COVER Testamentary trusts post-death: bespoke planning opportunities by Matthew Burgess, CTA, Director, View Legal

Abstract: It is clear that there is a growing need for planning to utilise appropriate structuring. Wills using testamentary trusts should be the starting point for any comprehensive exercise. The difficulty in many such exercises is that serious attempts to devise and implement a plan are often not made until some triggering event, such as financial or matrimonial misfortune, life-threatening illness or death, stimulates action. This article considers options available for implementing trust structures after death when appropriate planning was not done during a person’s lifetime, and the post-death strategies which can be used to fix estate planning problems. In such a case, it is possible to establish a trust following a person’s death, including an estate proceeds trust or a superannuation proceeds trust. The article discusses the benefits and limitations of these strategies in turn, and also includes a summary of child maintenance trusts.

Introduction The focus of this article is on options (the “” rules). The set formula is In light of fundamental changes to the available for implementing trust structures different in every Australian jurisdiction. taxation regime and the expanding wealth after death when appropriate planning was There are a range of issues that determine of Australia’s ageing population, there is a not done during a person’s lifetime, and the which jurisdiction’s rules will apply. growing need for estate planning to utilise post-death strategies which can be used to The intestacy rules will also apply where a appropriate structuring. “fix” estate planning problems. person dies without a valid will in relation to all of their assets. In this regard, it can in It is well established that wills utilising Strategies where there is no testamentary trusts (TTs) should be the fact be possible to die “partially intestate”. TT in a will This simply means that there are assets in starting point for any comprehensive estate While the best approach is to always a person’s estate that are not validly dealt planning exercise to ensure wealth passes “begin with the end in mind” and with under the will. efficiently to the intended recipients and ensure that a person’s estate planning that the transfer takes place at the intended The following summary gives a broad documentation achieves their objectives time. example of the way in which the intestacy (for example, by including a TT), it is rules often work (although as noted the Asset protection strategies and the use possible to establish a trust following position varies in each state). If a person of special purpose trusts are important a person’s death, such as an estate dies leaving: issues to consider in estate planning, proceeds trusts (EPT) or a superannuation „„ their spouse (including a de facto particularly where potential beneficiaries proceeds trust (SPT). spouse), but no children: their spouse are in financially high risk occupations, These “after-death trusts” should be receives everything; such as professional practice, or in considered as an asset protection and tax business, and where there is a risk that a „„ their spouse and children: their spouse planning tool. In certain circumstances, personal relationship of a may receives the first $150,000 and one-half they can be used to create a “set and degenerate in the future. of the balance of the estate if there is forget” structure that provides peace one child, or one third of the balance Potential beneficiaries that fall into any of of mind now, while still accommodating if there is more than one child. The these “at risk” categories will be exposed to the needs of evolving family dynamics children share the balance between losing assets, unless appropriate structures in the future. them; are put in place under the estate plan. „„ children but no spouse: their children The difficulty in many estate planning What is an estate proceeds receive a share each, but only once they exercises is that serious attempts to devise trust? turn 18 years of age or get married; and implement a plan are often not made Before looking at how an EPT operates, until some “triggering event” stimulates it is useful to provide an overview of „„ no spouse or children: the person’s action. Australian intestacy law, as these rules are parents will share the estate (if both are alive then equally); and Often the triggering event is itself an relevant to the quantum of the proceeds issue that may jeopardise the ability that will act as the capital fund of the EPT. „„ no spouse, no children and no parents: their siblings share equally. to implement appropriate strategies, If a person dies without a will, the law says for example, financial or matrimonial that their assets will be distributed to their The amount received by each person will misfortune or life-threatening illness. family, as determined by a set formula depend on the value of the estate and

