Backdating legal documents not possible ... without a time machine**

As explored in other View posts, backdating legal documents is never permissible, regardless of the phrase used to describe the approach (eg ‘retro dating’, ‘pre-dating’, ‘intended date’).

The decision in Edwards & Anor v Brougham [2022] SASC 8 provides another example of the rules in this regard.

Relevantly the factual matrix involved a dispute about the trusteeship of a discretionary trust where:

1. a sole individual trustee purported to transfer an asset of the trust to themselves (as a potential beneficiary of the trust);
2. there was evidence confirming the appointor of the trust had exercised their power to unilaterally remove the trustee before the purported transfer;
3. the trustee, on advice from a lawyer, backdated a deed of transfer to a date that was before the appointor removed the trustee.

In relation to the backdating, the court simply confirmed that it was 'not in itself effective to make a retrospective determination for the purposes of the trust deed'. The decision also confirmed:

1. it is not necessary for a trust deed to have a condition for effective removal of a trustee the giving of notice to the trustee being removed;
2. the key reason for not requiring a removed trustee to be notified is that a former trustee, who continues to exercise powers honestly without notice of their removal, will be protected in several ways, for example they are indemnified by trust assets (assuming they have acted honestly);
3. Where two or more appointors are nominated, unless there is unambiguous wording to the contrary, the assumption is that the surviving appointor may act solely, that is, the appointment of two or more persons to an office is both joint and several;
4. similarly, unless there is clear wording preventing the outcome, a trustee may also act as appointor;
5. the court acknowledged that having a trustee also acting as the appointor of a trust was a 'relatively unusual' situation and 'would naturally be expected only as a measure of last resort', given that under the trust deed (as is often the case) the appointor was structured as a checking mechanism on the powers of the trustee.

Similarly in the case of Jaken Properties Australia Pty Ltd v Naaman [2022] NSWSC 517, the confession of backdating cast a significant shadow over the claims of one of the parties.

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 Alicia Keys song 'Time Machine'.

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Your digital footprint (part II) – some further comments on ‘stayin’ alive’**

Last week’s post considered 6 of the key areas we suggest be captured on any checklist relating to a person’s digital footprint.

As promised, this week’s post lists a further 7 areas to consider, namely:

1. Inventory of all electronic devices (eg smart phones, tablet, laptops, computers, reading devices, watches, fitness bands, headphones, dvds, hard drives, USB sticks, digital cameras etc)
2. Review all apps on smart phones and tablets
3. Digital/virtual life games (eg Second Life, Kaneva, Virtual Life, School of Dragons, Twinity etc)
4. Online shopping (including payment gateways, buy/sell/swap services, ebay, Craiglist etc)
5. Online interactive gaming
6. Online gambling accounts (including Lotto, TAB, casino style games)
7. Online memberships (including discussion groups, home delivery, associations, clubs, libraries, professional associations, hobby groups, frequent usage/loyalty/rewards programs, work or student alumni associations, dating and introduction services)

** For the trainspotters, the title of today's post is riffed from the Bee Gees song 'Stayin’ alive’.

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Your digital footprint (part I) – a bit like stay(ing) alive**

A previous post has considered the key issues in relation to digital assets on death.

View also provides free access to a template memo of directions that has a section on digital assets.

One of the easiest ways to ensure a person’s digital footprint is identified and arguably the best way to achieve this is by using a checklist.

Where relevant the checklist should confirm contact details, user names, passwords, access codes, answers to security questions, log in pins, member numbers and payment arrangements.

Set out below are 6 of the areas we suggest be captured on any checklist – next week’s post will list a further 7.

In summary:

1. Social media (including Facebook, Twitter, Linkedin, Instagram, Pinterest, Snapchat, Google hang out, Tumblr, Yammer)
2. Digital platforms (including Skype, YouTube, App Stores, blogs, online music and movie streaming, education and information services [eg TED, Udemy, podcasting, books], news feeds, magazines, software providers, personal websites, domain names)
3. Online storage (including documents, personal information, photos, videos, personal health and fitness, dictation, blogs, data storage, diaries, journals, Moleskins, Evernote, back up storage services, Dropbox)
4. Digital financial assets (rewards points, prepaid services, Bitcoin etc)
5. Email accounts (including work, gmail, Hotmail, Bigpond, personal), including any automated responses and mail lists subscribed to
6. Instant messaging and SMS services

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 Hamilton and the song 'Stay alive’.

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A cover is not the book** Taxation of executor’s commission

Generally, where a person acts as the executor of another’s estate, one of three approaches are adopted to financially recognise the time, energy and effort involved.

In summary, the approaches are:

1. Reimbursement only – under this approach, all costs incurred by the executor (for example, engaging professional advisers) are reimbursed to the executor.
2. Payment according to services performed – often, this will be calculated by reference to the number of hours spent, multiplied by an appropriate hourly rate.
3. Commission.

The rules in relation to executor’s commission are relatively complex, largely based on case law that in some instances is hundreds of years old.

Importantly however, from a tax perspective, the Tax Office has confirmed that the payment of commission is essentially a reward for services rendered. This means that despite the fact that there is no formal employer/employee relationship, the income received by an executor must be included in their assessable income in the year it is derived and taxed at normal marginal rates.

This conclusion is explained in more detail in ATO ID2014/44.

Partly to counteract this outcome, and to provide a level of certainty as to the overall quantum of payment that is ultimately received by an executor, some will makers simply provide a specific cash gift to their executors under their will.

