Discretionary trusts – What happens to the assets held on death?

Discretionary trusts are an incredibly valuable tool for structuring the affairs of your business, investments and family finances. These trusts allow the trustee to split the income of the trust assets between a family group. This has significant tax advantages as the trustee can vary the amount of income paid to a beneficiary in light of that beneficiary’s other income.

It is important to consider what will happen to the assets held under a discretionary trust when you pass away. After all, you are unable to directly bequeath these assets through your Will. This is because a trust is a separate legal entity. Under a trust structure, the assets are owned by the trustee of the trust and do not automatically form part of your estate.

However, the trust can be structured in a way that preserves its longevity after you pass away. This can be considered through a holistic estate planning process.

One such strategy involves drafting your trust to include a clause which stipulates who will become the appointor or “controller” of the trust should you die or become incapable of performing this role. The role of an appointor is highly important, as this person has the power to appoint and remove trustees. They have the power to decide if any changes are made to the trust. The Appointor can nominate in writing or by a Will a trusted replacement Appointor to oversee the function of the trustee.

If you are the trustee of your own trust, a second option might be to draft the trust to stipulate who will replace you as the trustee by default when you pass away.

Alternatively, if the trust is managed by a corporate trustee, you can also nominate who will be the director or shareholder of the trust. This can be done through your Will, by company resolution, or through a Business Succession Agreement. By nominating a trusted replacement trustee, you can be confident that the trust will be efficiently managed when you pass away.

During the estate administration process, it is also important to check the balance sheets of the trust to determine whether there are any unpaid present entitlements or loan accounts owed from the trust to the deceased. This can be paid out by the trust to the deceased’s estate and is payable on demand by the executor as a debt due and owing.  The alternative is to forgive these loans so that the capital remains held by the trustee of the trust to the amount of the loan.

Through these strategies, you can ensure that your family members continue to benefit from the advantages of the discretionary trust continue once you pass away. At Perspective Law, we approach the estate planning process as a holistic strategy which addresses all aspects of your legal affairs. For further information, please do not hesitate to call our office on (07) 3839 7555.

Maintain Value- Why we recommend Business Succession Agreements

Where a business is run by multiple owners, it is important to secure the ongoing viability of the business in the event that one of the owners passes away or suffers from a critical injury, disability or illness. A Business Succession Agreement is a useful tool to ensure the seamless transfer of ownership over the company in one of these unfortunate events.

The importance of a Business Succession Agreement is best explained through a hypothetical scenario. Let’s say that two owners named Cathie and Barney carried on a business supplying building materials to government builders. When Barney died, Cathie offered to purchase Barney’s shares in the company from his estate. However, Barney’s Will left everything equally between his two teenage sons, Bill and Bob. Unfortunately, the boys fancied themselves as business owners. Rather than selling the shares, the boys insisted on taking an active role in the business. After a year of indecision, arguing and stagnant growth, the business failed.

The failure of the business could have been avoided if Barney and Cathie had executed a Business Succession Agreement which transferred Barney’s interest in the company to Cathie as the continuing owner.   

Essentially, a Business Succession Agreement is a legally binding document which stipulates what happens to each owner’s respective interest in the company should they pass away or lose the ability to continue running the business. Typically, this involves allowing the continuing owners to buy the outgoing owner’s shares in the company. This gives the remaining owners certainty that their rights to continue on in the business while also ensuring fair value for the family of the outgoing owner whose interest has come to an end.

This Agreement also ensures that third parties do not have an unacceptable level of control or influence over the business, the estate cannot demand an unreasonable amount for the interest in the business, loans are not called in without proper funding, and the continuing business owners can protect the asset that they have worked hard to build up. 

The Agreement functions through a grant of an option in favour of the continuing owners to purchase the outgoing owner’s interest. At the same time, there is a grant of an option for the outgoing owner or their executor to require the continuing owners to purchase the interest in the business on set terms. The Agreement will also set out the mechanisms by which these options can be exercised and the time periods within which a valuation of the interest must occur and payment of that interest.

To fund these buy and sell obligations, the Agreement may impose obligations on the parties to maintain policies of insurance to provide all or part of the funds to purchase the outgoing owner’s interest in the business.

Ultimately, a Business Succession Agreement is only part of an overall strategy that must be formulated. It is imperative that the other documents that form part of the legal framework under which a business operates are reviewed carefully.  Therefore, Trust Deeds, Company Constitutions, Loan Agreements and other arrangements must be reviewed and, where appropriate, updated. It is our pleasure to assist our clients and their advisors in achieving these goals. Should you be interested in arranging a Business Succession Agreement, please contact Tony direct on (07) 3317 4312.