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whether any other beneficiaries are entitled ability to split income according to the the EPT, only the income generated to the assets of the deceased. financial circumstances and needs of by that portion of the capital which the willmaker’s children would have If the person does not have any family the deceased’s children. members who qualify, then the assets may Diagram 1 illustrates how EPTs work. received on an intestacy will be entitled to the concessional rates of taxation; pass to the government bono vacantia. The income distributed from the EPT and may be used to pay for the children’s Estate proceeds trust education, living and other expenses. „„ any assets that do not form part A proceeds trust can be either an “estate Any income received by a minor will of the willmaker’s estate (such as proceeds” trust (where the proceeds were be taxed at the normal adult rate, assets owned as joint tenants with originally part of the deceased estate), rather than the penal rate that normally a spouse or insurance policies that or a “non-estate proceeds” trust (where applies to income distributions to infant are owned by the surviving spouse) the proceeds originate from an asset children. will not be able to be contributed to which does not form part of the deceased the EPT. This means that, assuming the children estate). Some common examples of are not earning other income, they will Table 1 provides a brief summary of the non-estate proceeds are those funded be eligible, once rebates are taken into key technical differences between an EPT by superannuation entitlements or life account, for more than $20,000 tax-free and a TT. insurance. for income received by each child each Despite these limitations, an EPT can be An EPT is a trust established by a deed financial year. Any additional income will of particular benefit where no TT has been after the death of the deceased. It is most be taxed at the ordinary adult marginal established and: commonly used to obtain advantageous rates. „„ for families with minor children where income tax treatment for income allocated There are numerous technical issues extra income would be needed to to minor beneficiaries. that must always be reviewed before support the surviving family members Generally, an EPT is more restrictive than establishing an EPT, including: should a parent die; and an ordinary TT established pursuant to „„ the person distributing the assets to the the terms of a will. The key difference „„ where legitimately minimising tax EPT must have received them under between an EPT and a TT is that the minor and having flexibility in relation to tax the will of the deceased; beneficiaries (persons under 18 years of planning is important. age on establishment of the trust) must „„ the transfer of assets into the EPT What is a superannuation be the ultimate capital beneficiaries of the must occur within three years of the trust, meaning the assets of the trust must deceased’s death; proceeds trust? ultimately vest in them. In contrast, there „„ the concessional rates of tax are An SPT is a trust that is established solely is complete flexibility when nominating the very unlikely to be available to the to receive superannuation proceeds on the ultimate capital beneficiaries of a TT. grandchildren of the deceased; death of a fund member. An SPT can be established by a will or by deed after the The main advantage of an EPT is the „„ while assets in excess of what the death of an individual. concessional tax treatment of income willmaker’s children might have received distributed from the trust and the on an intestacy can be contributed to Before considering the issues relating to establishing a post-death SPT, it is relevant to consider the operation of an Diagram 1 appropriately crafted SPT in a will and the taxation and asset protection benefits it Property affords. Gift into EPT Deceased /adult beneficiary SPT established in a will The Income Tax Assessment Act 1997 (Cth) (ITAA97) provides that a superannuation death benefit, paid to a death benefit dependant as a lump sum, is not assessable income. A death benefit dependant is defined as:2 EPT „„ a spouse or former spouse of the deceased; „„ a child, aged below 18, of the deceased;

– Establish within three years „„ a person with whom the deceased had of death. an “interdependency relationship”;3 and – Holds the sum the beneficiaries „„ a person financially dependent on the would have inherited under Minor beneficiaries intestacy law. deceased just before they died. – Kids taxed at adult marginal tax rate. Where there are death benefit dependants under a deceased estate who are potential recipients of superannuation benefits, it

