Hypothetical by Manny Wood published in the Coffs Coast Advocate on 20 June 2020.
As a successful businesswoman, Sally has built up an impressive portfolio worth around $1.5 million.
Sally books an appointment to make a will and tells her solicitor that she would like to split her estate equally between her two children. Sally also mentions that she is concerned about her eldest son, Jim who has been married to Jill for three years, but that the relationship “is looking quite rocky”.
Sally is worried that if Jim and Jill were to separate after Sally died, Jill could make a claim on Jim’s inheritance. Her solicitor suggests that Sally considers a will that establishes a Testamentary trust for Jim. The will would appoint Jim as the initial trustee of his trust and he would be given broad powers to distribute the trust funds as he sees fit, amongst his blood-related family, including distributions to himself.
The advantage being, whilst the inheritance is in the trust, it is not considered to form part of Jim’s personal assets if he was involved in contested property settlement proceedings with Jill. Sally is happy with this suggestion and asks her solicitor to draft a Testamentary will. She then executes the will and has it stored with her solicitor in safe custody.
Sadly, Sally passes-away suddenly a year later. After obtaining a grant of probate, her executors distribute her estate in accordance with her will.
Unfortunately, Sally was correct in her prediction that Jim and Jill would separate. It isn’t long before the separation becomes ‘messy’ and property settlement proceedings take place.
However, due to Sally’s foresight and proper estate planning, Jim is able to argue that his inheritance is not an asset of his, but a financial resource whereby he is only entitled to be considered among a range of beneficiaries of the trust.
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