Wills & Wealth News
We break from our tradition of giving technical updates to share some important Firm news:
- We recently farewelled Melissa Krajacic who is happily retired after 10 years at Wills & Wealth. We thank Melissa for her wonderful contribution, as evidenced by the regular compliments she received from her many clients.
- We welcome Jennifer Jackson who joins us after a long career as a senior estate planning lawyer with another suburban firm. Jennifer has expertise in complex estate planning matters, including advising on and establishing Special Disability Trusts.
- Bernie O’Sullivan has retired from Sladen Legal to focus fully on Wills & Wealth Lawyers. We look forward to seeing more of Bernie in Brighton this year.
- We are renovating! Our physical office will be closed from Monday 28 April for 2 weeks or so. But it will be business as usual during this period and we will be working from home and meeting with clients, so please call or email as usual. We look forward to welcoming you to our refurbished office from around mid-May.
Succession Planning and Trusts in the ATO spotlight for 2025
Key takeaway:
- The transfer of wealth from trusts or companies controlled by parents is coming under ATO scrutiny.
The ATO’s Private Wealth Deputy Commissioner Louise Clark stated in her recent update that “succession planning, and the tax risks associated with it, is our number one focus in 2025”.
Typical strategies for this wealth transfer include “Division 7A loans being settled, assets moving around the group, family member interest being restructured, and trust deeds being amended” said Ms Clark.
While the restructuring of assets can legitimately be undertaken for certain reasons, such as asset protection, if the only apparent reason for the restructure is to reduce tax this could offend the general anti-avoidance rules in Part IVA of the tax laws.
If you are considering:
- making significant trust distributions to other trusts or company beneficiaries; or
- amending your trust deed or making a family trust election; or
- paying out any Div7A loans earlier than planned under the loan agreement
you should first seek legal / tax advice to ensure there are no unexpected adverse consequences.
If you would like to book an appointment with one of our experienced lawyers, please email us at info@willsandwealth.com or call us on 9592 1177.
Who will control your Family Discretionary Trust when you can’t?
Key takeaways:
- Your Will cannot dispose of your family trust assets.
- Have a lawyer review the trust deed to ascertain who will control the trust after you lose capacity or die.
- Any documents created to pass control of the trust must be carefully prepared to ensure they comply with the trust deed and legislation.
You may be surprised to learn that you cannot dispose of family trust assets by your Will. This is because trust assets do not belong to you – they belong to the trust itself.
Self-evidently, if you lose capacity or die, you will cease to be a trustee or trustee director. What happens to the trust’s income and assets will then depend on the new or remaining trustee or trustee directors.
If you do not devise and implement a proper succession strategy for your trust, expensive family fights can result.
However, with some careful planning, you can ensure that control of the family trust passes to people who will properly manage the trust moving forward.
The preliminary steps should include:
- Have the trust deed reviewed. It is critical to firstly identify what the deed says about succession of control and to understand what requirements need to be met to pass control to your chosen successors. The identity of the trust’s Appointor is often a critical factor here, as the Appointor usually has power to replace the trustee.
- Consider who should succeed you. Should this be family members or will you involve independent persons? For example, if you pass control to three or more children, would it concern you that a majority might outvote the minority and exclude them from any benefits?
- Understand what family law and other asset protection risks might arise if one or more children become future controllers.
- Review the financial statements to identify whether there are any loan accounts or unpaid entitlements which may need to be paid before trust assets can be dealt with.
- If the trustee is a company, review the company’s constitution to understand how shareholder and director decisions are made.
Our expert lawyers can review your family trust’s deed, financial statements and the constitution of any corporate trustee. We can then advise you and help prepare and implement your trust’s succession plan.
If you would like to book an appointment with one of our experienced lawyers, please email us at info@willsandwealth.com or call us on 9592 1177.
Estate Planning isn’t just about a Will
Key takeaway:
- Up to date powers of attorney are important to help with the management of your financial, personal and medical affairs during any period of incapacity.
If you lose capacity and do not have a power of attorney, it will likely fall to VCAT to determine who should make decisions for you:. This can include:
- Financial decisions such as managing your investments, selling your home and paying your bills;
- Personal decisions such as deciding where you live, engaging with carers and deciding who can visit you; and
- Medical decisions such as whether you have a medical procedure.
VCAT might appoint a family member or an independent administrator, such as State Trustees.
By making a power of attorney, you get to choose who makes these decisions for you and you can impose restrictions, conditions and give instructions as you think appropriate.
Having the right attorneys is important for many reasons. As an example, if you have lost capacity then you won’t be able to monitor their decisions, and so it is essential to have the right people in these roles.
You can also direct whether your attorneys can make decisions solely, by majority, or jointly (note: for medical decisions, you can only have one decision maker, but you can nominate a succession of back-up decision makers).
It is also important for the attorneys themselves to fully understand and appreciate the powers they will have and the limitations on that power. Importantly, an attorney must act in the best interests of the person they are acting for and avoid any conflicts with their own interests.
Our team of experienced lawyers can help ensure you understand your options so that you can make an informed decision as to who is best suited to act as your attorneys.