Testamentary Trusts are created by the Will upon death. The wording for the trust is contained in the Will and is dormant, only coming into existence upon the Will maker’s passing.
Discretionary
A Trust under which the Trustee has discretion to decide how the wealth in the Trust is distributed.
Protective
Controls the disbursement of income (and/or capital) generated from the Trust, and are suitable where beneficiaries cannot control their own finances, including where they are incapacitated or vulnerable.
Minors
Provides for beneficiaries under 18 years old, ensuring their income and capital is protected and managed to their advantage.
As long as 80 years or may be terminated at any time at the direction of the Trustees (if discretionary).
The trustees hold assets on behalf of beneficiaries, and can have discretion as to which of nominated beneficiaries receive income and capital of the Trust.
Because of their discretionary nature, as long as your estate remains in Trust, your beneficiaries can be protected from matrimonial or de facto splits, from creditors in the case of bankruptcy. In the case of incapacitated beneficiaries, or those vulnerable to gambling or drug or alcohol related illnesses, steady funding can be provided for medical and accommodation needs.
The Trustees have broad powers to invest funds while under their control. Allowing the Trustee and beneficiaries a great deal of choice determining who and how will benefit from the Estate.
Lastly, they can be tax effective. This, along with them being a method to in some way “protect beneficiaries from themselves” have driven their popularity.
For more information, contact:
e: lawyers@mcpgroup.com.au
p: (03) 9620 2001
w: www.mcplegal.com.au
The information contained within this post does not constitute professional legal advice
Innovation in property transfer. Not something we associate with property, compared to other assets classes such as shares.
Though its emerging quickly, with electronic settlements.
This allows quicker access to your property, or if you are a seller, receive cleared funds from the sale sooner rather than later. There has been a few hurdles and false starts that have caused settlement delays in some cases, but innovation is improving.
For those in property, have a look at www.pexa.com.au. With nearly $100 Billion of settlements done so far it is an example of where our industry is evolving.
For more information, contact:
e: lawyers@mcpgroup.com.au
p: (03) 9620 2001
w: www.mcplegal.com.au
The information contained within this post does not constitute professional legal advice
Family Law matters are emotional, difficult times. Issues may include divorce and separation, agreements around parenting, financial agreements and settlements.
It is important to access family lawyer support you feel comfortable with. This may involve meeting with several lawyers before deciding who you will work with.
It can be best to trust your instincts on this point, as it is critical that you feel comfortable to communicate freely throughout the process.
In light of these challenges, we often work in partnership with Simple Separation. They specialise in amicable and efficient resolutions, providing structured end-to-end separation & divorce services for a fixed fee. Simple Separation’s model offers an excellent alternative to the traditional system, particularly suited for parties aiming to avoid expensive conflict and preferring a cost-effective and user-friendly approach.
For more information, contact:
e: lawyers@mcpgroup.com.au
p: (03) 9620 2001
w: www.mcplegal.com.au
The information contained within this post does not constitute professional legal advice
So you can direct how your affairs are to be managed.
This includes distribution of all your assets, irrespective of your net worth. A Will is the only legal way you can tell others how you want your assets to be distributed upon your passing.
Known as Intestacy, your affairs will be dealt via a formula contained in the relevant States Administration and Probate Act. These rules apply to everyone, and do not take account of your individual circumstances or what you may want.
For more information, contact:
e: lawyers@mcpgroup.com.au
p: (03) 9620 2001
w: www.mcplegal.com.au
The information contained within this post does not constitute professional legal advice
Probate is the process of proving and registering in the Supreme Court, the last Will of a deceased person.
The Will needs to be ‘proven’ as being the last valid Will of the deceased, before the distribution of any property. This process protects the executor, beneficiaries and claimants.
This is the formal process whereby those named in a Will as Executors and Trustees apply for the position of and are legally accepted as the rightful person/s to “stand in the shoes” of the Will maker after death.
That is, the person/s are formally appointed to manage the affairs and Estate of the deceased, in accordance with the provisions of the Will. Essentially, proving the Will gives legal recognition of the rights of all parties named in the Will and allows executors to act with legal authority in exercising those rights.
The Supreme Court in its probate jurisdiction has the power to make orders in relation to the validity of the Will, the appointment of an Executor and the administration of a deceased Estate.
Where an Executor is applying for a Grant of Probate, there are a number of formal procedures to be followed. Normally the larger the estate the more complex the Executor’s task is and the more advice is required. This process starts with advertising the intention to apply for a grant of probate through to filing documents in court.
Probate may not be required for very small estates or where property is held jointly.
For more information, contact:
e: lawyers@mcpgroup.com.au
p: (03) 9620 2001
w: www.mcplegal.com.au
The information contained within this post does not constitute professional legal advice
The structure of business ownership is important.
Your options include a number of structures including sole trader, partnership, company or trust structure.
You own the business. Income and Expenses are included in your personal tax position. The business has no separate legal entity from the owner.
Advantages – This structure is simple and inexpensive to establish and administer, and can easily be altered. There are no registration procedures other than GST/Business Name. There are fewer regulations and nominal costs.
