Hypotheticals by Manny Wood. Published in the Coffs Coast Advocate on 24 October 2015.
Donald has been in a de facto relationship with Daisy for the last 10 years. He has three sons to a previous relationship; Huey, Dewey and Louie.
Donald owns a house in Coffs Harbour and has a significant amount of savings together with a substantial share portfolio.
Donald sees a solicitor about updating his will.
Donald decides to leave his house and savings to Daisy but is concerned about leaving his share portfolio to his sons.
Bankruptcy
Huey conducts his home renovation business as a sole trader. He has had significant cash flow problems in the past and Donald is concerned that Huey’s creditors may cause him to go bankrupt at some stage in the future. Donald’s solicitor advises him that a properly worded testamentary trust can protect Huey’s inheritance in the event that he is declared bankrupt.
Divorce
Dewey is on his third marriage and has endured messy property settlement proceedings in the past. The property settlements have the left Dewey with few assets and the legal costs have been substantial. Donald’s solicitor advises him that a testamentary trust can protect Dewey’s inheritance in the event of a future property settlement dispute. Whilst Dewey’s interest in a trust may be considered to be a financial resource it is unlikely that the interest could be the subject of an order in favour of an ex-spouse.
Gambling
Louie has a problem with poker machines and has frittered away most of his savings. Donald is concerned that if he receives a large number of shares, that he will sell them and gamble away the proceeds. Donald’s solicitor advises him that placing the shares in a testamentary trust will prevent Louie from having access to the shares but will grant Donald’s executor the ability to distribute them to Louie for worthwhile purposes.
Choice of executor
Donald is advised that it is important to appoint an executor that does not have an interest in the trust and Donald decides to appoint his solicitor in the role of executor and trustee of his testamentary trust.