What happens to your super when you pass away?

While this may seem like a morbid question for a Monday morning, dealing with your superannuation is an important part of estate planning. After all, your super funds may represent a sizeable portion of your asset pool when you pass away.

However, unlike your other assets, your super death benefit is not automatically considered to be part of your estate. Your super therefore cannot be dealt with by your Will unless you have directed your super fund to leave the benefit to your legal personal representative (‘LPR’), otherwise known as the executor of your estate.

This is because your Will deals with the assets already owned by your estate such as your savings, property, shares and other personal items. Conversely, your super is held on trust by the trustee of your super fund.

We recommend executing a Binding Death Benefit Nomination form through your super fund to specify who you wish to receive your death benefit. This is a legally binding document which must be submitted to your super fund and updated every three years.

You can choose to nominate either your dependants or your LPR.

Nominating your dependants

Section 10 of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SIS Act’) defines ‘dependant’ to include your spouse, children or a person with whom you have an ‘interdependent relationship’ with at the time of your death. An ‘interdependent relationship’ describes a close personal relationship between two people who live together and receive financial, domestic and personal support from each other. When you pass away, your super fund will distribute your death benefit to your dependants.

Nominating your LPR

Alternatively, you may nominate your LPR to distribute your super funds in accordance with the terms of your Will. This means that your super benefit forms part of your estate and may be distributed to your beneficiaries.

What happens if a Binding Death Benefit Nomination has not been completed?

If you do not give instructions to your super fund, or if your Binding Death Benefit Nomination is declared invalid, the trustee will have discretion to distribute your death benefit to either your dependents or your estate. Completing a Binding Death Benefit Nomination Form removes this discretion and ensures that your wishes are carried out.

At Perspective Law, we will submit a Binding Death Benefit Nomination to your super fund during the estate planning process. We have the experience to ensure that this form is completed properly to avoid any question of its validity.

Should you be interested in updating your estate planning, please do not hesitate to give us a call on (07) 3832 5555.

Advance Health Directive – Benefits to you and your family?

Life is full of surprises and not everything goes according to plan. The one thing we treasure is the freedom to make a choice about our life including our health care. As distinct from an Enduring power of Attorney, it is important to plan ahead for the possibility that you may no longer be able to make serious end of life decisions regarding your health care. What happens if you lose capacity to make health decisions on your own behalf?

A situation may arise where you suffer from an accident, dementia or a mental illness. It is absolutely vital to express your wishes for your future health care ahead of time, so that health professionals have clear directions about the types of treatment that you want to receive. Doing so can also relieve the burden experienced by your loved ones when making difficult decisions on your behalf. Every person we have spoken to that had to make that tough decision about continuing life support for their spouse felt terrible no what the decision made.

Certainty about your end if life health care can be achieved through an Advance Health Directive (‘AHD’), a binding legal document which spells out your future health care preferences. The  document under  ‘Your Directions’, is divided into three parts; life-sustaining treatment,  other health care and  blood transfusions. You can give binding directions in each category, so that a hospital or doctor knows exactly what you require.

An AHD allows you to give directions about life-sustaining treatments such as CPR, assisted ventilation and artificial nutrition (example naso-gastric feeding) which aim to prolong your life. To make a  decision, on whether you want this to be done, we recommend that you consider your age, state of health, your values and what quality of life means to you. You can choose to either choose yes or no to  particular treatment in different sets of circumstances to life-sustaining treatments, or even leave the decision with your attorneys.

The next part of the document allows you to give directions regarding both general and special health care. General health care relates to the majority of medical treatments, procedures and services for mental and physical conditions. Conversely, special health care includes procedures such as organ donation, experimental health care and participation in special medical research are options you can choose.

The final part of ‘Your Directions’ relates to blood transfusions. This includes the transfer of blood, red cells, platelets and/or plasma. You may stipulate the terms upon which you would consent to a blood transfusion or list the types of transfusions that you would accept. This section may also be useful if you have religious preferences that do not sanction the procedure.

Your doctor will need to explain the treatment options to you and witness your AHD to confirm that you have capacity to execute the document. During the appointment, your doctor will explain the medical implications of each health states and treatment in the context of your medical history. If you are terminal, palliative, unconscious or in a permanent negative state, you may consider treatments in a  different light and select different options.

