The One-Day Trust

Earlier posts have looked at various aspects of the mantra ‘read the deed’ – see -

Another reminder to ‘read the deed’

ATO reminder – read the deed

Read the deed - another reminder re invalid distributions

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?’

The continuing saga of how many powers of attorney it takes to create authority

In one of the LinkedIn discussion groups I am a member of, the issue was raised recently about what documents are required when someone has assets or spends time in more than one state around the country.

The issue is particularly prevalent in communities near state borders. However it can potentially arise in any situation. Indeed, the issue can also arise across international borders.

Our view, which seems to align with the general consensus of those regularly advising in this area, is captured succinctly in my earlier post – see How many powers of attorney does it take to create authority?

Interestingly, the post from 2011 flags the ‘ongoing push' to have uniform succession laws across Australia. In the five years that have passed since that post, most would agree no progress at all has been made in this area.

In adopting the approach recommended in the earlier post of preparing a document in each jurisdiction that a person has significant assets or spends significant time, it is generally seen as best practice to include ‘duplication acknowledgement' wording.

Some example base wording in this regard is as follows:

1. For the avoidance of doubt I confirm that I have executed an Instrument Appointing an [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian] pursuant to the [#insert relevant state act] ('the [#insert state acronym eg NSW] [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian]’) for any matter that requires signing by an [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian] duly appointed by the laws of [#Insert state eg New South Wales].


2. By this Power of Attorney for personal and health matters ('the [#insert state acronym eg QLD] [#Name of medical EPA in relevant jurisdiction eg Power of Attorney for personal and health matters]) I appoint my Attorneys in respect of any personal or health matter not strictly required to be signed by an [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian] appointed by the laws of [#Insert state eg New South Wales].


3. To the extent there is any inconsistency or overlap between the [#insert state acronym eg QLD] [#Name of medical EPA in relevant jurisdiction eg Power of Attorney for personal and health matters] and the [#insert state acronym eg NSW] [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian], the [#insert state acronym eg NSW] [#Name of medical EPA in relevant jurisdiction] is to prevail and the [#insert state acronym eg QLD] [#Name of medical EPA in relevant jurisdiction eg Power of Attorney for personal and health matters] is to be modified (and its operation suspended to that extent only) for such time as the [#insert state acronym eg NSW] [#Name of medical EPA in relevant jurisdiction eg Enduring Guardian] remains in existence.


4. In all other respects the [#insert state acronym eg QLD] [#Name of medical EPA in relevant jurisdiction eg Power of Attorney for personal and health matters] shall apply and remain in force.

Image courtesy of Shutterstock

ASIC Records and Trust Ownership

In the early 2000’s, the ASIC started requiring shareholders to disclose whether they owned their shares on trust.

The particular question on the ASIC records is 'are the shares owned beneficially?'

We regularly see situations where the ASIC records do not reflect wider accounting, tax and trust records.

Strictly, the inaccurate ASIC records are a breach of the law. More problematically however, where ASIC records do not reflect what is otherwise being argued for tax or asset protection purposes, it can place clients in an unnecessarily difficult position.

There are a number of mechanisms to correct ASIC records, in some cases without any penalty, so whenever inconsistencies are identified, we recommend proactive steps be taken to update ASIC records immediately.

It is important to note however that there can often be a trade off between adopting the simplest alternative to making ASIC records accurate and the best practice approach in relation to tax planning and asset protection. Similarly, the late fees of a best practice approach can also be prohibitive.

Image courtesy of Shutterstock

A Practical Perspective on Resettlements

Earlier posts have looked at various aspects of the Clark decision and trust resettlements – see -

Statement of principles to be (finally) amended (?)

ATO releases draft determination on trust resettlements

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.

Tinder-isation of the law

For most likely readers of View posts, Tinder is not an app that features on their handheld device (see - https://www.gotinder.com/).

This said, Tinder's historical 'swipe right for yes; swipe left for no' has become ubiquitous.

As 'gamification' similarly becomes expected across all aspects of our lives we have relaunched each of our 7 apps on both Apple and Android.

You can now use the Tinder inspired 'swipe right' approach to narrow down some of the broad areas that might be relevant in relation to a range of estate planning related topics.

Each app generates a free white paper or template legal document.

The apps are as follows -

1. estate planning;

2. self managed superannuation funds;

3. estate admin;

4. business succession;

5. memorandum of directions;

6. directors duties;

7. binding death benefit nominations.

All 7 of the View apps can be downloaded via our website – see - http://viewlegal.com.au/download-our-latest-apps/

Bespoke Corporate Trustee Constitutions

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.

Challenging a Will due to Existence of Mutual Wills

A recent post listed the five main ways in which a will can be challenged – see 'Ways to contest a will'

One of the aspects listed was that wills are always subject to any contractual arrangements that a will maker may have entered into before their death.

One particular approach that is used from time to time is the concept of creating 'mutual wills'.

Essentially, a mutual will is a contract whereby two people agree to make their wills in a certain way and to then not change the document without the express consent of the other party to the agreement.

Traditionally, mutual wills are made between spouses, often where one or both of the spouses are in their second or subsequent life relationship. Alternatively, mutual wills can be implemented where there are particular assets in the estate that both spouses want to ensure are dealt with in a particular way, regardless of when they may each die.

The creation of a mutual will, if crafted correctly, can allow a party who would otherwise have received a benefit, but for a person entering into a new will in breach of the mutual will, to sue on the basis of a breach of contract.

While in theory, litigation for the breach of contract should be easier to succeed in, there have been a number of cases that have seen attempted mutual will arrangements fail.

Furthermore, the significant inflexibility created by mutual wills mean that most specialist advisers caution against their use.