a new trustee company with 100% of the shares in that company owned by me and I will be the sole director’.
‘Once I've taken those steps, and there's specific tax and stamp duty roll-overs available to let me do that, once I've taken those steps, I'll get all those assets out of the trust and give them to me. My brother can make his own arrangements’.
Brother #2 (son # 2) got word of this approach and tried to challenge the arrangement and said there's effectively a fiduciary duty.
That is, even though the trust deed said the principal couldn't be the trustee, surely that also included that the principal couldn't set up a sole director, sole shareholder company and just sidestep the prohibition.
The Supreme Court said yes, you're right son # 2, that’s not fair, you win.
The Court of Appeal said yes, you're right son # 2, that’s not fair, you win.
The High Court said you know what, this wasn’t a very complex trust instrument.
Mum could have quite easily got someone to read that for her, tell her that all of her objectives would be unwound if she only appointed son # 1 as her LPR. We think that what son # 1 has done is entirely in accordance with the trust instrument. Son # 1 wins; not son # 2. So the whole arrangement was held to be valid and son # 1 took the full control of the trust and son # 2 was left to make his own arrangements.
As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers some related practical issues in relation to this case in a ‘vidcast’ at the following link - https://youtu.be/xO0rrLqGSkU
As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
A further very interesting aspect in the case of Harris, is that over many years, there'd been distributions made to a bucket company by the relevant family trust.
The 100% shareholder in that bucket company was the husband. So the wife had a legitimate expectation in relation to that company that she would be absolutely entitled to at least 50% of that under the property settlement.
There was over $1 million worth of distributions that had been made to that bucket company over time out of the family trust that owned the business.
What the court did was that they actually read the trust instrument.
The trust instrument was quite particular on who the beneficiaries were, including saying that any bucket company must be expressly listed as a beneficiary. Here the relevant company wasn’t listed as a beneficiary.
This meant there had about eight or nine years’ worth of distributions that had been purportedly made to the bucket company which were in fact all void.
The family court said we don’t need to get our hands dirty on what the Tax Office might think about that, but we suspect they will be interested. For the purposes of the family law case, the husband was ‘fine’ because the bucket company was in fact valued at nothing.
As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers some related practical issues in relation to this case and trust splitting in a ‘vidcast’ at the following link - https://vimeo.com/154687783/
As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
Harris is an example of the interplay between using a bespoke constitution, but not doing a trust splitting exercise.
In this situation, under an estate planning arrangement, the dad was the original shareholder and director of the corporate trustee. He died and under his estate plan, he gave shares in the company to the adviser, he gave shares to the husband (his son) and then mum (the wife) retained her shares in the trustee company.
These shareholders also acted as the board of the trustee company.
Inside that family trust was a family business that had been running for many years. The husband was, on all the evidence, important to that business and had a really key role. At no stage did the family attempt to split the trust though.
The husband had siblings, it was clearly still the ‘family’s trust’ and there were still all of the normal rules and obligations you'd expect. The husband had not otherwise been given any significant control. Thus, on his argument, the trust was not an asset of his in the family court scenario.
The wife said the opposite. The wife said even though the family hadn't gone through a trust splitting exercise in a formal sense, there were significant assets that were the husband’s, and therefore, they're things she was entitled to 50% of.
The court held that family law cases will turn on the facts.
Here, they were satisfied that the husband has no control.
There was no de facto splitting.
The terms of the corporate trustee constitution meant that the trustee directors must act jointly and in concert.
There was no evidence to allow the court to assume that the mum was somehow under the manipulation or control or acting as the mere puppet of the husband.
This meant the court essentially ignored the trust.
The reality however is that if the family had gone down the trust splitting path, you can almost guarantee that the earlier family law case of Pittman (email me if you would like a copy of that decision) would have been followed. In that case the court held that assets of a family trust, being a business, were exposed to a family law settlement.
As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers some related practical issues in relation to this case in a ‘vidcast’ at the following link - https://vimeo.com/148843224
As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
The trust split that took place in Kennon v Spry was probably the fundamental thing that meant the whole structure and intended strategy fell over.
After the separation with his wife, Dr Spry took steps to split the trust or segregate the assets of what was in the initial family trust and create four separate sub-trusts for each of the four daughters of the relationship.
