Inheritance / will / divorce question

S

Skeetaboat

One of my parents has been separated from their spouse for a long time (about 5 years, maybe longer). They don't want to apply for divorce for various don't-want-to-upset-the-apple-cart reasons. Same parent will inherit significant assets when my grandparents die (which could be 10 years away, but hopefully longer :D).

I have always been suspicious about step-parent's motivations for the relationship and marriage. Very manipulative, etc.

I have just learned through InveSTAR's thread about purchasing a property during divorce settlement proceedings, that if something terrible should happen to my grandparents suddenly, and my parent inherited, that the inherited money would be considered as part of the divorce settlement, even though they have been seperated loooong before the inheritance took place.

Grandparents are wise to the fact that spouse is manipulative although I don't know if my parent has told them that divorce proceedings have not started yet. Parent may have told them that divorce is in fact finalised for all I know.

So.. my question is, is there anything my Grandparents can do (like a trust?) to prevent the spouse from getting their money in the event that my parent does not divorce and settle before they die?

Any input much appreciated.
 
Do a search for Testamentary Trusts. I would strongly suggest you bypass your mum/dad and speak to your grandparents about this directly
 
As Mark alluded to - easily solvable.

Do some thorough research into Testamentary Trusts. You could even go so far as to spend some money getting the facts.

It'll be the best value for time and money you've ever spent.



Most people are too scared and avoid the issue completely.


You just need to decide which camp you fall into. 'Most people'....or the rare few who get their act together. Choice is yours.
 
Yes, testamentary discretionary trust is the way to go. There are also significant tax benefits - children can receive income and be assessed at adult rates on income from a Testamentary trust = maybe $16,000 pa tax free.

you should do this quickly as the grandparents will need to do it while they have capacity.
 
Thanks all. Grandparents pretty savvy with these sorts of matters but I will discuss with them to make sure.

Funny enough, the spouse who is not so bright is probably sitting back quite pleased with position and will get a nasty suprise when they make their move to cash on and find that they have in fact been locked out.

Hopefully not an issue any time soon though, grandparents are fit and healthy and with luck should remain so for quite a while :)
 
Please speak to them, and soon.

After Mum was diagnosed with a brain tumour (seemingly healthy one day, cannot properly form a sentence the next day..... it was literally that quick), she was able to convey to us that she wanted her will changed. Her speech was very disjointed, but good enough to make it quite clear to us that this was a huge worry to her, that she had not changed her will. Her friends confirmed she had been discussing this for a few months.

The change was not major, but did mean quite a difference financially to her grandchildren down the track, and as she was very distressed by having not changed it, we got the solicitor to our house to make the change.

It cost us around $900 and we knew it was not ever going to be a "valid" will, because she was not "of sound mind", we did it to try to give her some peace before she went back into hospital.

It didn't matter whether it would have been "valid" or not, because everything was left to my dad, who has advanced alzheimers, and his will is the one that will be acted on, and obviously his will could not be changed due to his mental state, so it was purely for her peace of mind.

Don't ever assume you have time to do this type of stuff, just because you are hearty and healthy today. Tomorrow could be the day that everything changes.
 
Even a testamentary trust might not solve the problem.

The big issue here seems to be whether they're separated or not. If they're still a couple then odds are the trust could still form part of the asset pool.

Settlement is generally based on the assets owned on the separation date.

This may be the big sticking point.
 
tubs said:
Even a testamentary trust might not solve the problem.

The big issue here seems to be whether they're separated or not. If they're still a couple then odds are the trust could still form part of the asset pool.

Settlement is generally based on the assets owned on the separation date.

This may be the big sticking point.
Click to expand...

This doesn't make any sense. The assets owned by the grandparents are passed into the trust when they die. The parent would have no claim to the assets as a beneficiary and does not own the assets in any capacity whatsoever.

Testamentary trusts are set up for this very reason - to protect assets of the deceased from attack by spouses/creditors/even the beneficiaries themselves. It's why I set one up - so my assets go into the trust for my brother and niece/nephew as beneficiaries and they are protected in case my SIL decides to divorce.
 
