Leading gift and loan back case

Atia v Nusbaum: the leading case on gift and loan backs.

Other posts have dealt with various aspects of gift and loan back arrangements (see http://mwbmcr.blogspot.com.ar/2012/05/family-court-case-on-distinction.html and http://mwbmcr.blogspot.com.ar/2013/10/one-remedy-where-trust-distributions.html).

Arguably, the leading case in relation to gift and loan back arrangements is Atia v Nusbaum [2011] QSC044. As usual, a link to the full decision is as follows http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/qld/QSC/2011/44.html.

In summary the circumstances of this case were as follows:

1. Dr Atia (a cosmetic surgeon) entered into a gift and loan back style arrangement with his mother; 
2. when Dr Atia's mother subsequently called in the debt, Dr Atia argued that the loan and mortgage were not intended to be actually binding and were only a pretence to protect against situations where Dr Atia was sued professionally; 
3. in particular, Dr Atia argued that his mother was only calling in the debt secured by the mortgage because he had married his girlfriend against his mother's express wishes; 
4. the court found that all aspects of the legal documentation, including a deed of gift, loan agreement and registered mortgage, had been validly signed; and 
5. the court confirmed that the legal effect of the documentation signed was exactly as the parties intended it to be and there was no mistake or sham involved. This meant that Dr Atia's mother was allowed to enforce recoverability of the debt, and if necessary, exercise her rights under the registered mortgage. 

Until next week.

Super deed variations and resettlements

Confused about super deed variations?

Last week we had an adviser, probably quite rightly, question us as to why a superannuation trust deed could be totally revoked and replaced with a completely new document, while changes to a family trust deed tend to be extremely piecemeal.

The issue can be largely answered by reference to the Tax Office’s approach to resettlements.

Broadly, the Tax Office accepts that in relation to superannuation funds, a resettlement for tax purposes will never occur. Due to this approach (and stamp duty exemptions that apply in essentially every Australian state), most advisers recommend that when updating a superannuation trust deed, it is best to adopt a completely new deed.

In contrast, where updating a family trust deed, because of the risks associated from a resettlement perspective, it is usually best to only amend the provisions that are in particular need of being addressed.

Until next week.

Image Credit: sidibousaid cc

Double entrenching binding nominations

'Binding' nominations may sometimes be removed. 

In a recent post, we touched on the importance of reviewing a trust deed before making any superannuation death benefit payments.

The 'read the deed' mantra, which is so often used in the context of family trusts, is of similar importance in relation to self managed superannuation funds.

One particular provision to be aware of in this regard is that, even if a nomination (which appears to be binding) is embedded under the deed, unless the provision of that deed has a prohibition against amendment, the intentions of the parties may not in fact be achieved.

For example, the remaining trustees after death could elect to vary the deed (and effectively remove the binding nomination) before ultimately making a death benefit payment.

Until next week.

Death benefit nominations – read the deed

Read the deed.

Following on from recent posts concerning superannuation death benefit payments, I was reminded this week of the absolute importance of reading the superannuation trust deed before making any death benefit payment.

It is becoming more and more regular to see many people, as part of their overall estate plan, embedding their required superannuation distribution provisions into the superannuation trust deed. Where this is done, the fact that there might be other nominations, or even provisions in a person’s will, not be of any effect – rather the terms of the deed must be followed.

In a future post, I will touch on a related issue concerning binding nominations that are entrenched in superannuation trust deeds.

Until next week.

Receipt of superannuation death benefits

Following a recent post, I had a number of enquiries, and one particular adviser raised an issue with me which (as she flagged) is often overlooked.

The particular issue relates to the payment of superannuation benefits on death. The legislation requires (and there have been cases supporting this) that the recipient of any death benefit must be alive on the date of the payment themselves – in other words, if the recipient is no longer living at the date the payment is ultimately due to be made, then neither they (nor their estate) will be entitled to receive it.

There are a number of ways to minimise the impact of this rule, however the steps must always be taken as part of the overall estate plan.

Until next week.

Image credit: SalFalko via Flickr

Estate planning 101 with superannuation entitlements

Last week, I was again reminded of the very strange way in which the superannuation laws currently operate concerning death benefits, and more particularly, the distinction between someone withdrawing their superannuation on the day before death as opposed to it being paid out as a death benefit.

All other things being equal, it is often very likely to be the case that a withdrawal immediately before death will be completely free of tax, whereas the same funds distributed as a death benefit can be liable for tax of up to 30% (plus Medicare).

Obviously, there are a range of competing issues that need to be considered as part of any superannuation and estate planning exercise, however we are certainly seeing an increasing number of people more seriously consider the total amount they wish to retain in super in their later years.

Until next week.

Image credit: 401(K) 2013 via Flickr

Digital assets on death

The virtually limitless ability to create digital content has seen an increasing amount of media attention focused on ownership of content, particularly in the event of death.

In most jurisdictions, government legislation does not separately deal with digital assets, and therefore, the same rules that apply to physical assets will generally apply.

Unfortunately, many of the rules in this area lack this sophistication required to deal with digital platforms that are normally either hosted outside Australia, or alternatively, perhaps outside any discrete jurisdiction on the basis that they are cloud based.

While most digital platforms do offer deactivation mechanisms or automatic closure due to inactivity (similar to the much publicised approach taken by Google), these features do not necessarily of themselves assist in relation to ownership of the data.

Ultimately therefore, digital assets should be treated in the same way as any other asset, and to the extent that they are of significant emotive or financial value, dealt with in the last will of the owner.

Alternatively, digital assets (including passwords) should at least be communicated via documents such as letter of wishes or memorandum of directions (click here for a template memorandum of directions on the View Legal site - via the 'learn' and then 'resources' tabs).

Some of the specific information that should be documented includes a listing of every digital platform utilised, account, user name and passwords for each platform, security question answers, and even directions as to post death activity and ultimate closure of the various accounts.

Until next week.

Image Credit: TheRealMichaelMoore via Flickr