Dr Spry did that effectively, in the court’s view, as a way to mean that not only did he not have the assets, so that he could be subject to giving them up to his wife, it also meant that his wife didn’t have them either.
Essentially it was his way of saying to the family court ‘catch me if you can’.
Where the court landed was that they effectively ignored the attempted trust split.
While it might have been effective for tax purposes, while it might have been effective for stamp duty purposes, while it may have even been effective from an estate planning perspective, it was done after the relationship had broken down.
Although there were a myriad of other factual issues that called into question the way Dr Spry conducted himself, the court effectively simply ignored the trust split.
What that meant in a practical sense was that all of the assets that had otherwise been given to the control and benefit of the four daughters of the relationship were returned back into the head trust and the control of that trust was deemed to be solely with Dr Spry.
Once the court had gone through the unwinding of the estate planning exercise, or what was argued to be an estate planning exercise, once all that was unwound and all the assets were back up under the main trust, it was then quite easy for the court to say that trust was under the sole direction and coercion of Dr Spry. Therefore, those assets could then be administered under the terms of the family court order and pass entirely to the benefit of the wife.
As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers some related practical issues in relation to the read the deed mantra in a ‘vidcast’ at the following link - https://vimeo.com/145349504
As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
This case study involves a family trust deed produced by a reputable deed provider – or at least a well-known deed provider, producing a deed in 2009.
This particular deed provider had adopted a ‘schedule’ approach. That is, in the back of the document, they had a schedule. Under that schedule, they listed a number of key things. For example, they had the date of establishment, the trustee, the principal and the beneficiaries.
They then had the vesting date.
A further reminder - this is a well-known provider, with a well-known accounting firm, with a high net wealth client.
The date of establishment of the trust was listed in the schedule as 28 June 2009.
The vesting date was listed as 29 June 2009.
That is they had created a one-day trust.
This trust deed came to us 2015 as the client wanted to do a trust split and we said ‘we need to read the trust instrument’.
Ironically we had trouble getting a copy of the trust instrument.
For some weeks we only had a photocopy of the undated document, however we held firm that we really needed to see the entire document, with the schedule completed. When we finally got the stamped trust deed and completed schedule our entire advice was one sentence – that is ‘do you realise your trust ended over six years ago. What are we going to do about this?’
As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers some related practical issues in relation to resettlements in a ‘vidcast’ at the following link - https://vimeo.com/145339753
As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
If you go back to Clark as a benchmark, that decision followed a whole thread of decisions starting right back to Commercial Nominees, which was a superannuation resettlement case.
There was significant white noise around that decision from the Tax Office’s perspective, because they were arguing that the principles about amending trust instruments out of Commercial Nominees were really only available for superannuation funds. Therefore while, a super fund could amend its deed significantly, that didn't apply to any other form of trust.
Clark, somewhat interestingly, was a case that involved a unit trust. But ultimately the Tax Office following that case was comfortable that the principles, as initially confirmed by the High Court in Commercial Nominees, did in fact apply to any form of trust.
Even though Clark involved a unit trust, there were really quite radical changes to the way in which the trust instrument was crafted. There were changes to the unitholders, the trusteeship, and the way in which the trust instrument actually worked.
Despite all of those changes, the court held that the trust was an ongoing trust and there had been no tax event, that is there had been no resettlement, which would have notionally meant that all of the assets of the trust were disposed of from the original trust and reacquired by the new trust, effectively creating a tax event.
What Clark in theory should allow in any trust splitting arrangement, is permit amendments to whatever trust instrument is involved, to allow whatever is desired to be achieved from a trust splitting perspective.
As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses some of the key issues in relation to ‘bespoke’ corporate trustee constitutions’ and trust splitting in a ‘vidcast’ at the following link - https://vimeo.com/145236253
As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
One of the things that we're spending a lot more time working with is what we loosely call a ‘de facto corporatisation’ or indeed a de facto trust splitting exercise.
In other words, tailoring what would otherwise be a constitution for a shelf company, so as to provide all of the same outcomes that you might otherwise see under a trust split, and embedding those arrangements at least into the company’s constitution, but may be also into the trust instrument itself.
As part of segregating particular assets sitting underneath the trust structure, you can put in place a bespoke or a tailored company constitution, and regulate the way in which directors are appointed to that company, regulate the way in which the shareholders can operate, regulate the way decisions are made in relation to particular assets sitting down inside the trust.
