Accessing disablement proceeds via superannuation

This week’s post addresses an issue recently raised with us by an adviser, focusing on the ability to access insurance proceeds from a superannuation fund on an event of permanent incapacity.


The particular issue raised involved the fact that best practice often dictates that clients should obtain insurance protection on the basis of an inability to work in their ‘own’, as opposed to ‘any’ occupation.

The satisfaction of the ‘own’ occupation test is obviously easier than the condition of release set out under the superannuation legislation, being that a member must be incapable of working in ‘any’ occupation.

Where insurance is owned via a superannuation fund there is therefore a risk that while the fund will receive an insurance payout, it will be unable to release it to the member until some other condition of release is satisfied (for example, reaching the retirement age).


Historically therefore, the conservative view was undoubtedly that own occupation insurance should always be owned outside super.  Importantly, since 1 July 2014, own occupation insurance is no longer available via superannuation, subject to a grandfathering for arrangements already in place before that date.

For those pre-existing arrangements, there appears to be a pragmatic approach adopted, particularly by those with policies via a self-managed superannuation fund.  This approach involves assuming that a trustee (who will also be a member of the relevant fund) will adopt a liberal interpretation of the ‘any’ occupation definition under the superannuation legislation and therefore always allow the release of insurance proceeds.

 Until next week.

Image credit: panshipanshi cc

Age of entitlement

Following last week's post some questions were raised about at what age a person can be entitled to receive benefits under a will.

The issues in this regard are a little more complex, however broadly:

1. If a specific entitlement under a will passes to anyone under the age of 18, the trustee of the will effectively holds it for them on a bare trust until their 18th birthday. 
2. If an age is nominated in the will for a beneficiary to receive their entitlement, it will be held on trust until that age, unless the will is not drafted correctly (there are some complex issues that can apply in this regard). If the will is not drafted correctly, then regardless of the age nominated, the beneficiary can get access to the gift on their 18th birthday. 
3. Generally, none of the above rules are applicable where the asset passes to a testamentary trust – in this instance, the assets normally remain indefinitely within the trust structure, regardless of the age of the beneficiaries. 

Until next week.

Age of majority

Last week an interesting issue arose with the child of a client who was about to travel overseas on an exchange. 

The child was a part time employee and member of a superannuation fund. Under the superannuation fund, they were automatically entitled to a life insurance policy which gave a payout of $200,000 on death. The fund required that any payout be made to the legal representative of a deceased member.

The parents of the child felt that it would be prudent to ensure that on receipt of these insurance proceeds the estate would be able to administer them easily – the obvious answer in this regard was the creation of a will.

Unfortunately, in these circumstances, no will is able to be made because in order to make a will, the individual involved must be 18 years of age.

The only substantive exception to this rule is if the will maker, being under the age of 18 years, has lawfully married.

Until next week.

Two View Legal iPhone and Android apps launched

Based on feedback from advisers, View Legal has recently developed and launched two new iPhone and Android apps.

Each app can be downloaded via the following links –

1. iPhone Directors’ Duties – https://itunes.apple.com/us/app/directors-duties/id902289581?ls=1&mt=8
2. Android Directors' Duties - https://play.google.com/store/apps/details?id=director.duties 
3. iPhone Estate planning – https://itunes.apple.com/us/app/view-legal-estate-planning/id902301642?ls=1&mt=8
4. Android Estate planning – https://play.google.com/store/apps/details?id=view.legal.estate.planning 

Directors’ Duties App

Acting as a director of a company imposes many obligations and duties.

The directors’ duties app is designed to allow the user to help narrow down some of the broad areas that might be relevant in relation to their current or any intended directorships.

Depending on the answers provided, the app generates a free white paper that sets out general information about numerous aspects of the duties directors have.

Estate Planning App

Estate planning is the process of ensuring wealth is dealt with, after death, as intended, while minimising the impact of challenges against the arrangements and costs such as stamp duty, tax and administration expenses.

The estate planning app is designed to allow the user to help narrow down some of the broad areas that might be relevant in relation to implementing, or updating, an estate plan.

Again, depending on the answers provided, the app generates a free white paper that sets out general information about a range of estate planning strategies.

Until next week.

Scope of the Richstar decision

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Scope of the Richstar decision’ at the following link -  http://youtu.be/N2VpKrws93c

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

It’s fair to say Richstar is seen as probably the high watermark in relation to how the assets of a trust may be exposed in the context of some sort of bankruptcy litigation. Interestingly, it has remained almost as an outlier decision.

There really haven't been any decisions that have supported the landing the court reached in relation to Richstar. On top of that, the cases like Smith which have come down since Richstar, effectively completely ignore Richstar and go to the extent of saying it doesn't actually represent good law.

Ultimately, pragmatically and practically what the position seems to be is as long as a trust is structured appropriately it will provide a very good level of asset protection from creditors and should be seen as probably the choice structure in an estate planning exercise under a will - in other words, the use of a testamentary discretionary trust - in order to provide an adequate level of protection.

Until next week.

Impact of Richstar on discretionary trusts

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Impact of Richstar on discretionary trusts’. If you would like a link to the video please email me.

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

Probably the most interesting part of Richstar is that in some respects counter-intuitively, it confirms that trusts remain a very robust structure from an asset protection perspective.

If you actually take a helicopter view of where the court landed in Richstar, it certainly supports this idea that just because an individual happens to be the trustee and beneficiary and appointor will not of itself mean that the trust is ignored and that the assets of the trust will automatically be deemed to be those of the relevant individual.

In contrast however, and the flipside to this argument is that if you do fulfil a number of those roles and the court feels as though that’s enough in combination to create a scenario where a person is effectively the alter ego of the trust, then indeed the trust structure will not provide you any asset protection and the assets will be potentially exposed.

Until next week.

Image credit: Jasper Nance cc

Is appointorship an asset?

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Is appointorship an asset?’ If you would like a link to the video please email me.

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

Whether the appointor role is an asset on the holder’s bankruptcy is probably one of the most contentious issues to have arisen in recent years. Certainly, the feeling amongst lawyers that act on behalf of trustees in bankruptcy or creditors is that absolutely the role is a potential asset.

If it is an asset, then it forms part of the bankrupts’ estate. The reality however when you actually look at the decisions that have been handed down is the exact opposite. So in other words, the role of an appointor is a personal role, akin to a directorship. Therefore, that’s not an asset that can be handed onto creditors.

Having said this, the issue does not seem to be going away and the conservative view would be that you would try, when setting up this type of structure, to ensure that you do one of a myriad of things.

So for example, making sure that if there is an at risk person that is needing to fulfil the role of appointor or principal, that they don’t fulfil that role individually and solely, that ideally there's some other person acting with them.

Secondly, the way in which the role is structured, it's embedded under the trust instrument, whether it be a family trust or a testamentary discretionary trust, the appointor is automatically disqualified in the event of committing an act of bankruptcy.
Until next week.