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income beneficiaries. While TR 98/4 sets Table 1 out the ATO’s view in relation to child maintenance trusts (CMT), established to EPT TT access the concessional taxation rates for minors under the ITAA36 (discussed in Established by the beneficiary who has Established by deceased person’s will. 10 received (via a will) the property from the more detail below), it can by analogy be deceased person’s estate, within three argued that the comments apply to similar years of their death. types of trusts (including SPTs). No CGT exemption on transfer of assets CGT exemption on transfer of assets from TR 98/4 also confirms that the trust deed from estate to EPT. estate to TT. may contain mechanisms to prevent 11 No stamp duty exemption on transfer of Stamp duty exemption on transfer of the rule in Saunders v Vautier from assets from estate to EPT. assets from estate to TT. applying. The rule in Saunders v Vautier is that the beneficiaries can agree to Only children of the deceased can Children and grandchildren can receive receive concessional tax treatment on concessional tax treatment on income wind-up and distribute the assets of a distributions, limited to the income from distributions earned on all assets of TT. trust among themselves where they are the assets received by the EPT which absolutely entitled to the trust property. the children would have received on an One example is to include additional intestacy. discretionary income beneficiaries so CGT is payable on the transfer of any No CGT is payable on the transfer of any that the ultimate beneficiary cannot call assets from the EPT to beneficiaries, assets from the EPT to beneficiaries, for the distribution of trust property upon including on vesting. including on vesting.1 attaining 18 years. In practical terms, it appears that the ATO only tests the range of potential beneficiaries of the SPT at the date at is often an appropriate estate planning In particular, the ATO has confirmed that which the superannuation proceeds are strategy to allow for a separate SPT under it appears to be the clear intention of the received by the SPT.12 Therefore, even if a the will in addition to any TT, so that a legislation that the fact that a payment is takes the conservative approach, tax-free distribution of the superannuation made to a trustee, rather than directly to that is, to limit the range of potential proceeds can be achieved via a protected the dependant, should not obscure the income beneficiaries to ensure tax-free structure. Other estate assets can be fact that the payment is ultimately for the receipt of proceeds,13 following receipt of 6 distributed to a TT that has beneficiaries benefit of the dependant. the proceeds, it may be possible for the who are not death benefit dependants. This is particularly the case where7 the range of beneficiaries to be expanded to A death benefit received by a legal death benefit dependant is the sole include non-death benefit dependants. (LPR) is treated as beneficiary of the trust and, therefore, For completeness, as superannuation income to which no beneficiary is presently absolutely entitled to the income and proceeds do not automatically form part of entitled. The LPR is, therefore, liable for capital of the trust. the estate of the deceased member, it may 4 any tax liabilities. The requirement that death benefit be necessary to ensure that appropriate Where the superannuation proceeds dependants receive the capital on the nominations are made by the member are paid to an SPT, the LPR is taxed ending of the trust is also driven by to direct that the superannuation death in accordance with how the person or the requirements of the Income Tax benefits are paid to the LPR for distribution persons intended to benefit from the estate Assessment Act 1936 (Cth) (ITAA36),8 which under the will and, if appropriate, to any would be taxed were they to have received sets out the basis on which trust property SPT established. the payments directly. That is, the ATO will must be regulated when the trust ends, in generally adopt a “look-through” approach order to access the excepted trust income Post-death SPT as if the death benefit had been paid provisions. There is limited guidance about A form of SPT can also be established directly to the recipient. whether the ATO will require all the income after the death of a superannuation fund To ensure that any receipt of beneficiaries of an SPT to be death benefit member. It can be useful where there superannuation proceeds is tax-free, the dependants. are substantial superannuation assets, LPR should ensure that, at least on receipt The conservative position would be to the willmaker had not incorporated TTs of the superannuation proceeds by the limit the income beneficiaries of the SPT into their will and there is a death benefit SPT, the only capital beneficiaries of the to death benefit dependants only. In dependant. SPT are those who meet the definition of particular, the guidance available in relation This style of SPT is of particular benefit “death benefit dependant”.5 Diagram 2 to whether tax will be payable on receipt to a surviving spouse with infant children, gives an example of making distributions of the superannuation proceeds under where tax effective income splitting is under a will to a TT and an SPT. the ITAA97 indicates that the income and important. Diagram 3 gives an example In practical terms, this means that, where capital beneficiaries should be limited to of this. 9 there is more than one death benefit death benefit dependants. In Diagram 3, following the death of the dependant, the terms of the SPT should It is arguable, however, based on the ATO’s husband, the wife (in default of any other provide that they receive the trust capital comments in TR 98/4, that an SPT can decision by the trustee of the self-managed in specified shares on vesting. include a broad range of discretionary superannuation fund (SMSF)) would be