If you actually contractually go and put that into the terms of the constitution, what you can effectively have is, for example, if you're talking about this in an estate planning context, kid 1 controlling part of the trustee company, and giving kid 1 complete autonomy over decisions in relation to assets that are related to that part of the trustee company.
You can then have kid 2 likewise in relation to another control part of the structure and so on.
Alternatively, many people will only look to regulate control in relation to the trustee company.
So they’ll say look, we'll put in place voting requirements, we'll say that one kid has a super vote, or we'll actually appoint an independent board to that company and regulate how those decisions might be made, and this will be an overall strategy for the trust at the trustee company level.
As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers some related practical issues in relation to corporate trustee duty and trust splitting in Western Australia and Queensland in a ‘vidcast’ at the following link - https://vimeo.com/143839535
As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
If, for example, you've got your mum and dad as the shareholders in a trustee company, and as part of the trust splitting arrangement, you're wanting to actually transfer the shares in that company, because you're wanting to transfer the ultimate control, what the stamp duty offices may do is notionally deem the value of that company to be exactly equal to the value of the assets inside the trust.
Effectively this creates a situation where, even though that’s invariably only a $2 company, for stamp duty purposes, the shares in the trustee company will be notionally deemed to be the same value as the family trust, and the shareholders will pay stamp duty on that value.
There are exemptions to that outcome, but the starting point is that it is dutiable.
If you're not aware of this risk and you've had clients enter into one of those transactions, you need to become very aware of it, because there's now data matching between the Australian Securities Commission and the revenue authorities in both WA and Queensland. Therefore if you do your share transfer and process it through ASIC and haven't lodged that with the Stamps Office, you'll likely get a letter from the Stamps Office saying ‘please explain’.
As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses some of the key issues from the Clark v Inglis decision (please email me if you would like a copy of the case) and trust splitting in a ‘vidcast’ at the following link - https://vimeo.com/143343257.
As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
Clark v Inglis was focused on an estate planning exercise.
As part of that estate planning exercise, there was a standard family trust under which the main asset was listed shares sitting inside the trust that overtime had grown significantly in value.
As part of that estate planning exercise, there was an asset revaluation reserve undertaken by the trustee of the trust.
As part of that asset revaluation reserve, and as part of the overall estate planning exercise, there was a distribution on paper effectively of that increase in value of the shares to the person who was actually making their will.
Glossing over some of the facts and the key issue as it relates to trust splitting, what happened under the estate planning exercise was that firstly, the trustee company, and therefore the control of the trust went to the kids of the willmaker from his first marriage (i.e. marriage No.1.).
However the big debt that was outstanding between the trust and the deceased person went to wife No.2.
The core issue was - was it a valid exercise of trustee’s discretion to revalue those assets and then notionally distribute them out?
If that was valid, what was the terms of the loan whereby the willmaker effectively was lending that money back into the trust and was that loan repayable by the trustee company into the estate and therefore passing to the second wife? Obviously, there was quite a lot of tension between wife No.2 and kids from the first relationship. The key take outs in the context of the trust splitting exercise were that yes, the arrangement was entirely valid; yes, the loan was outstanding and formed an asset in the estate; and yes, it was repayable on demand to the second wife.
As usual, a transcript of the presentation for those that cannot (or choose not) to view the presentation is below –
Certainly, immediately following Spry, for an extended period, the usefulness of trusts was under the spotlight and there was significant nervousness about how robust they actually were going to be.
The reality has been that this conclusion has been tempered by the combination of firstly the fact that Spry is a bit of an outlier decision and actually driven a lot by factual scenario, which is a relatively strange set of circumstances, and the fact that there have been so many cases since Spry that have respected the integrity of trusts.
Therefore, it is generally accepted that all forms of trusts, particularly testamentary trusts, will remain the vehicle of choice in estate planning context at least for the foreseeable future.
As usual, a transcript of the presentation for those that cannot (or choose not) to view the presentation is below –
There is no doubt that a properly crafted binding financial agreement or 'BFA' provides the best protection from an asset protection perspective available.