It is also worth noting that an updated version of this document was recently released by the Queensland Government which allows you to appoint attorneys for health matters. This section does not need to be filled out if you have prepared an EPA.

If you wish to have an Advance Health Directive as part of your strategic estate plan to ensure that your wishes regarding your future health care are clearly recorded, please contact our office on (07) 3839 7555.

What is an Enduring Power of Attorney and why is it necessary?

An Enduring Power of Attorney (‘EPA’) is a legal document that allows you to appoint one or more trusted individuals to make decisions about your financial and personal (including health) matters should you lose capacity to make these decisions on your own behalf.

An EPA is a forward-thinking document. It plans ahead for a situation where you lose capacity to manage your own affairs and outlines your wishes for your care ahead of time. For example, an EPA would come into effect should you experience a medical condition (such as a stroke) , mental illness or accident that impairs your decision making or ability to sign (such as paralysis) . You are also able to specify the circumstances under which your attorneys may begin exercising their decision-making powers. Ultimately, the document enables your loved ones to manage your affairs in accordance with your needs and best interests. Most of the time it is needed so that access to bank accounts, access to insurance, access to superannuation member benefits and a sale of  property is required to support you. Financial institutions are very tough on proving what powers the attorney has been granted, so very careful thought must go into the drafting of the special conditions and what actions an attorney can take.

At the end of 2020, the Queensland Government introduced a new EPA form which separates your attorneys’ decision-making powers into two sections: personal (including health) matters and financial matters.

Personal (including health) Matters

The first section of the form relates to personal and health matters. This covers decisions about your general welfare, including the support services that you may require and decisions regarding your place of residence.

The section also relates to decisions surrounding your health care, enabling your attorneys to make decisions regarding any medical treatments and services that you may require. If you have specific wishes about your future healthcare, an Advance Health Directive may be completed with the assistance of your General Practitioner to supplement your EPA. We will discuss this further in our blog post next week.

Financial Matters

You may also enable your attorneys to assume responsibility over your financial affairs should you lose capacity. This may relate to access to superannuation, making claims on insurance policies, managing your businesses, paying your expenses, selling your property or making investments on your behalf.

It is also worth noting that the new EPA form allows you to require that your attorneys notify you, or another trusted person, of the content of any decisions made on your behalf. This is an extra layer of accountability to ensure that your attorneys are acting in your best interests.

We recommend preparing an EPA as part of your strategic estate planning to support your loved ones in carrying out your wishes in the situation that you lose capacity. An EPA can also provide you with peace of mind, as you can be confident that your needs have been planned for ahead of time.

At Perspective Law, we can insert tailor made clauses to further maximise the protection that an EPA can offer. For more information, please give us a call on (07) 3317 4312.

What are the benefits of a discretionary testamentary trust, and who controls the assets?

A testamentary discretionary trust is used to manage family assets and businesses. It has significant tax advantages and asset protection benefits for beneficiaries, making it a popular option for testators who wish to provide financial security and peace of mind to their families.

Firstly, it is useful to outline the basic operational structure of a testamentary discretionary trust. These trusts are operated by the trustee, who controls the trust assets and makes discretionary distributions in favour of the beneficiaries. Conversely, the appointor of the trust has the important power to appoint and remove trustees. The trust deed will also stipulate the testator’s family members as the class of beneficiaries.

The trust itself is considered discretionary as the trustee can withdraw capital and distribute income as they see fit. This provides a high degree of flexibility to the trustee.

On the one hand, it is open to the trustee to retain the capital and produce income for the long-term benefit of the beneficiaries. This provides a protected environment for the environments from which the beneficiaries may benefit. This is especially important in circumstances where they are compromised or vulnerable or unable to support themselves or their dependants due to mental or physical disability, financial hardship from loss of employment, bankruptcy or matrimonial property disputes. The trustee can therefore securely invest the estate funds and generate income for the purpose of providing financial support to the beneficiaries.

The testator can express their preference for the trustee to retain the trust capital through a Statement of Wishes. With that being said, the trustee is not locked into this course of action. It is open to the trustee to remove the capital to suit the particular needs of the beneficiaries upon financial advice.

Finally, these trusts are also desirable for their tax advantages. We recommend that you seek accounting advice to further unpack the financial benefits of a testamentary discretionary trust to suit your particular circumstances.

If you would like further information about incorporating a testamentary discretionary trust into your strategic estate planning, please contact our office on (07) 3839 7555.

