A number of people contacted me following last week's post with questions in relation to the consequences of an accountant or financial adviser (or for that matter a lawyer) acting as an attorney for a client.
Many of you will have either professional body guidelines or guidelines that your firm has agreed to implement about the basis on which (if at all) you can take on the role of an attorney.
In a practical sense, the two biggest issues you need to ensure are addressed:
1. The conflict of interest rules are very strict in this area. It is always preferable to have a very clear statement in the attorney appointment document confirming that the person appointing you as their representative waives any prohibition on you acting due to an issue of conflict.
2. Similarly, on a number of levels, it is always our strong recommendation that the professional adviser be permitted to charge their standard professional fees. This ability should be clearly set out in the appointment document.
Until next week.
Matthew Burgess
Monday, June 28, 2010
Monday, June 21, 2010
Further trust deed tips
A few weeks ago (see the posting 'Trust deed tip'), I mentioned the trust where a number of variations had been implemented over the years, but those variations did not comply with the rules set out under the trust instrument.
The short term fix (in order to satisfy financier requirements) was to implement a deed of confirmation of the historical changes.
To try and minimise future difficulties, we are also implementing the following:
1. With the settlor’s consent (given that he is still alive and has capacity to do so), we are removing the requirement for him to consent to any future changes. This step has some potential tax and stamp duty consequences, however on balance, the client’s accountant has agreed with us that it is the most logical next step.
2. We are also clarifying the requirements around the consent of primary beneficiaries. For this particular situation, all primary beneficiaries are currently over the age of 18 and alive, however the client did not want a situation in the future where there were infant beneficiaries (or beneficiaries that were no longer alive) given third parties might seek to challenge whether a future purported variation was in fact effective without the consent of those people.
Until next week.
Matthew Burgess
The short term fix (in order to satisfy financier requirements) was to implement a deed of confirmation of the historical changes.
To try and minimise future difficulties, we are also implementing the following:
1. With the settlor’s consent (given that he is still alive and has capacity to do so), we are removing the requirement for him to consent to any future changes. This step has some potential tax and stamp duty consequences, however on balance, the client’s accountant has agreed with us that it is the most logical next step.
2. We are also clarifying the requirements around the consent of primary beneficiaries. For this particular situation, all primary beneficiaries are currently over the age of 18 and alive, however the client did not want a situation in the future where there were infant beneficiaries (or beneficiaries that were no longer alive) given third parties might seek to challenge whether a future purported variation was in fact effective without the consent of those people.
Until next week.
Matthew Burgess
Topics:
Deed of variation,
Stamp duty,
Trust beneficiaries,
Trust deed
Tuesday, June 15, 2010
Corporate trustee duty (part 2)
Last week, I mentioned the unique way in which the Queensland stamp duty rules can operate in relation to the transfer of shares in companies that act as trustees for discretionary trusts.
As touched on last week, the provisions are such that the transfer of shares in these companies can be charged with standard stamp duty rates based on the underlying market value (ignoring any debt) of the dutiable assets in the discretionary trust located in Queensland or Western Australia.
In Queensland there is however the ability to legitimately avoid this stamp duty cost, if the transaction comes within an exemption set out under the stamp duty rules.
Broadly these rules provide that so long as the transfer of shares is between individual members of a family group, and the trust is established primarily for the benefit of members of that family, then there will be no duty payable.
As the ability to access the stamp duty relief is subject to the discretion of the Stamps Office, there is the ability to get an indication on whether stamp duty relief is likely to be available and with the client that I mentioned last week, we have submitted a ruling application on their behalf.
If an unfavourable ruling is received, we will need to explore other, less commercially appropriate, alternatives to achieve the client’s overall objectives.
Until next week.
Matthew Burgess
As touched on last week, the provisions are such that the transfer of shares in these companies can be charged with standard stamp duty rates based on the underlying market value (ignoring any debt) of the dutiable assets in the discretionary trust located in Queensland or Western Australia.
In Queensland there is however the ability to legitimately avoid this stamp duty cost, if the transaction comes within an exemption set out under the stamp duty rules.
Broadly these rules provide that so long as the transfer of shares is between individual members of a family group, and the trust is established primarily for the benefit of members of that family, then there will be no duty payable.
As the ability to access the stamp duty relief is subject to the discretion of the Stamps Office, there is the ability to get an indication on whether stamp duty relief is likely to be available and with the client that I mentioned last week, we have submitted a ruling application on their behalf.
If an unfavourable ruling is received, we will need to explore other, less commercially appropriate, alternatives to achieve the client’s overall objectives.
Until next week.
Matthew Burgess
Topics:
Company,
Discretionary trust,
Stamp duty,
Transfer of shares,
Trustee
Thursday, June 3, 2010
Trust deed tip
Again this last week, we have had some more issues arise in relation to family trusts.
As is often the case, the issue from this week was identified by a financier.
The issue arose due to a review of some historical variation deeds to the original trust documents.
Due to a relatively unusual provision, the original trust required that any variation could only be made with the consent of the settlor (i.e. the person who originally set up the trust) and all of the 'primary' beneficiaries who were set out in the schedule to the trust.
None of the earlier variations had received consent from any of the relevant parties.
The solution (which is still to be approved by the bank) was to implement a comprehensive deed of confirmation and obtain signatures from all relevant people – fortunately, the settlor was still alive and willing to assist.
Next week, I will touch on some other practical difficulties that we are going to need to consider and possibly address in the future.