The difficulty is that even despite the changes that the government has brought in to make binding financial agreements more robust, the reality is there is a level of scepticism about just how useful BFAs are actually going to be, because there seem to be so many ways in which they can be unwound on a technicality.
While the general view is that they are the ideal outcome in terms of protecting wealth, the conservative view would always be that steps are taken to complement the BFA and to try and ensure the assets are ultimately quarantined on a relationship breakdown. One obvious example is to implement testamentary discretionary trusts under the estate plan, regardless of whether a BFA is in existence.
c had not contributed to the assets of the trust being generated in the first place as they had come down the family line.
Despite these facts, the court still held the
assets to be the husband's resource and therefore took into broad account the
terms of matrimonial property settlement.
Importantly though, the assets were not
considered property. That was a very important part of the decision, because
the court also found that despite the fact that the husband did not have any
control over the structure and had yet to receive any benefit, there was
absolutely clear evidence that he would ultimately receive it, in the court's
opinion.
While on the face of the decision, Essex was probably a 'loss' for the husband, the reality is that the decision supports
this idea that trust structures will only be attacked where the court believes
that it is absolutely legitimate in the circumstances and in any other scenario
that the integrity of the trust structure will be respected and the assets
will, therefore, be protected.
As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of memos of directions, or letters of wishes in relation to trusts at the following link - https://youtu.be/B9NuAE3lIiM
As usual, a transcript of the presentation for those that cannot (or choose not) to view the presentation is below –
Memos of directions, or letters of wishes, are a classic example of the 'continuum's' that the court has to work in and the overall framework of appropriate public policy.
With letters of wishes, what the courts are generally trying to balance on the one hand, is the idea that they should be there to support the trustees and help them reach the right decision, against the argument that trustees are ultimately responsible to answer to the court and not be subject to anyone else's direction.
Many cases in this area have had factual scenarios where the letters of wishes are referred to in the reasons for a decision by the trustee and the beneficiaries have challenged the decision and directions were sought from the court.
Often, the court will release the letter of wishes and make it known to the beneficiaries. However, the decisions observe that the only reason that the letter of wishes even comes into play is because the trustee chooses to disclose the existence of them.
Therefore, from a planning perspective, it may be a conservative and pragmatic approach that letters of wishes, even if they exist, are not actually disclosed anywhere by the trustee.
As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘When will a multiple testamentary trust be preferred?’ at the following link - https://youtu.be/JXOrmklYY8Y
As usual, a transcript of the presentation for those that cannot (or choose not) to view the presentation is below –
Interestingly, the reasons supporting use of multiple trusts are almost a mirror image to those supporting a single trust. The practical reasons include where the underlying beneficiaries are all adults, spread all over the world, or simply don’t get on. For any of these reasons it would often be impractical to lock them inside one structure.
Similarly, if there are different risk profiles or investment objectives for each of the underlying main beneficiaries, that would be another reason that a multiple trust would be preferable.
Again, what the underlying assets of the estate are can also be a big driver towards supporting use of multiple testamentary trusts.
For example, if there are particular assets that need to go into direct control of particular beneficiaries, then again the multiple trust structure will be the preferred approach.
Multiple trusts can be of particular use where there is a need to have different control mechanisms in relation to different components of the estate.
This can be particularly relevant to people who are concerned about the mental stability of a beneficiary or a beneficiary has a physical disability, then this in itself can be a driver to regulate part of the estate in a certain way through a testamentary trust and then have a separate trust to manage other parts of the wealth.
As usual, a transcript of the presentation for those that cannot (or choose not) to view the presentation is below –
The issues around the appropriateness of a single testamentary trust structure are really driven by the practicalities and the exact factual framework that a particular client finds themselves in.
The obvious one and the most common scenario would be where the family is quite young (for example), all children who are beneficiaries are under the age of 18. Another of the reasons is if asset protection is a core goal.
Generally, the conservative view is that using one trust, as opposed to multiple trusts, will provide a stronger level of asset protection.
Other issues include where the overall framework of the people making the estate plan is one where they want to see the beneficiaries more as a custodian of wealth, as opposed to being a direct recipient.
Probably the last main example would be where the underlying assets don’t lend themselves to a structure, other than being inside a single testamentary trust. A classic example would be a business interest or a large property holding. In this type of scenario, it's normally the case that a single trust would be preferred, as opposed to a multiple testamentary trust structure.