What is Probate, why is it necessary to obtain, and what common issues arise?

One of the most important steps of the estate administration process is obtaining a grant of Probate.

Probate is the seal of the Supreme Court of Queensland that officially recognises a Will as valid. It confirms that the formal requirements of the Will have been complied with and that the executor has been properly appointed. Furthermore, Probate demonstrates that due notice has been given that the document is the final Will of the deceased.

It is necessary to obtain a grant of Probate to allow the executor to administer the estate. This enables the executor to claim estate assets, pay the outstanding debts of the deceased, make investments on behalf of the beneficiaries, and distribute the estate assets. Financial institutions and banks will require a grant of Probate to ensure the validity of the Will and the executor’s ability to transfer estate assets.

There are a number of issues that can arise when applying for Probate. This blog article will step through nine of these issues.

  • Firstly, the Will is damaged or has holes in it from removed staples. In this case, the executor will need to explain how this occurred using a Form 111 – Affidavit of Plight. This Form requires a deponent to state on oath whether there were any other testamentary documents attached to the Will that have since been separated.
  • The testamentary capacity of the Willmaker is another common issue that arises in the context of Probate. This legal issue was raised In the Will of Esme Jane Ferris, heard by the Supreme Court of Queensland in 2020.[1] At the time of executing her second Will on 14 March 2016, Ms Ferris had been diagnosed with rapidly advancing Alzheimer’s disease. Moreover, her psychiatrist had recommended that she be admitted to a dementia unit for specialised care. This drew into question the testamentary capacity of Ms Ferris to radically alter her first Will which had been executed on 31 May 2005. Ultimately, the Court was satisfied that Ms Ferris did not have testamentary capacity at the time, and the second Will was therefore declared invalid. A grant in common form was instead ordered for the earlier Will.

In these cases, the onus of proving testamentary capacity falls on the plaintiff. Probate will not be granted where there is significant doubt as to the testator’s soundness of ‘mind, memory and understanding’ at the time of executing the Will.[2]

  • Another common problem occurs where the executor only holds a copy of the Will as the document is missing or lost. In this case, the executor will be required to complete a Form 9 – Application with supporting affidavit material.
  • Thirdly, if the Will has been incorrectly or inconsistently dated, one of the witnesses will need to file an affidavit using Form 107 – Affidavit of due execution of will/codicil stating that the Will was duly executed. This Form must be accompanied by a copy of the original last Will.
  • A Form 107 must also be completed where the attestation clause does not make clear that the testator was blind or illiterate at the time of executing their Will. One of the witnesses will be required to complete this Form to confirm that the testator was completely aware of the contents of the Will and approved of its execution.
  • Next, if an attestation clause was not included in the Will at all, a Form 107 will again need to be filled out by a witness or another person present while the Will was signed. They will be required to confirm the identities of those present during the execution of the document. Alternatively, an affidavit may be filed alongside a copy of the Will.
  • Moreover, a notice for Probate must include all known aliases of the deceased. If this does not occur, the process must be started again. A new affidavit using Form 104 – Affidavit of publication must be submitted, the notice must be re-advertised and re-served to the Public Trustee, and the registry counter must be attended to amend the headings of the filed documents.
  • A typographical error in the application for Probate regarding the date of the Will is much easier to fix as an amended application can be filed.
  • Finally, an application that has been submitted too early can be refiled after two weeks has passed since filing the last application and the publication of a death notice in the newspaper.

Evidently, obtaining a grant of Probate is an essential step of estate administration. At Perspective Law, we have the experience that is required to step you through this process. For further information, please do not hesitate to call our office on (07) 3839 7555 to discuss your specific needs.

[1] In the Will of Esme Jane Ferris (deceased) [2020] QSC 26.

[2] In The Will of Edward Victor Macfarlane Deceased [2012] QSC 20 at [9] – [10]

Key Points to Selling your Business

What are the essential points to consider when thinking about selling your business if you’ve been approached?

