The days of a couple leaving their assets to each other by way of Will and the last surviving one then leaving them equally to the children are gone.
Take the situation of Bill and Betty Brown and their son Peter and their daughter Sally. Let’s assume Bill dies first and then Betty becomes involved in another relationship, the trust Bill and Betty set up (BROWN FAMILY TRUST), keeps the family assets safe during the remainder of Betty’s life. When Betty dies the assets are resettled into Peter and Sally’s Inheritance Trusts.
The Structure detailed below gives you the protection from future partners and also protects your children from any relationship problems they may have in the future.
If Peter or Sally wants funds from their trusts they take them as a loan/mortgage and thereby protect them from becoming relationship property. Then in the event of their relationships failing the funds will be repayable to their trust.
Simple but effective. The legal opinion we have dealing with trusts and the new act states “Assets which are transferred into a trust will not be relationship property if subsequently a relationship develops unless the assets are distributed and merged into the family assets of the couple”.
Costs
The fee structure for these is quite simple. For each trust deed there is a fee of $500.00 plus GST with a maximum cost per family of $1950 plus GST.
As these trusts in the effect remain dormant until such time as they are funded, usually after the parents have passed away, there are no other costs involved and no ongoing costs until the trusts become active.
You may well ask the following questions:
WHY INHERITANCE TRUSTS WHEN THE LAW HAS ALWAYS PROVIDED FOR AN INHERITANCE TO BE SEPARATE PROPERTY?
Yes an inheritance is treated as separate property provided it is not INTERMINGLED. Just imagine this situation;
· Peter is married, owns a house jointly with his wife and has a mortgage of $100,000
· Peter inherits $100,000 from his parents
If he pays off the mortgage he has intermingled the inheritance and its status as separate property is lost.
How does he tell his wife he is going to keep the $100,000 separate so as is to protect it from any relationship property claims she may bring against him if their marriage fails?”
An Inheritance Trust set up by Peter’s parents solves the problem
WHY NOT JUST CONTRACT OUT OF THE PROVISIONS OF THE ACT WITH A PRENUPTUAL/PROPERTY SHARING AGREEMENT?
For those of you who are couples and decide to do nothing other than to enter an agreement that says that the act will not apply to your relationship I urge you to consider the following statement made by one of the Law Commissioners:
”As the law stands there is no contracting out method that can be guaranteed to survive the tinkering urge of a Family Court Judge”.
You owe it to yourself and your family to find out more about the options available to you. Please call your adviser without delay to arrange an appointment to discuss your family circumstances.