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entitled to receive his $1m superannuation Diagram 2 death benefit. The wife, in her capacity as trustee of the SMSF, distributes $700,000 to an SPT that she establishes and controls. Will Income and capital distributions to the infant children can then be used to pay Superannuation Other death benefits for food, accommodation, school fees, clothing, holidays etc. Each year, the wife is able to distribute Assets pass to the over $20,000 (once rebates are taken into LPR to distribute according to the account) to each of the three children will (ie over $60,000) tax-free under the excepted trust income rules of the ITAA36. There are a number of technical provisions that need to be satisfied to ensure access to this outcome. Similar to an EPT, an SPT established following the death of a member of a superannuation fund is significantly SPT TT more restrictive than an SPT established pursuant to the terms of the former member’s will, for example: „„ many appear to adopt an interpretation of the superannuation laws that prohibits any such payment For tax dependants For all beneficiaries only nominated by TT (more detailed comments in this regard are set out below). Often, there is no clear pathway to allow the trustee of a superannuation fund to distribute to an SPT unless the SPT has been established under the deceased’s will; „„ minor beneficiaries must be the ultimate Diagram 3 capital beneficiaries of the SPT, meaning the assets of the trust must ultimately vest in them; Superannuation „„ the concessional rates of tax will fund generally not be available to the grandchildren of a member; and „„ depending on the situation, the assets $300,000 $700,000 transferred must not exceed the Husband dies entitlements that the minor beneficiaries suddenly would have received if the deceased superannuation trust member had not left a valid will (ie if the deceased had Wife died intestate). Difficulties can arise when relying on the ability to establish a post-death SPT, as in Post-death SPT many cases, superannuation fund trustees All three children under 10 years might not have discretion to pay proceeds of age to an SPT under their trust deed or indeed at law. Under s 62 of the Superannuation Industry (Supervision) Act 1993 (Cth), a death benefit can only be paid to: $ Income „„ a death benefit dependant of the relevant member; or „„ the member’s LPR, being the executors or administrators of their estate.

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On one view, the trustee of a post-death The judgment has been interpreted as normally gift over provisions that avoid its SPT satisfies neither criterion, and as such, meaning that where a beneficiary who has application. there are often significant difficulties in attained legal capacity (ie the age of 18) arranging for the superannuation benefits and has a vested and indefeasible interest What is a child maintenance to be paid directly to the trustee of the SPT. in a trust asset, they can issue a call to the trust? If the superannuation benefits are paid trustee requiring the transfer of the asset While a CMT is not strictly a post-death to a death benefits dependant, and then to them. trust, it is relevant to include a brief gifted to the SPT, arguably the fund will This power undermines the ability for an summary of CMTs as they are a not be eligible for excepted trust income EPT or SPT to be used to preserve the post-relationship structure regulated by treatment.10 trust assets from any risks of spendthrift or essentially the same provisions of the tax That is, unless the money passes directly irresponsible beneficiaries once they attain legislation as EPTs and SPTs. from the superannuation fund into the SPT, majority. Child maintenance trusts are specifically 10 there is a real risk that the ATO will not Further, the trustee must be very cautious provided for in the ITAA36. As with the allow access to the excepted trust income in the exercise of their role if the trust other types of trusts dealt with in this provisions (unlike an SPT established in continues after the minor beneficiaries article, the main advantage of a CMT is the a will). attain 18 years of age, to ensure they do ability for income of the trust to be treated A “prescribed person” is defined in the not breach their trustee duties. as excepted trust income. ITAA3614 as any person, other than an Some practical steps which can be taken In particular, the rules allow income derived “excepted person”,15 under 18 years of age by a trustee to minimise the potential risks by infant children via distributions from a at the end of the income year. in this regard include: testamentary trust to be assessed