Consider the following major recommendations:

It does not matter if you have one or a number of interested parties, these initial actions are critical in getting the best outcome:

  • Advise the buyer that you are seeking professional assistance to better prepare for the sale and to facilitate the process. Let them know that you are awaiting further advice before going ahead with any more discussions. This shows that you are serious about the negotiations and will only proceed if it is conducted professionally.
  • Sign an engagement agreement with a specialist business sale company experienced in mergers and acquisitions, including financial reporting and different share solutions. It is important you choose the right person that is knowledgeable in more than just the sale process.
  • Together with your accountant and agent, analyse your business to determine the market. This includes evaluating your business’ financial and systems strengths, financial and operational performance and any opportunities of the business.
  • Prepare an Information Memorandum containing “normalised” financials, excluding personal use items or income, assuming you are putting the sale on the broader market.
  • Review the working capital by removing excess assets from the balance sheet of business before the sale.
  • Provide a price estimate and be sure it meets your expectation and requirements.
  • Focus carefully on the information flow and ensure that trade secrets, pricing structures, key clients and staff are kept secret until the buyer is fully committed and bound by an unconditional contract. Ensure you get a confidentiality deed signed first and have contingency plans in plan to exit at any stage of the process, if the buyer proves unsuitable during negotiations.
  • Get specialist tax advice for your personal circumstances to ensure any CGT issues are anticipated and dealt with before undertaking the transaction. This is more so for larger, more complex transactions, including existing business structure and tax history, to minimise the assessable tax from the transaction.
  • Do not narrow down on just one buyer, at least without strict timeframes and exit clauses in place, so that you can still explore alternative options without committing too much time, costs, and professional engagement. Maintain the right to terminate within your discretion if the buyer becomes difficult on key points that may reduce the value of your outcome.
  • Do not allow the buyer to dictate the time frames without an end date for a mutual right to end the negotiations. Retain the leverage to exit if the sale process loses momentum.
  • Exercise great care and discretion when sharing sensitive information about your business by not giving too much or too little information at each stage, including the due diligence period.

You may only get one opportunity to maximise on the capital gain created in your business. The best outcomes can take years in the making, and it does take early professional advice to prepare for a sale.

Be sure to invest the time and money to prepare your business for a sale, targeting the right category of buyer with the optimum outcome. Often sellers ignore a slower sale process over a longer time frame, such as a 3 year period, when they can give the buyers’ financier greater comfort by a post-sale consultancy or retain a shareholding. This ensures a smoother transition that protects the buyer and the seller from loss of key employees, loss of customers and breakdown of the systems created.

If both parties have greater assurance regarding a continuation of profit then there is a greater likelihood of a better class of buyer that is better financed for a higher sale price.

Ask us now how we can assist you to get your business “sale fit” and ready for your retirement. Get your free checklist by emailing us of info@perspectivelaw.com

Sentimental the law is not

Happy New Year everyone, we hope that you and your family had an enjoyable break. 2020 was an incredible year which turned our lives upside down and altered our expectations forever. The threat of Covid 19 caused enormous stress to families, particularly to the elderly and the vulnerable in our society. We have all had to quickly adapt and utilize technology to our advantage and ensure that our economy continues to run albeit in a reduced capacity.

Our integral focus is on the outcomes that clients seek when giving legal advice and drafting legal documents. However, in the process of providing our assistance, it can be hard to explain that the law is a very tough task master, leaving little to no scope for moral or sentimental application. This is incredibly relevant to the preparation of a comprehensive estate plan. Assumption is the death of certainty therefore it is extremely important to cross check the facts with a fine-tooth comb when drafting an estate plan.

This includes:

  • Reading the Superannuation Fund Trust Deed to see what binding nominations can be made
  • Checking the balance sheets for companies and trusts in order to see what loans are repayable by or to the estate
  • Checking all the circumstances of potential beneficiaries who may be entitled to make a claim on your estate
  • Preparing all necessary evidence to ensure your Will is enforceable i.e is there a medical certificate to prove capacity

In addition to our research, we like to read Probate cases from earlier times as it provides a great deal of context as to the way courts interpret facts, apply the law and make judgements. It is important to note that judges will not apply a test of what is “fair” or “moral” as they will and must apply the law.

The case of Re Farrar’s Application Probate Division Court of Appeal 1966 is a compelling example. A wife was provided a house for herself and her five children by the husband, a surveyor, subject to a mortgage to a building society. The husband left and took up residence with his mistress elsewhere. He continued to pay the mortgage until he became very sick and made a new Will. He appointed his friend and surveyor as Executor leaving his entire estate to his mistress, and nothing for the wife and his children. When he died the Executor refused to pay the mortgage and the building society proceeded to give notice to take possession and sell the home. The wife gave Notice of a Claim for herself and the five children on the estate and sought an order from the court that the Executor must continue to pay the mortgage so that the house could be preserved, so they can continue to occupy it as their home. The registrar initially made an order that the Executor must continue to pay the mortgage. The court at first instance agreed and ordered the husband pays the costs. On appeal the Court found otherwise and concluded that the Executor was not obliged to continue to pay the mortgage, the house could be sold as a normal asset and that the wife could and should make an application for further provision from the estate in the normal course.

