Estate Planning Gone Wrong

Terry_w

Terry_w

Here is an interesting article about the estate of the late Michael Hutchinson of INXS.

http://www.smh.com.au/lifestyle/cel...-michael-hutchence-report-20140729-zxzkn.html

"Worth" around $30million he died with assets of just over $1000. The rest of the assets were in complex trust structures, probably across several tax havens. After Michael died the control of most these trusts fell outside the family. His daughter inherited nothing it seems.

This situation is no doubt different to the average Aussie 'battler's' trust - which would unlikely to have tax haven connections but the same principals apply:

Trust assets are not your assets to give and cannot be left via your will!!!!

So where will the control of the family trust fall when you die?
 
ps. I am going to tradmark the name "Aussie Battler Trust" so don't you go using it (without paying royalties to my Cayman islands trust which has a stranger as my nominee trustee).
 
Terry what happens with a simple fixed unit trust with personal trustee with all units held by same person and same person as trustee, do units form part of the estate?
 
I don't get it - did he have money or not?

But not long before his death he told his mother, "there's virtually no money left", while they were on a holiday in Vienna.

So did he lose all his money and nobody was aware of it?

Or did he still have lots of assets, but due to the way in which his assets were structured, nobody could access it? In which case, where does the money go?
 
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DaveM said:
Terry what happens with a simple fixed unit trust with personal trustee with all units held by same person and same person as trustee, do units form part of the estate?
Click to expand...

In such a case there would be no trust as a person cannot hold assets for themselves in trust as they would have both beneficial and legal ownership.

If the trust was set up properly with units owned by an individual them these units are property which can be passed on via a will or the intestate laws
 
neK said:
So what happened to the assets?
Who's got control of them now?
Click to expand...

Probably taken over by nominees. Ie the person who appeared to be the person controlling the trust would now be the person actually in control. Any secrets gone to the grave.

There have been a few court cases where the people behind the trustee's still have not shown who they actually are.
 
Terry_w said:
Probably taken over by nominees. Ie the person who appeared to be the person controlling the trust would now be the person actually in control. Any secrets gone to the grave.

There have been a few court cases where the people behind the trustee's still have not shown who they actually are.
Click to expand...

And these people haven't been challenged? Or it was that well hidden that no one even knows where they are ?

Sure the solicitors / accountants that set this up are aware of where his assets are.
 
Being adopted by Bob Geldof, I'm sure she'll be fine, as will her children.

How do we know that this isn't exactly what Michael wanted? SMH journalists aren't exactly known for their depth in investigative reporting. If he had it all tied up in trusts in tax havens, who's to say that he didn't have his finances extremely well organised and the money is in the hands of the right people, or it's simply waiting for Tiger Lily to be old enough to collect it?

Control of my trusts and other assets are very explicitly taken care of in my will and it's all going exactly where I want it to. There's some direction as to what they should best do with it after I'm gone, but ultimately it's for them to screw up.
 
neK said:
And these people haven't been challenged? Or it was that well hidden that no one even knows where they are ?

Sure the solicitors / accountants that set this up are aware of where his assets are.
Click to expand...

The trustees are probably companies. Some tax haven countries allow nominee directors - with the real director hidden. They also allow bearer shares - whoever has the certificate is the shareholder despite registration. Good secrecy laws means the ultimate controller is hidden.

It is also likely the trustee is acting within their lawful powers and it may be hard or impossible to challenge.
 
Terry_w said:
In such a case there would be no trust as a person cannot hold assets for themselves in trust as they would have both beneficial and legal ownership.

If the trust was set up properly with units owned by an individual them these units are property which can be passed on via a will or the intestate laws
Click to expand...

Trust merger. There is NO TRUST. A trust ends when the trustee of a unit trust and the sole beneficiary are the same person / company. The assets are now owned by the unitholder. A CGT event. A stamp duty trigger too (but OSR cant levy duty !!)This is an advanced tax planning strategy that is poorly understood by probably 99% of accountants. Two issues:
- Accidental merger (usually through stupidity or poor advice). Rule : NEVER have human trustees in a trust that owns property. Rule : Use an accountant who can explain what "merger" is. If they don't know. Don't use them.
- Deliberate merger : A legit "scheme". Its used by countless smart property savvy investors.
 
neK said:
And these people haven't been challenged? Or it was that well hidden that no one even knows where they are ?

Sure the solicitors / accountants that set this up are aware of where his assets are.
Click to expand...

The accountant (Diamond) who was made the trust appointer knew what he was doing. To this day when I discuss trusts I use the expression "doing a Diamond" to describe the hijack of a trust.

Courts wont challenge the appointors actions.
 
Paul@PFI said:
Trust merger. There is NO TRUST. A trust ends when the trustee of a unit trust and the sole beneficiary are the same person / company. The assets are now owned by the unitholder. A CGT event. A stamp duty trigger too (but OSR cant levy duty !!)This is an advanced tax planning strategy that is poorly understood by probably 99% of accountants. Two issues:
- Accidental merger (usually through stupidity or poor advice). Rule : NEVER have human trustees in a trust that owns property. Rule : Use an accountant who can explain what "merger" is. If they don't know. Don't use them.
- Deliberate merger : A legit "scheme". Its used by countless smart property savvy investors.
Click to expand...

Yes, and I hope Dave was just using this as an example. If the property was actually purchassed by such a trust it wouldn't exist. To fix it would mean stamp duty and CGT pllus weakening of asset protection.

I have seen another trust set up by a well know advisor with A and B as trustees and B as unit holder. A and B are spouses and if A died without a will B would inherit and the trust would cease to exist.
 
Terry_w said:
Yes, and I hope Dave was just using this as an example. If the property was actually purchassed by such a trust it wouldn't exist. To fix it would mean stamp duty and CGT pllus weakening of asset protection.

I have seen another trust set up by a well know advisor with A and B as trustees and B as unit holder. A and B are spouses and if A died without a will B would inherit and the trust would cease to exist.
Click to expand...

Stamp duty - Maybe not. The practical issue is that if the Trustee is Dave Smith then if it merges the asset will be owned by...Dave Smith. OSR cant impose duty unless there is a change of owner. Sure its a change between the legal owner and a beneficial owner but the new legal owner is the same as the former legal owner. So no duty. I shouldn't be saying so but there is a scheme you can run to change Trustees and force merger to transfer ownership without duty sometimes.

My Rule 1 : No human trustees. Had a requestto setup a SMSF a few weeks back and I refused because they wanted human trustees. I don't do it for any trust and haven't for a long time. Its like milking snakes. One day you will get bitten. If a company is too costly then what other corners will be cut ?

Not unusual to see some accountants create a Unit Trust and a SMSF with same Trustee Co (perhaps its even a trading entity)...Lease between property owner is basically a lease between ABC P/L to ABC P/L. You cant contract with yourself so a SIS compliance issue.
 
I was thinking more along the loans of Dave as trustee entering into a contract and then finding out there is no trust and trying to fix this by changing the trustee.

I don't think there would be a stamp duty issue initially as the trust would never have existed.
 
so, if you were the sole unit holder in a unit trust that had a corporate trustee, if the trustee was changed to yourself, then the trust ceases and you own the property in your own name?

very interesting
 
Ausprop said:
so, if you were the sole unit holder in a unit trust that had a corporate trustee, if the trustee was changed to yourself, then the trust ceases and you own the property in your own name?

very interesting
Click to expand...

The definition of a trust is "A holding property for B" where A and B are the same there is no trust relationship. A would just hold legal and beneficial ownership.
 
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