at the Division 6AA ITAA36 will apply, where „„ ensuring that the trust deed for the trust normal, individual adult rates. As a result, the beneficiary of a trust is a “prescribed is crafted so that: over $20,000 is tax-free and the balance person”, to so much of the beneficiary’s is taxed at the adult marginal rates. For „„ only the primary beneficiary can most families, this can mean significant share of the net income of the trust that is receive distributions of capital; and not “excepted trust income”.16 tax planning opportunities. „„ the primary beneficiary obtains As set out above, in the vast majority Specifically, income of a trust estate is ultimate control of the trust upon “excepted trust income” where the income of cases, access to the excepted trust turning 18 years (for instance, via the income concessions is only available was derived directly as a result of the principal role); death of a person and out of a provident, following someone’s death. One key trust „„ limiting distributions of income only to benefit, superannuation or retirement arrangement that falls outside this general the primary beneficiary or their guardian fund.17 position, however, is the CMT structure. wherever possible and appropriate; and Consequently, it is likely to be problematic A CMT is another form of trust „„ once the primary beneficiary has for accessing the excepted trust income contemplated by Div 6AA that should be reached 18 years of age, a letter from treatment where there is a subsequent considered whenever there is a personal the trustee should be provided to the gift of superannuation proceeds from a relationship (referred to as a “family”) beneficiary: death benefit dependant (who is not a breakdown and either party is responsible “prescribed person”) to the trustee of „„ enclosing a copy of the trust deed for making child support payments. This the SPT. and financial statements for the trust; is because a validly established CMT can also create access to the excepted trust For these reasons, a post-death SPT is „„ confirming that while absolute income provisions and the resulting tax generally seen as a structure of last resort. entitlement to the trust fund will vest with the primary beneficiary on concessions. Asset protection limitations the vesting day, until that time it is Given the significant percentage of of EPTs and SPTs the responsibility of the trustee to personal relationships that breakdown As summarised above, a critical administer the fund on behalf of the irretrievably, many of which then result requirement of a valid EPT or SPT is beneficiary; in child maintenance obligations being that the minor children or death benefit „„ confirming that the primary imposed, it is important to be aware of the dependants are absolutely entitled to the beneficiary is automatically planning opportunities afforded by CMTs. capital of the trust on its vesting. nominated as the principal on their What is a “family breakdown”? As set out above, the Saunders v Vautier 18th birthday (assuming the deed The ITAA36 defines a transfer of property case sets the framework for the concept of has been crafted in this manner) and as a result of a “family breakdown” to absolute entitlement, where it was held:18 has unilateral power to change the trustee at any time, thus obtaining include legal obligations arising from a “I think that principle has been repeatedly acted ultimate control of the trust at that range of situations such as: upon; and where a legacy is directed to accumulate date; and „„ the breakdown of a formal marriage; for a certain period, or where the payment is „„ the breakdown of a de facto postponed, the , if he has an absolute „„ summarising the main benefits of relationship; and indefeasible interest in the legacy, is not bound to maintaining the trust in existence. wait until expiration of that period, but may require As set out above, the rule in Saunders v „„ where a child has been born outside a payment the moment he is competent to give a Vautier does not generally have the same “traditional” relationship arrangement valid discharge.” operation with a standard TT, as there are (for example, a “one night stand”).19

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Child maintenance trusts are potentially The arm’s length requirement is set out in „„ TR 98/4 which sets out in detail the available in relation to children who are: detail in s 102AG(3) ITAA36. In particular, Commissioner’s position in relation to „„ born of the union of the relationship that this section provides that if any two or CMTs and should be studied carefully has broken down; more parties to: before implementing the structure; „„ adopted children; and „„ the derivation of excepted trust „„ the CGT relief afforded by Subdiv 126-A income; or ITAA97 due to a marriage breakdown „„ step-children. „„ any act or transaction directly or does not extend to assets transferred The ITAA36 and excepted trust indirectly connected with the derivation to a CMT; income of that excepted trust income, „„ similarly, in relation to non-capital assets (eg depreciating assets), there