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 Mary Poppins Returns and the song 'A cover is not the book’.

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Always learning … Latest lesson: ‘Last Christmas’ ** by Wham is a break up song … Final Post for 2023 and Season's Greetings

With the annual leave season starting in earnest over the next couple of weeks and many advisers taking either extended leave or alternatively taking the opportunity to catch up on things not progressed during the calendar year, last week’s post will be the final one until early 2024.

Similarly, the social media contributions by both the View and Matthew will also largely take a hiatus until the New Year as from today.

Thank you to all of those advisers who have read, and particularly those that have taken the time to provide feedback in relation to posts.

Additional thanks also to those who have purchased the ‘Inside Stories – the consolidated book of posts’ (see - https://viewlegal.com.au/product/inside-stories-reference-guide/).

The 2023 edition of this book, containing all posts over the last year, edited to ensure every post is current, indexed and organised into chapters for each key area should be available early in 2024.

Very best wishes for Christmas and the New Year period.

** for the trainspotters, ‘Last Christmas’ (riffed for the title of today’s post) is the Wham! hit from 1986, watch the quintessential 1980s video clip here:


PS: & recently I learnt why my first ever girlfriend broke up with me in grade 5 at about this time of the year back in 1986 … at the time I had just spent weeks of pocket money on a 7 inch single (you can google what this is …) by her favourite band Wham and the aforementioned single …

not stopping to listen to the lyrics focused on the withdrawing of the giving of true love … she broke up with me the very next day …

when sharing the breakup story with my daughters recently and musing how I never understood why she ‘dropped’ me they quickly pointed out the stupidity of my choice of gift. Samantha Curran of Flynn Primary School Canberra (who I have not seen or spoken with since that day in December 1986) – I am sorry.

Why every will contains a testamentary trust (Not calling anyone a liar**)

While the popularity of comprehensive testamentary trusts has continued to grow significantly in recent years, strictly every valid will does contain a form of testamentary trust.

While the popular usage of the term 'testamentary trust' refers to a comprehensive discretionary trust embedded into a will instrument, testamentary trusts can refer to any arrangement set out under a will where the intended beneficiaries are not absolutely and immediately presently entitled.

The structure lasts only for the length of administration of the estate (ie normally only a few months).

They are not testamentary trusts as normally understood and do not offer any ongoing tax, asset protection or flexibility advantages.

The phrase for the clause establishing this form of ‘trust’ in a will is often along the lines of:

‘As to 50% of my Net Estate, UPON TRUST for my child once they attain the age of 25 years absolutely’

One (perhaps anecdotal) way to determine if a will has a comprehensive testamentary discretionary trust included is to apply ‘the weight test’.

That is, a comprehensive testamentary discretionary trust will usually is around 30 pages in length.

A ‘bare’ testamentary trust will is rarely more than 10 pages, and can often be as short as 2 pages.

Some examples of where basic or 'bare' testamentary trusts exist include:

1. where the beneficiary receives a direct gift that is subject to them attaining a certain age (for example, the clause set out above);
2. where a gift is given to a beneficiary who does not have legal capacity (for example, because they are under the age of 18, or are over the age of 18 and lack mental capacity); and
3. where a specific gift is given to a beneficiary, however the administration process of the estate has not been completed.

In relation to the first two categories, the Tax Office will generally allow the ultimate beneficiary to enjoy access to the excepted trust income provisions.

In relation to the last category however, the Tax Office generally only allows a maximum of 3 years whereby the excepted trust income provisions apply, and practically, we are aware of situations where they in fact only allow a maximum of 12 months.

The Taxation Ruling IT 2622 explains in more detail the Tax Office’s approach.

The case of Walker v Walker [2022] NSWSC 1104 similarly explores many of the key principles in this area - and indeed appears to support a conclusion that the administration process of an estate will be completed, at least for the purposes of present entitlement for tax, at a point in time even earlier than what the Tax Office has historically suggested in the IT.

That is a beneficiary may be held to have a vested and indefeasible interest to the income (and be specifically entitled) far earlier than might otherwise be assumed. Furthermore, executors may have a duty to ensure tax imposts are legitimately minimised by protectively making interim distributions to beneficiaries.

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 Florence and the Machine song 'I’m not calling you a liar’.

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Journal** entries

Recent posts have considered various aspects of the leading cases where two parties owe mutual liabilities or obligations, and the ability to set off the liabilities against each other through a book entry.

It is however important to note that generally, journal entries of themselves have no legal effect.

Arguably the leading case in this regard is Manzi v Smith [1975] HCA 35.

The key quote out of this decision is as follows -

‘We were referred to cases in which a payment of money was held to have been made by means of entries in books of account. But in those cases the entries represented the agreement of the appropriate parties….

These decisions, quite clearly, are not authority for the proposition for which they were advanced, namely, that a payment of money was made by the making by the company of a journal entry in the books of account without reference to, or without the agreement of, the persons said to be the recipients of the money. The company's assertions in its books of account did not establish the indebtedness of the appellants or any payment of money in discharge of that indebtedness.’

The Tax Office similarly has confirmed that while book entries record transactions having legal consequences, they do not of themselves constitute transactions. In other words, a unilateral action by one of the parties, such as a mere entry in its books of account, does not change the liabilities between the parties.

This means that in any transaction it is important that there is a valid binding agreement (or agreements) supporting the existence of the arrangements to which any journal entries purportedly relate.

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 Johnny Cash song 'The singing star’s queen'.

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