Author: admin

A recent Supreme Court decision considered the costs of a dispute between adjoining owners as to the conditions under which the property A owner could enter into the property B owner’s land of the other to carry out work to property A. The entitlement to do so is triggered by section 180 of the Queensland Property Law Act, and is called the “statutory right of user”. It might be for a permanent easement going through property B to benefit property A (say for access or services), or for a temporary right to enter property B, in this case to install scaffolding along the common boundary. Requests of this nature are concerning for the owner of property B, there are liability issues to consider, and also any permanent impairment on the value of property B or the ability to use it. Section 180 has preconditions to the making of orders which are quite rigorous, and a wide discretion for the kinds of orders that can be made, including for compensation. The decision can be found here and provides a good summary of the effect of the section and costs considerations https://www.sclqld.org.au/caselaw/QSC/2022/160 The section itself is here: http://classic.austlii.edu.au/au/legis/qld/consol_act/pla1974179/s180.html

In most discretionary or family trusts, there are three main roles.  The first is of the trustee, who holds the property and carries on the business for the benefit of the trust.  The second is the identity of the primary beneficiaries.  Usually, the beneficiaries will be in some way related or associated with the primary beneficiaries, and it is usually to the primary beneficiaries that the income of the trust will be allocated if it is not distributed by the end of the financial year, and it is usually to the primary beneficiaries that the capital of the trust will be returned when the trust is wound up.  The third role is that of “Appointor”, sometimes called “Principal” or “Nominator”.  The power of the Appointor is one which allows them to dismiss the trustee and appoint a new trustee in their place, or to fill the role of trustee if it is otherwise vacated (as an example, by the death of the Trustee), without having to make an application to court. As a result, the position of Appointor is a very important one, as in an extreme case the Appointor can dismiss a Trustee who they are for some reason unhappy with and appoint themselves or a more compliant person or company to be trustee in their place.  It is therefore critical that if the Appointor ceases to have that role, the trust deed provides for a suitable replacement process. Many trust deeds provide for the power of appointment to be vacated in the event that the Appointor is bankrupted or dies.  The power of appointment is not a property right and will not normally go to a trustee in bankruptcy if the Appointor is bankrupted.  Despite that, some commonly used trust deeds provide that on a person becoming bankrupt, the power of appointment vests in their “legal personal representative”.  Unless otherwise defined in the trust deed itself, the expression “legal personal representative” is one that is only relevant to superannuation law (and in that context means the executor of the persons last Will).  As discretionary trusts are not governed by superannuation legislation, it is arguable that the “legal personal representative” of the Appointor is actually their trustee in bankruptcy, literally the last person that the parties to the trust would want to hold the power of appointment in respect of the trust.  It is accordingly important to check the power of appointment in trust deeds to ensure that not only does it reflect what you want, but also the succession (replacement) provisions reflect a sensible outcome.  This should be done frequently, and also as part of estate planning processes. For enquiries regarding trusts and estate planning, please contact Peter Muller at peterm@qbmlaw.com.au or Jessica Murray jessicam@qbmlaw.com.au

Many will be familiar with binding death benefit nominations for their superannuation funds. These nominations direct the trustee of the fund to pay the benefit upon a member’s death in a particular way (generally to “dependants” in particular proportions, or to the legal personal representative (executor of the will or trustee of the estate) of the member. In the absence of the binding death nominations, it is for the trustee to decide which dependants are to receive the benefit, and in what order. Under the superannuation legislation, there are particular requirements for valid nominations, eg, they require two independent witnesses, and unless authorised by the superannuation trust deed to be non-lapsing, they will lapse after 3 years. The importance of this is that if a nomination is not done correctly, it does not bind the trustee who will then usually consider competing claims of dependents, whether or not that represents the wishes of the member. So first it is critical when estate planning to get the the nominations right, it is also critical to ensure that the they conform with the trust deed for the fund (you’d be surprised at how often they do not, and often even the form attached to the trust deed does not conform to the wording of the trust deed). With superannuation often forming a large part of the wealth distributed on a person’s death, the nominations are often challenged. As an example, let’s say that Joe dies. He has a child to his first marriage, now 25 years old, and has left a $1M superannuation benefit with a binding nomination to that child. His second wife and the child don’t get along. Under his will she gets his estate which is his home worth $1M, and $100K in the bank. If the nomination is valid, that is how the estate will be distributed. If it isn’t, then his new wife can press for part or all of the superannuation death benefit. If it was paid into his estate, then she would receive all of it, and the child would miss out entirely. A number of challenges to binding nominations are whether they comply with particular provisions in the superannuation regulations, reg 6.17A which sets out formal requirements. The High Court has recently confirmed that it does not apply to self managed superannuation funds. This means that for industry funds, it is critical that the nominations comply with the trust deed and regulation 6.17A. For a SMSF, the nomination does not have to comply with reg 6.17A save to the extent that the trust deed requires, but it has to comply with the fund deed. For advice in relation to wills and estates, contact Jessica Murray (jessicam@qbmlaw.com.au) or Peter Muller (peterm@qbmlaw.com.au).

The Supreme Court of Queensland has twice recently considered the implications of the “gift and loan back strategy” which is a common device whereby a person makes a gift of a substantial amount of money to a trust, which gift is made through a loan from the trust, and secured against the assets of the gift maker.  The transaction sets out to achieve the reduction of the equity that the gift maker has in their own assets, with the corresponding increase in the equity owned by the trustee of the trust, for the trust.  Generally, this device is used in asset protection strategies, but also it has been used to reduce the equity of a person in their own assets as part of estate planning, with a view to reducing the overall size of an estate capable of being fought over in family provision claims which are made under the Succession Act – for example, when the Will maker wants to give all of their assets to one child and not another. The underlying intention is to reduce the amount of the estate available for claims to be made. Such a strategy was considered in the matter of re: Permewan, first in May 2021 and second in June 2022.  The first decision related to an application to remove the executor so that an independent person could be appointed to investigate whether the gift and loan back strategy was a sham and should be set aside as not being binding on the estate (which would have the result that the estate would be larger, and then the disappointed potential beneficiaries would potentially share in the larger estate when making claims for further provision).  Orders were made in that application for the removal of the executor and the appointment of an independent person as administrator to the estate to allow for the investigation of the dealings. Subsequently, there was litigation over the validity of the documents comprising the gift and loan back strategy.  Ultimately, the parties agreed that due to a deficiency in the way in which the transaction was carried out, it should be set aside.  That said, the question of the merits of the strategy itself was considered in relation to an argument over costs and His Honour Cooper J gave a detailed judgment delivered on 10 June 2022 considering the merits of the transaction in the context of whether or not costs should be ordered.  His Honour found that – As a consequence of these matters, there is potential that attempts to manage family provision claims by reducing the size of the estate through the use of a gift and loan back strategy will be attacked and potentially set aside, with significant cost risks to any party seeking to enforce it.  For advice regarding estate planning, please contact Peter Muller at peterm@qbmlaw.com.au or Jessica Murray jessicam@qbmlaw.com.au