Child maintenance trusts are specifically were not dealing with each other at arm’s 10 will generally be no roll-over relief provided for in the ITAA36. As noted length, then the excepted trust income available for asset transfers to the CMT; above, the main advantage of a CMT from (if any) is only so much of that income as a tax perspective is the ability for income would have been derived if they had been „„ generally, there will also be no stamp of the trust to be treated as excepted trust dealing with each other at arm’s length. duty relief available for dutiable income. assets transferred to a CMT, although A CMT, like most trusts, must be anecdotally it appears some state established by deed but, in contrast revenue offices do allow an exemption; to many of the other types of trusts and contemplated by the excepted trust income „„ it is often extremely difficult to establish rules, cannot be created by a will. a CMT unless both parents work There are also other requirements that The conservative collaboratively, which obviously may must be met before the income of the not be the case where the personal trust is treated as excepted trust income, position would relationship has otherwise broken down. including: Court-ordered wills „„ the children named as the “primary be to limit beneficiaries” of the trust must be While not technically a “post-death” younger than 18 at the time the trust strategy, it is prudent to include reference is established; the income to the ability of the courts to alter wills where the willmaker has lost capacity to „„ income must be derived by the beneficiaries to do so themselves. investment of property transferred to the trustee of the trust for the benefit of The case of Re Matsis; Charalambous the primary beneficiary/beneficiaries, as death benefit v Charalambous20 (Re Matsis) was the a result of a “family breakdown”, as set first case that allowed a court-ordered out above; dependants only. will where the primary objective was not because the relevant incapacitated „„ there is no set time frame in which a person had no will at all, rather that CMT must be established following the the pre-existing will did not achieve family breakdown, although they should the appropriate asset protection and ideally be set up at the time of the tax planning objectives of the ultimate property settlement; and Due to the strict requirements for a valid beneficiaries. „„ the children for whose benefit the trust CMT, particularly on the ultimate vesting of The case involved a businessman who is established must ultimately receive the assets in the children of the relationship had accumulated some millions of all of the capital from the trust in equal that had a family breakdown, one approach dollars of wealth and who had signed an shares. often used is to contribute depreciating “interim” will, which did not incorporate assets such as plant, equipment and motor Both in relation to tax planning and any TTs, sometime before losing capacity vehicles to the trust. These assets can asset control, it is important to note that to dementia. On the application of the be leased, either to a related individual or potential income beneficiaries of a CMT ultimate beneficiaries, the court allowed business entity for value. may include persons other than children them to introduce comprehensive TT Provided the lease repayments are on an of the relationship subject to the family provisions into the will as if they were arm’s length basis, then the income will be breakdown, without jeopardising access to inserted before the willmaker’s death. the excepted trust income concessions. able to be distributed to infant children as This decision is particularly important excepted trust income. Non-arm’s length arrangements because there are other cases, such 21 The income of a CMT can be generated Other issues to consider as Hausfeld v Hausfeld, where similar from non-arm’s length arrangements. While there can be tax planning requests have been denied. However, any income which results from advantages to utilising a CMT, there are In Hausfeld, an application was brought non-arm’s length transactions must be of also a number of potential pitfalls (in by the willmaker’s son for leave to make equal value to that which would have been addition to the matters set out above). an alteration of a will on behalf of his derived on an arm’s length basis in order to Some of the things to specifically consider father. At the time of the proceedings, the be considered excepted trust income. before establishing a CMT include: willmaker was 91 years of age and lacking