Disadvantages – A sole trader has no separate entity from the business which unlimited liability and personal responsible for the business liabilities. A Business Name does not create a separate legal entity, and a sole proprietor must receive all capital and revenue of profits. A sole trader cannot share the burden of management and costs.
Partnerships are groups of two or more legal persons who associate in a mutual business enterprise. The objective is to distribute the profits amongst themselves.
The partners can be individuals, companies or trusts. They are governed by either a Partnership Agreement or a Partnership Act which implies various rights and liabilities into the Agreement.
Advantages – Unlike companies a partnership has no formalities, registration or reporting obligations other than taxation returns. The partners may agree to withdraw their capital at any stage.
Disadvantages – Partners have unlimited liability which means that their personal assets are liable if the Partnership’s assets are insufficient. If one partner will not or cannot pay their share of a partnership liability, then the other partners must do so personally, jointly and severally.
A partnership exposes personal assets to any partnership liabilities. Partners pay personal tax and can be sued personally for anything done in the name of the Partnership. Generally, there is limited flexibility in terms of distribution of profits, because profits are distributed in accordance with the terms of the Partnership Agreement.
The Australian Securities and Investments Commission (“ASIC”) is the federal government body which administers Company Law.
Advantages – A Company is a separate legal entity and once created is an entity in its own right.
It has a legal personality to do what a natural person can do. Therefore, a Company can sue and be sued. A Company officer is generally not liable for trade debts unless he personally guarantees the debt. A shareholder’s liability is limited to the paid value of their share and a creditor cannot gain access to the assets of the shareholders. Transferring of ownership is simply transferring shares in the Company to someone else.
Disadvantages – Companies are highly regulated through the Corporations Law (Cth); Trade Practices Act (Cth) and other Acts. Greater regulation and penalties result in more time in ensuring accuracy and accountability in registers, accounts and annual returns. A Company is a more expensive start up and requires an annual fee payable to ASIC. This does not include accounting, corporate secretarial or legal fees. There is always a possibility of personal/director guarantees to banks, landlords, suppliers or other third parties. Companies have less privacy; the ASIC, members and the public can search company records. Onerous Directors Duties apply.
For all structures, get advice. Taxation and asset protection issues must be considered at the start and you should obtain advice from professional advisers including lawyers and accountants.
A Trust is composed of three (3) parties, the Settlor who creates the trust by drawing up a deed and entrusts property or money to a Trustee, the Trustee who then manages the property or money, and thirdly the Beneficiaries, who receive the benefit of the capital and income of the Trust.
The Trustee and the Settlor are in a contractual relationship. The Trustee is in a fiduciary relationship with the Beneficiaries.
Discretionary (Family) Trusts
Generally established for the benefit of a family and its members. It allows the Trustee discretion as to the distribution of both income and capital, to Beneficiaries who can be both specified in the Trust Deed and general.
Advantages – The Trustee has decision making power which is at their discretion. This is in contrast to Unit Trusts where the Trustee has less real decision-making power. Flexible, because profits are distributed in accordance with the Trustee’s discretion.
Disadvantages – A Trust must be run according to the rules of the Trust Deed, though the common law of Trusts will imply many rules.
A Trust has no separate legal entity from the Trustee; the Trustee is liable for all the liabilities of the Trust. Because the Trustee is personally liable, a Trustee may be a Company with Limited Liability so that the personal assets of the Manager are protected. Onerous Trustee Duties apply.
Unit Trusts
A Unit Trust is usually a trading trust where capital is divided into Units, each Unit Holder owning Units according to their contribution, like shares. A Trustee invests the money into a business venture and the profits are then paid back to the Unit Holders who are the beneficiaries of the Unit Trust, like shareholders receiving dividends. The Unit Trust is run according to a Trust Deed. The investors are initial ‘settlors’ who contribute capital to a fund; the Trustee is usually a Company which appoints a manager to invest the funds.
Advantages – The Trustee has Limited Liability. Unit Holders can pool their small amounts of capital to achieve a viable investment. Unit Trusts are means of spreading the risks of an investment.
A Unit Holder owns Units which are usually readily transferable and can be sold, like shares. Unit Holders directly own the property of the Trust. Unit Holders can wind up the Trust.
Disadvantages – Unit Trusts have some disadvantage in that they are only as good as the way they are managed. A Unit Trust may have a Deed which allows for shortfalls to be paid by the Unit Holders. Unit Trusts are limited in flexibility because profits are distributed in accordance with the fixed percentage outlined in the Trust Deed (although this is now avoidable with ‘Hybrid’ Unit Trusts, which allow income to be distributed at the discretion of the Trustee, like discretionary trusts above).
Buying or operating a business is exciting though it involves risk. The structure of ownership behind a business and cost of establishing it are important. Whether as a buyer or seller, it is strongly recommended business advisers including accountants and lawyers are involved in the process, to ensure rights and obligations are respectively protected and honoured.
For more information, contact:
e: lawyers@mcpgroup.com.au
p: (03) 9620 2001
w: www.mcplegal.com.au
The information contained within this post does not constitute professional legal advice