Justice Russell remarked: “I hope I do not appear unsympathetic towards to former wife and the children in their present situation, but I take this to be a court of law and not a court of sentiment and in accordance with law her case must fail.”

You can see that the application of the law will always be without consideration of fairness or moral high ground. It is a strict and unemotional application of the law. To make assumptions about the strength of a case, the goodwill or another party, the moral fibre of a relative or best intentions, is to ignore the harsh reality of the approach by the courts.

Our recommendation is to plan carefully, invest time and money in advance and make sure you prepare all necessary evidence to put your Will in the best position you can. Call us now to talk about how you can achieve this peace of mind regarding your estate plan and the commercial outcomes you want. Cheers

2020 Testamentary Trusts “Foreign”

2020 Testamentary Trusts and a year that was unprecedented

As we all contemplate the year that was 2020 and our thoughts turn to Christmas with our family members, it is a good time to reflect on where we are at in terms of our succession plans.

There have been many changes this year brought on by the Covid 19 pandemic which has caused us to look at life from a different perspective. Life is not always about getting the next payment, the next job or the faster car. It has enabled us to reflect on what we find most important, what we truly cherish and how we want to live the life we have. There has never been a better time to contemplate what we will leave behind for those loved ones and how we prepare for an easier transition.

This year there has been a number of key changes in succession law. The most striking example has been the Duties Act NSW, which deems discretionary trusts, including testamentary trusts, to be a “foreign” trust, by having the mere power to distribute to a person that is defined as foreign.

Effective from 24 June 2020, all trusts will be subject to a higher surcharge for land tax and duties including penalties and interest, for failing to notify the commissioner of revenue. This covers any purchases of residential land in NSW and land tax to foreign persons who own land in NSW. The trust may be liable for the surcharge and higher duty if “any one of the potential beneficiaries” is a foreign person. Each beneficiary is deemed to have the maximum percentage interest in the income of the income or  property over which the trustee may exercise a discretion to distribute. [see 104JA Duties Act 1997 and section 5D Land Tax Act 1956]

The ruling issued 1 July 2020 changed the way a trust is viewed and defined in that potential beneficiaries are not limited to those individuals named in the trust deed. It also extends to the members of any class of people to whom distributions can be potentially made under the discretion powers of the trustee.

A person is a “potential beneficiary” of  a trust if the exercise or failure to exercise a discretion under the terms of a trust deed could result in any property of the trust being distributed to or applied for the benefit of a person.

To avoid the trust being deemed to be a “foreign trust” the trust deed must meet two conditions:

  1. No potential beneficiary of the trust is a foreign person (“no foreign person”) and;
  2. The terms of the trust must not be capable of amendment in a manner that result in a foreign person being a potential beneficiary (“no amendment”)

The transition period ends on 31 December 2020, so if you are the trustee of a trust that is capable of distributing to a foreign person (including foreign company or trust) then these provisions will apply.

The simple response is to prepare and sign a Deed of Variation of the trust to confirm that the powers of the trustee exclude distribution to a foreign person as defined and that such variation is irrevocable.

Consider the examples they state. Mr & Mrs Jones both Australian citizens are primary beneficiaries of the Jones Family Trust. Other beneficiaries include their two children Mark and Peter who are under the age of 10. The trust has potential beneficiaries who include future spouses and children of Mark and Peter and no other potential beneficiaries.

The trust has no existing foreign beneficiaries, but future spouses and children of Mark and Peter could be foreign persons. The trustee is taken to be a foreign person. To be exempt from stamp duty surcharges on purchase and land tax each year on owning property in NSW, the trust must be amended to exclude any foreign beneficiaries and the amendment must be irrevocable.

Many of our clients buy residential property in their trusts in NSW whether it is a standard discretionary trust or one which was established by a Will (a testamentary trust).

Note this situation also applies to property owned by trusts in Victoria and is under consideration for changes in Queensland.

We recommend having someone read the trust carefully, identify any land owned or being purchased by the trust and to make a Deed of Variation as soon as possible before the transition period ends.

Given the strength of property investment at the present time it is a very important review to undertake and should be part of the trustees practical steps in administration of the trust.

Call us now if you need a review and Deed of Variation to be completed.