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to alter his will due potential beneficiaries via the trust (eg administration barriers and to dementia. structures; and increased tax and stamp duty costs); and The son, who was married at the time of „„ the court accepted that the proceedings, sought an order for the the willmaker may well have himself „„ limited asset protection. implemented TT provisions had he not will to be altered by substituting his wife for Considering the significant limitations of lost capacity. himself as one of the beneficiaries. post-death trusts compared to TTs, they The reason behind the application was A further case that referred to both should not be considered as an appropriate held to be primarily because the son was Re Matsis and Hausfeld is Gau v Gav.22 proactive estate planning strategy. Rather, a respondent to litigation in which it was Broadly, the decision confirmed that each they are an avenue of last resort. alleged that he had engaged in misleading case will turn on its own facts, and on the or deceptive conduct, resulting in the proper construction of the succession Matthew Burgess, CTA possibility that he could be found liable in legislation in each state and territory. Director View Legal whole or part to the claims made against In considering the appropriateness of him, giving rise to significant damages and making an order, the court noted that the Acknowledgment possible bankruptcy. court’s jurisdiction to grant a statutory will The author gratefully acknowledges the assistance of The court denied the son’s application on was protective in nature, in that it is for the the directors and staff at View Legal in the preparation the basis that it was not appropriate: benefit and interests of the person who of the article, particularly Patrick Ellwood, Tara Lucke, Hayden Dunnett and Naomi Arnold. 23 “… for the court to authorise an alteration to requires the court’s protection. Colin Hausfeld’s will in order to defeat his son’s The court concluded that in these References creditors. Whilst [the court] accept[s] that Colin circumstances, the primary judge failed 1 See PS LA 2003/12. Hausfeld, if he were capable, could leave the share to properly consider the “compelling 2 S 302-195 ITAA97. of his estate that would otherwise pass to his son evidence” that the testatrix would have 3 S 302-200 ITAA97. to his son’s wife in the expectation that she would made the changes if she had testamentary 4 S 99 of the Income Tax Assessment Act 1936 (Cth) provide for his son out of that share if his son were capacity. (ITAA36). made bankrupt, [the court] do[es] not think that the 5 S 302-195 ITAA97. Therefore, if before the court there is a 6 ID 2001/751 (which has since been withdrawn on the court should condone such a course. The policy of request that would neither offend the policy basis that its view has been subsumed into s 302-10 the law is that people should pay their debts so far of the law nor exhibit moral obloquy if ITAA97). as they are able. It is not that they be sheltered in implemented by the willmaker when they 7 ID 2001/751. the way proposed.” had capacity, then, if all other requirements 8 S 102AG(2) ITAA36. 9 S 302-10 ITAA97. In contrast to the Hausfeld matter, of the statutory will rules are satisfied, the 10 S 102AG ITAA36. arguably, the important factors in Re court should approve the will. 11 (1841) 4 Beav 115. Matsis that led to a successful application While the intentions of the parties seeking 12 For example, see PBR 1011741138466. were that: benefit from the statutory will application 13 S 302-10 ITAA97. (here, effectively, the son who was involved „„ evidence was able to be shown that 14 S 102AC(1) ITAA36. in property settlement proceedings) have the will that was in place before the 15 S 102AC(2) ITAA36. some relevance, they should generally be willmaker lost capacity was largely seen 16 S 102AG(1) ITAA36. considered relevant only “at the margins”. by him as an “interim” document; 17 S 102AG(2)(c)(v) ITAA36. „„ the only person who could have The current guidance about the scope of 18 (1841) 4 Beav 115 at 116. brought a challenge against the the court’s powers to alter wills reinforces 19 S 102AGA ITAA36. estate was the willmaker’s daughter, the importance of having a comprehensive 20 [2012] QSC 349. who indicated in the proceedings that estate plan. However, in granting an 21 [2012] NSWSC 989. she was independently wealthy and application for a statutory will, the court 22 [2014] QCA 308. had no intention of challenging the will consider the facts and circumstances 23 Ibid at [52]. estate; of each case. „„ the ultimate beneficiaries of the estate Conclusion (and the people bringing the application) While EPTs and SPTs can be established were the willmaker’s grandsons. While after death to partially replicate the same each of them potentially had asset outcome as if an appropriately drafted TT protection risks, none of them were had been included in a person’s will, there aware of any potential litigation against are significant limitations with these trusts. them; Broadly speaking, these limitations include: „„ the change to the existing will did not alter any of the provisions in relation „„ access to excepted trust income to, for example, executorship or any treatment is significantly reduced; specific gifts; „„ the range of beneficiaries will be „„ while the grandsons lost direct narrower than a TT; entitlement by the inclusion of the „„ practical difficulties in contributing TTs, they were still ultimately the likely assets to the post-death trust

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