The advantages of a beneficiary controlled testamentary trust Will

To provide your Primary Beneficiaries with the ability to take their inheritance in whichever way they choose, you might consider incorporating a Beneficiary Controlled Testamentary Trust (BCTT) into your Will. That way, after you die, a Primary Beneficiary can instruct the estate Executor to pay some (or all) of their inheritance, to any one or more of the following:

• themself absolutely;
• a Testamentary Trust that is controlled by them;
• a Testamentary Trust that is not controlled by them;
• any of their children or grandchildren instead of themselves; or
• another trust which they (or their descendants) are beneficiaries of (or control).

The terms set out in the Will give Primary Beneficiaries flexibility and options, including the ability to:

• control the activities and investments of their own trust if they wish;
• minimise tax, and, use the benefit of the concessional tax rates that apply to minors;
• retain their inheritance for their descendants for up to 80 years (or longer in States where there is no rule against perpetuity) or wind the trust up earlier;
• appoint another person or company to be the Trustee of their trust;
• appoint someone other than themselves or a company, to have the power to remove a Trustee and appoint a new Trustee of their trust;
• protect their inheritance from being lost through bankruptcy;
• protect their inheritance in the trust from having an inheritance claim lodged after their death;
• run more than one trust. For example, if a Primary Beneficiary has more than one child, they can run parallel trusts and nominate:
a). which assets go into the trust;
b). who the income beneficiaries will be from those you have nominated in the terms of the trust;
c). who the capital beneficiaries will be from those named in the terms of the trust;
d). who will be the Trustee of each trust;
e). restrict the terms of the original trust or any parallel trusts (however, they can never expand on the terms of the trust set out in the will);
f). specify which of their descendants will have control of the trust (and any parallel trusts), after the death of the Primary Beneficiary; and
g). create a protective trust for any descendants who cannot manage their own affairs.

During the continuance of their trust, the Primary Beneficiary has the power to:

• take some assets out of their trust and keep the remainder in the trust;
• pay assets and income to themself or any other person named as a potential beneficiary of their trust; or
• take all the assets out of their trust and wind up the trust; and
• create separate testamentary trusts.

If the Primary Beneficiary leaves their inheritance in their own trust, then upon their death the assets in their trust do not form part of their estate. Their chosen descendants then inherit the trust and take control of it.

Scammell & Co have experienced Wills and Estate Planning lawyers who can tailor your testamentary trust Will to achieve particular objectives for both your estate and your beneficiaries.

For further information on Scammell & Co's Wills and Estate Planning services please follow the link HERE

*This information is current at the time of publication. For accurate legal advice, please contact Scammell & Co on 08 8440 270.

SA's inheritance laws are under review. Here are the key considerations.

Sweeping reforms to South Australia’s succession laws are soon to be debated in parliament. If the Succession Bill 2021 (the Bill) is passed, it will consolidate and amend existing laws relating to Wills, probate and administration, the administration of deceased estates, intestacy, and family provision.

Of all the proposed changes, perhaps the most contentious relate to family provision. The new inheritance laws are designed to prioritise the wishes of the testator (the person making the Will).

The existing Inheritance (Family Provision) Act 1972 (SA) (Act) is intended to strike a balance between the wishes of the testator to have their property distributed as they wish after they die, and the idea that people also have a responsibility to provide for certain people after their death. However, with the rise in “frivolous”, “greedy” or “opportunistic” claims currently clogging up the courts there is a growing appetite for reform. There is no perfect solution.

Those that have the most to lose by the proposed changes include former spouses and domestic partners, siblings, grandchildren, and stepchildren of the deceased. Under existing laws these persons can make a claim if they can demonstrate that they had been left without adequate provision for their proper maintenance, education, or advancement in life.

The Bill would severely limit claims to those who can satisfy the court that they qualify to make a claim. For example, if the relative can prove that they cared for, or contributed to the maintenance of, the deceased person, immediately before their death; or that they were wholly or partly maintained by the deceased person immediately before their death.

Whilst the proposed changes are well-intentioned, the Bill has raised concerns that the reforms go too far, with the view that the current Act and the legal system as it is, serves the community well in that regard.  The proposed changes would reduce the rights of certain relatives, as well as limit the ability for the courts to step in if the deceased had failed to properly provide for a relative with a valid need, such as a minor or a vulnerable person.

Unfortunately, it is very common for a particular person (child, relative, carer, housekeeper, and others) to deliberately ingratiate themselves with an ageing or disabled person. They do so with the intention of inheriting some (or all) of the estate. This often is a fraud perpetrated upon other family members who have a proper claim on the estate. Under the proposed laws which give priority to the deceased’s wishes, such fraud will be successful most of the time. There are separate laws regarding undue influence, but they are ineffectual in this context.

What remains central to ensuring someone’s wishes are carefully thought through, is to have a Will in place (over half of South Australians do not), and to have it drafted by a knowledgeable and experienced legal practitioner who can ensure it is legally valid and viable.

For further information about Scammell & Co's Wills and Estates services please follow the link here

*This information is current at the time of publication. For accurate legal advice, please contact Scammell & Co on 08 8440 270.

Dying intestate can cause headache and heartache for your grieving loved ones.

High-profile legal proceedings currently before the Supreme Court, demonstrates how important it is to have a valid Will in place.

The matter involves millions of dollars in assets which belonged to businessman Hongtao Liu. Mr Liu died without a Will. This has created conflict between his wife Ms Xianting Kong and his mother Ms Junying Yan, as each party tries to assert control over his $50m estate.

In South Australia, if someone dies without a valid Will, he or she is said to have died “intestate”. In this instance, the Administration and Probate Act 1919 (SA) (“The Act”) sets out the rules for distributing assets. This may conflict with the deceased’s wishes.

The above example has added complexity as the court determines where Mr Liu was “domiciled” - or intended to live “indefinitely”. The deceased had moved to Australia in 2012 with his wife and their children. They bought property in Adelaide and in 2016, became Australian citizens.

Under Chinese law Mr Liu ceased to be a citizen of the People’s Republic of China, and consequently relinquished the right to reside there. Ms Kong’s lawyer argues that this demonstrates the deceased’s clear intent to reside permanently in Australia. If the court agrees, then the estate will be distributed in accordance with the laws of intestacy in South Australia, which stipulate that the wife is entitled to the following:

The remainder of the estate is divided equally between the deceased’s children.

Counsel for Ms Yan on the other hand argue that at some point in the future he intended to return to China. In which case the court would need to determine in accordance with the Chinese law of succession which could see his mother inherit his estate.

Whilst this case involves a large pool of international assets, a more modest intestate estate can still cause disputes. In this instance The Act will dictate the distribution of assets taking into consideration any previous husbands or wives (if not formerly divorced); the nature and extent of any domestic partner’s relationship with the deceased; the size of the estate; whether there are any surviving children or grandchildren; and whether assets are held jointly or solely.

To ensure your wishes are carried out and to reduce the risk of someone contesting your Will, it is important to receive accurate and independent legal advice.

For information on Scammell & Co.'s comprehensive Wills and Estate Planning services click here.

*This information is current at the time of publication. For accurate legal advice, please contact Scammell & Co on 08 8440 270.