Mark Laszczuk said:
This doesn't make any sense. The assets owned by the grandparents are passed into the trust when they die. The parent would have no claim to the assets as a beneficiary and does not own the assets in any capacity whatsoever.

Testamentary trusts are set up for this very reason - to protect assets of the deceased from attack by spouses/creditors/even the beneficiaries themselves. It's why I set one up - so my assets go into the trust for my brother and niece/nephew as beneficiaries and they are protected in case my SIL decides to divorce.
Click to expand...

Hi Mark

it could be true I am afraid. The family law court has wide powers to class trust property as being property of the marriage. This is especially so if one of the parties is able to control and benefit from the trust. The court can also make orders on third parties, such as trustees, which can override other laws and trust deeds, s 90AC FLA.

However, testamentary trusts are still one of the safest asset protection tools out there. Its just that they could be undone by the family law court - it doesn't mean it will happen often.

One other example, I know a guy who has just gone bankrupt. His dad is probably going to die soon, leaving him a fair bit of money - which will just go to his creditors. Too late for a testamentary trust to be formed now because of lack of capacity.

BTW, may I ask how much it cost to set up your TT?
 
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Terryw said:
it could be true I am afraid. The family law court has wide powers to class trust property as being property of the marriage. This is especially so if one of the parties is able to control and benefit from the trust. The court can also make orders on third parties, such as trustees, which can override other laws and trust deeds, s 90AC FLA.
Click to expand...


Yes, the Judges like to give themselves the largest berth possible. "At the court's discretion." Nothing hard and fast, everything is worth challenging.

Must go and dip ya lid, pay yer fee to the wigs and sit quietly while they make the final binding determination.

Couldn't possibly have just a cut and dried Law. Always must leave room for interpretation and the ol' "well that's not necessarily so"....
 
Wylie, very sorry to hear about the sudden loss of you mum. Thanks for sharing.

To everyone else, thanks for your input. (now, let's delete the thread lest one of our crazy relatives finds out with a quick google that a TT can be challenged!!!!) I have some homework to do it seems. I wonder how often a TT has been successfully challenged. Off to see if I can find out...
 
In a situation where the parents die and leave the property in a testamentary trust to an only child, and that child was married and using the income from the trust, then I believe (personally) that the asset could well form part of a matrimonial pool.
 
Then that would make Testamentary Trusts absolutely worthless. The ex-wife might be able to argue she may have claim to part of the income, but the assets would surely not be considered as his, since they were never put into trust by him to avoid any claim in the case of divorce proceedings.

From reading the case Terry posted, it seems the Judge transferred assets for the purpose of hiding them from his wife, so that she couldn't get to them. This is not the case with TT's.

Has anyone heard of a TT being attacked by the ex wife and if so, was it successful? The reason I ask is because unless there is some sort of precedent, then all this discussion is pure speculation and has no basis in fact.
 
tubs, I will be interested to see if someone of knowledge makes any comment on your belief...

I am a beneficiary in a testamentary trust (life tenant of a property and income from investments for life) which on my death all passes to my children absolutely. I don't believe the trust assets form any part of the assets of our marriage, however annual income from the trust could well be taken into account in assessing "marital worth".
I'm also not an only child and my brother has an identical testamentary trust established in the same will.

Interested to see other views.
 
Mark

I know of no case on Testamentary trusts being unravelled in family law matters - or any other matters such as bankruptcy etc.

It is probably unlikely that the would be attacked as the property of the trust cannot be property of the marriage - because it is usually built up by the person who is now dead!

But it may still be possible if one party to the marriage controls the trust and they are a beneficiary of the trust. There are ways to set up the trust to make it stronger - such as making sure no one person controls it or is the major beneficiary. Gifting to the trust during your marriage could also hurt in the future as you would be contributing property of the marriage to the trust etc.

Also consider that the testamentary trust also protects assets from creditors and there are great tax benefits so even if they were useless for family law situations they are still great for other reasons.
 
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