The Role of Trusts in the Estate Plan - 5 program on-demand webinar series

Program 1: Spanner in The Works: Effective Trust Distributions After Owie’s Case

The Victorian Court of Appeal decision of Owie [2022] VSCA 142 has certainly thrown a spanner in the works in the world of discretionary trusts by challenging the idea that trustees of discretionary trusts have absolute discretion when it comes to making distributions for the benefit of beneficiaries. Following this decision, there has much been debate and questions asked about the impact of this decision. This session shall explore the differing views held by the profession and seek to provide guidance in relation to questions such as:

• How do trustees now properly exercise discretion where there are multiple beneficiaries?
• Have the obligations of trustees been expanded? To what extent do trustees need to be informed as to the circumstances of beneficiaries to be able to properly consider them and how should this be documented?
• In what circumstances can beneficiaries now challenge the trustee’s exercise of discretion?
• What rights do beneficiaries now have to information/documents and how should this be managed)
• When might a Court seek to interfere with trustee decisions? In what circumstances will the court step in and what remedies will it grant if it does interfere?
• Can the problem be overcome by narrowing the class of beneficiaries? Or does that itself create problems?
• What advice should now be provided to clients post-Owie?

Program 2: Family Trusts for the Next Generation: Who’s in Control?

How family trusts are controlled, and how control might be passed from one generation to the next, are integral questions that need to be navigated by estate planners. This session will take a deep dive into the options available to achieve a change of control in a family trust and explore related issues including:

• Understanding the formal legal mechanisms to manage and shift control of family trusts
• Unintentional resettlements, protecting ‘at risk’ or vulnerable family members and the role of guardians
• Tips for drafting and reviewing trust deeds and powers of appointment (including lessons from Mercanti and managing fiduciary obligations flowing from appointment)
• How to manage the potential tax consequences that can arise
• FIRB considerations for foreign residents
• Practical case studies

Program 3: Protecting Vulnerable Beneficiaries Through Trusts

While a well-considered estate plan is always important, the structure of the plan is more important when there are vulnerable family members. Whether that be a person with a disability, someone struggling with addiction, or in a risky profession or otherwise financially vulnerable, there is often a desire of the testator to provide for their financial future while protecting them from undesirable or harmful behaviour. This is easy said than done in most cases. This session will examine:

• The different types of vulnerable beneficiaries and the pros/cons of the options available to provide for each (including protective and special disability trusts)
• Practical issues which need to be addressed as part of planning:
  • ability to move assets exempt of duty and CGT
  • preserving entitlements to social security benefits
  • identifying and quantifying future financial needs
• Practical tips to limit the risk of conflict including communication strategies, who to involve in the planning and trust structure and when
• The extent to which a testator can validly exert control over beneficiary behaviour and/or use of funds after death in light of recent cases including Mead & Lemon 
• Practical case studies

Program 4: Dealing with Trusts and Asset Revaluation Reserves: Where To From Here?

The 2016 High Court decision of Fischer & Ors v Nemeske was significant as it held (but only in a 3-2 majority decision) that a trustee had validly exercised a power to advance and apply trust capital/ income, by creating a debt enforceable at law that reflected the increase in value of the trust asset when the “advance” was made. At the time of this decision, a number of questions arose including how best to confer entitlements out of asset revaluation reserves and how to manage trust assets noting the right of beneficiaries to sue for their entitlement in law or equity. Fast forward to 2023, and it is questionable whether the High Court (as constituted now) would arrive at the same decision and whether Fischer & Nemeske remains good law today. This session will take a deep dive into these issues and explore from a trust management perspective:

• How to create the asset revaluation reserve under a trust deed
• Tips for ensuring distributions can be made from it and how to minimise challenge from beneficiaries
• How to confer entitlements out of asset revaluation reserve and what to consider
• For trusts established prior to Fischer, what to look out for when reviewing the trust deed, how to identify when trust variation is required and tips for managing this

Program 5: Angel of Death, Section 100A and Other UPE-Related Estate Planning Challenges

In 2022, the ATO released its finalised Tax Determination 2022/11 as part of its efforts to target and manage the proper use of unpaid presentation entitlements (UPEs) in estate planning and other family arrangements. This session will look closely at issues and strategies for dealing with UPEs and accumulated wealth in corporate beneficiaries, including:

• The role UPEs can play (and when not to use them) to achieve estate planning objectives
• Unpacking the recent AAT decision in Bendel and Commissioner of Taxation [2023] AATA 3074 and its practical implications
• Sub-trusts and PCG 2017/13
• Identifying s100A problems and how to mitigate the risks
• Specific considerations when dealing with corporate beneficiaries in the estate plan
• The angel of death strategy: advantages and dangers of shifting wealth just prior to death
• Family trust elections – when might they be a problem and how to manage the risks
• Practical case studies