This presentation discusses strategies to safeguard family wealth in order to 'keep it in the bloodline'. Some of the topics covered include having an appropriately crafted estate plan, using trusts, excluding beneficiaries and asset transfers.
5. Asset protection
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During lifetime – marriage breakdown
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Inheritance forming pool of
relationship assets
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Bankruptcy or insolvency – exposure
of assets held in trusts
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11. Testamentary discretionary trusts (TDTs)
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Established pursuant to a will
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Effective upon death of the willmaker
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Asset protection
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Tax flexibility
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Trustee – legal
ownership and control
Succession
TRUST
Beneficiaries
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12. Family Court’s trust busting powers
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Financial resource versus property of the marriage
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Understand practical outcome of each option
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The following options are available to a court in dealing with interests in a
trust
□ the assets of the trust are ignored
□ the assets of the trust are treated as property of the parties (or either of them)
□ the assets of the trust are not included in the property pool but treated as a
financial resource of the parties (or either of them)
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14. Themes from decisions
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Family Law Courts can
□ set aside transactions entered into before the end of the marriage
□ look past legal documentation
□ make orders binding on third parties
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Beneficiaries’ proprietary rights in trusts continue to evolve
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Relevant factors
□ control
□ source of trust assets
□ purpose of trust and beneficiaries
□ distributions
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15. Keach v Keach & Ors (No. 2)
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The husband’s interest in a discretionary trust was not to be included in the
asset pool
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Facts
□ H’s father (F) set up 4 trusts – one for each of his children
□ F wanted to protect the assets of the trust from any matrimonial breakdown
□ H and W lived in a house owned by the trust for many years
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17. Keach v Keach & Ors (No. 2)
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No sham
□ High threshold for ‘sham’
□ F’s intention was clear
□ F ‘controlled’ the trust
□ H had no ownership, no control
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Court could not include property of a third party unless there was a ‘sham’
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19. Trust busting cases
Pittman v Pittman
Beeson v Spence
Originally a discretionary trust
Discretionary trust set up during marriage
Husband entitlements later fixed
Wife changed control after separation
Irrevocably given 25% of all assets
All evidence suggested trust was intended to
benefit husband as well
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20. Trust excluded cases
Harris v Harris
Morton v Morton
Husband’s mother, son and friend
were directors
Two brothers (one the husband) were jointly
in control
Husband’s mum appointor
True joint control, meant neither controlled
trust or bucket company
All changes to control done as part
of estate plan
Assets of trust only a resource
Husband didn’t control
Close relationship does not automatically
mean a sham
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23. Practical recommendations
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TDTs (lineal descendent)
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Review structure of TDT and discretionary trust:
□
□
□
□
how many?
who are trustees?
who are appointors?
who are beneficiaries?
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Independent controllers
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Source of trust assets
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Intergenerational transfer of wealth – custodian role vs controller
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Structure pre-death distributions appropriately (loan vs gift)
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BFA to complement estate plan
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38. Relevant cases
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Power to distribute (Bamford)
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Wait and see rule (Nemesis Australia)
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Excepted trust income (AW Furse No. 5 Will Trust)
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ATO attitude (SCCASP Holdings)
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Control (Montevento)
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