Until next week.
Matthew Burgess
As is often the case, the issue from this week was identified by a financier.
The issue arose due to a review of some historical variation deeds to the original trust documents.
Due to a relatively unusual provision, the original trust required that any variation could only be made with the consent of the settlor (i.e. the person who originally set up the trust) and all of the 'primary' beneficiaries who were set out in the schedule to the trust.
None of the earlier variations had received consent from any of the relevant parties.
The solution (which is still to be approved by the bank) was to implement a comprehensive deed of confirmation and obtain signatures from all relevant people – fortunately, the settlor was still alive and willing to assist.
Next week, I will touch on some other practical difficulties that we are going to need to consider and possibly address in the future.
Until next week.
Matthew Burgess
Wednesday, May 19, 2010
Testamentary trusts - is it ever too late?
As you may recall from previous posts, there are significant advantages of utilising a testamentary discretionary trust (TDT) as part of an estate planning strategy.
We often receive queries from clients asking whether it is possible to establish a TDT to receive estate assets after a person's death.
While establishing a TDT in a person's will is by far the simplest approach, it is possible for an estate proceeds trust (or post-death TDT) to be established following a person's death to receive the estate assets.
Any property received from the estate may be transferred to an estate proceeds trust (EPT) within three years for the date of death, provided the trust is structured to satisfy the requirements in the tax legislation.
The summary about EPT on the View Legal website is available via the View Legal website (www.viewlegal.com.au) via the core services section and explains the requirements in further detail.
Practically, the area where we see the biggest demand for estate proceeds trusts is in relation to receiving insurance proceeds from life insurance policies.
Matthew Burgess
We often receive queries from clients asking whether it is possible to establish a TDT to receive estate assets after a person's death.
While establishing a TDT in a person's will is by far the simplest approach, it is possible for an estate proceeds trust (or post-death TDT) to be established following a person's death to receive the estate assets.
Any property received from the estate may be transferred to an estate proceeds trust (EPT) within three years for the date of death, provided the trust is structured to satisfy the requirements in the tax legislation.
The summary about EPT on the View Legal website is available via the View Legal website (www.viewlegal.com.au) via the core services section and explains the requirements in further detail.
Practically, the area where we see the biggest demand for estate proceeds trusts is in relation to receiving insurance proceeds from life insurance policies.
Matthew Burgess
Monday, May 10, 2010
Trust distributions 101 - Read the deed!
Last week, an accountant and I caught up in relation to his review of trust distributions in previous years for a new client to his firm.
The main issue related to income that had been passed to a company over a number of years.
While the trust deed allowed distributions to companies, it had a relatively unusual provision that required all of the shares in that company to be owned by the 'primary beneficiaries' set out in the schedule.
Unfortunately the company that had been used had a share structure that did not comply with the provisions of the deed and we were trying to explore if there were some potential solutions available.
Each idea we have come up with to date has not been particularly satisfactory, so this week’s practical tip is simply to remember to ensure that whenever working with trust someone is made responsible to 'read the deed’.
Until next week.
Matthew Burgess
The main issue related to income that had been passed to a company over a number of years.
While the trust deed allowed distributions to companies, it had a relatively unusual provision that required all of the shares in that company to be owned by the 'primary beneficiaries' set out in the schedule.
Unfortunately the company that had been used had a share structure that did not comply with the provisions of the deed and we were trying to explore if there were some potential solutions available.
Each idea we have come up with to date has not been particularly satisfactory, so this week’s practical tip is simply to remember to ensure that whenever working with trust someone is made responsible to 'read the deed’.
Until next week.
Matthew Burgess
Tuesday, May 4, 2010
Deeds of variation and stamp duty
As I flagged in my last blog posting, we had a very difficult day recently – all triggered by a simple typo in the schedule to a trust deed.
One aspect that proved unnecessarily difficult due to the particular approach of the relevant bank officer was in relation to stamping.
Most Australian states (and particularly Queensland where this transaction was taking place) do not require administrative type changes to trusts to be charged with stamp duty.
In fact, in Queensland, recent changes have been made by the Stamps Office to actively discourage people from lodging these types of documents for assessment, given that the assessment is going to be returned as no duty payable.
Essentially then the only types of trust variations that need to be lodged for assessment in Queensland are ones that historically have been loosely described as 'resettlements'.
Practically, there is in fact no definition of a resettlement under the stamp duty rules and instead there is a series of other, relatively technical, provisions that need to be considered. For those interested in the general way in which these rules operate, please let me know and I can direct you to the relevant parts of the Stamps Office website.
Until next week.
Matthew Burgess
One aspect that proved unnecessarily difficult due to the particular approach of the relevant bank officer was in relation to stamping.
Most Australian states (and particularly Queensland where this transaction was taking place) do not require administrative type changes to trusts to be charged with stamp duty.
In fact, in Queensland, recent changes have been made by the Stamps Office to actively discourage people from lodging these types of documents for assessment, given that the assessment is going to be returned as no duty payable.
Essentially then the only types of trust variations that need to be lodged for assessment in Queensland are ones that historically have been loosely described as 'resettlements'.
Practically, there is in fact no definition of a resettlement under the stamp duty rules and instead there is a series of other, relatively technical, provisions that need to be considered. For those interested in the general way in which these rules operate, please let me know and I can direct you to the relevant parts of the Stamps Office website.
Until next week.
Matthew Burgess
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