Trusts – Vesting, Ruling from the Grave, Splitting, Cloning & More!

The trust issues confronting practitioners in 2018 are substantially different from those of the past.

A number of trusts organised from the 1960s to the 1980s are now reaching their vesting dates, and many trust controllers are concerned about ensuring orderly succession of the trust assets.

At the upcoming WA Tax Intensive in Perth, Michael Butler, CTA, takes a look at a wide-range of issues facing advisers in his session ‘Trusts – Vesting, Ruling from the Grave, Splitting, Cloning, Umbrella & Master Trusts & More!’

Michael Butler, CTA

We speak to him about the session in this post.

“In 2018, an increasing number of trusts will soon be reaching their vesting dates; indeed some have already vested. Even when no vesting issue arises, it is often the case that a husband and wife, who organized a trust 25 or 30 years ago, now wish to transfer control of the trust’s assets to one or more of their children,” Michael said.

Michael’s session will look at the reason why trusts can’t simply last forever – the “rule against perpetuities”, what happens when a trust vests, and what happens if the vesting date has already been reached, discussing the approach the ATO is taking in such instances.

“I presented on this topic at the Institute’s Noosa Tax Intensive last year, where I noted that the issues regarding trusts were, in many respects, were very similar to those being considered ten, twenty, even twenty-five years ago. For example, in 1992 practitioners and their clients were dealing with the difference between the meanings of ‘net income’ and ‘income’. That distinction has continued to cause problems for a further quarter of a century.”

“At the same time, certain issues currently being considered by trust advisers are very different from those of the past. In particular, we now face an increasing number of trusts soon reaching, or already having reached, their vesting dates, or instances where there is a desire to transfer control of the trust’s assets to the next generation. That has resulted in practitioners and clients reviewing the legal and tax consequences of the termination of trust estates, of extending trusts—possibly indefinitely by moving them to South Australia; and investigating the consequences of cloning, splitting, dividing and resettling trust assets.”

The session will ask, given that the “rule against perpetuities” has been abolished in South Australia, can a testator or settlor “rule from the grave” using a SA perpetual trust? Michael will also discuss whether a trustee can change the proper law of a trust to South Australia – and if so, how?

He will also look at the current position relating to splitting and cloning trusts, in light of TD 2018/D3, and the consequences for estate and succession planning.

Michael told us “I am hoping that after my session, attendees will consider themselves “up to date” with recent developments in trust vesting, cloning and splitting. Whether a client is looking to terminate a trust estate, extend it, possibly by moving them to South Australia, or clone, split, divide, or resettle trust assets, I hope that as a result of attending my session, delegates will be able to confidently assist their clients and businesses in doing so.”

Following his session, Michael will facilitate a workshop, using a case-study approach to draw on the issues presented in his session in relation to vesting dates, splitting and cloning, in an estate and succession planning context.

Michael Butler, CTA, is the Partner in charge of the Finlaysons Tax & Revenue Group in Adelaide.

He advises domestic and foreign clients on federal, international and state tax matters, and has a special interest in mining and property taxation, corporate restructurings, cross-border investment, trusts, and estate & succession planning. Michael is a past Chair of The Tax Institute’s SA State Council, a regular contributor to Institute events.

“I have been a member of the Institute since I was an articled law clerk in 1983 - but I am a long way from being The Tax Institute's oldest member! Outside of tax, I have a wife and three grown-up daughters (and a black Labrador), none of whom unfortunately has any interest in tax whatsoever. It sounds a bit corny, but I really enjoy walks with my wife and our (very demanding!) black lab. I am also learning Mandarin in an attempt to stop the calcification of my brain.”

The 2018 WA Tax Intensive takes place 8-9 November at the Perth Convention & Exhibition Centre.

Providing attendees with the knowledge and skills to advise their clients on the issues they face a daily basis, the program features a masterclass on valuations in the tax arena, from Nicki Ivory (Deloitte), and a deep dive into private company capital management, from David Marschke, CTA (dbm horizons).

The Intensive wraps up with a pair of masterclasses, one from Laura Hanrahan (HopgoodGanim Lawyers) looking at the succession of a super fund, the other from Jonathan Woodger, ATI, (PwC) on Part IVA.

Find out more about the program on our website.


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