How a Discretionary (Family) Trust works

Cassandra Townsend, Lawyer

We've recently received a number of customer queries about how a family trust works and how to set up a family trust through Cleardocs.

A family trust is a type of discretionary trust generally set up to hold a family's assets or conduct a family business. A family trust structure can assist in providing asset protection and certain tax advantages.

Information on family trusts and family trust elections are available on our website.

Below are some common customer queries about family trusts:

1.     Can the sole trustee of the discretionary (family) trust also be the sole beneficiary?

2.     Can a trust be a beneficiary under a family trust?

The Cleardocs Discretionary Trust deed is only suitable if you wish to name individuals, local companies or incorporated associations as beneficiaries. Maddocks does not recommend that trustees be named beneficiaries because distributions from one trust to another may raise issues in relation to the rule against perpetuities.

3.     Can I update the deed of my discretionary trust?

Yes, however Cleardocs does not have a product to update the deed of a Discretionary Trust. If you wish to amend your discretionary (family) trust, you should engage a lawyer to draft the changes. The lawyer will need to ensure the changes do not trigger the creation of a new trust and that the relevant variation process described in the deed is followed.

4.     Is the Cleardocs Discretionary Trust compliant with the Bamford ruling and/or change to laws regarding streaming provisions for trusts?

Yes.

o    The deed contains an appropriate definition of income - since 13 December 2004, Cleardocs deeds adopt a definition equivalent to taxable income ("net income" under taxation law).

o    The deed contains a specific power for the trustee to determine whether receipts are to be treated as on account of capital or income. All Cleardocs deeds since Cleardocs launched in 2002 provide this discretion.

o    The deed contains a specific power for the trustee to determine whether to adopt an alternate definition of income in respect of a year of income by signing a minute to that effect (or taking some other action). Again, this feature was introduced into Cleardocs deeds in December 2004.

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Cleardocs launches Wills products

Cassandra Townsend, Lawyer

In law school, I recall the story about a pre-eminent author of a textbook on estate planning who died without a will. I'm not sure whether this story is true but it definitely did the trick in emphasising the importance of having a will.

You can read about the consequences of dying without a will in our October ClearLaw article.

What? This year, Cleardocs has expanded its estate planning suite of products with 2 Wills products:

·    ClearWill Online – a comprehensive Will that anyone can make to express their  wishes about their estate and protect their assets; and

·    a more complex Will designed for use by law firms, ClearWill with Trusts for Law Firms.

Why? These products were developed in response to customer feedback. They were designed to be comprehensive, and flexible enough to cover a wide range of personal circumstances, such as blended families, will makers without children, will makers holding trust positions. And, at the end of the day, they were designed to make your estate planning as simple and painless as possible.

How? Through ClearWill with Trusts for Law Firms, lawyers can establish by will a range of testamentary trusts including:

·    single and multiple testamentary discretionary trusts for specific gifts and the residuary estate;

·    superannuation proceeds trusts;

·    life interest estates;

·    right of residence trusts; and

·    protected trusts.

Who? Given the complexity of the features of this Wills product and the need for a will maker to obtain legal advice about them, this document package is available to law firms only. For non-lawyers to take advantage of this product, they should discuss it with their lawyer.

As always, we welcome your feedback and suggestions about these products.

MASTERS RETREAT FOR "SMALLER LAW FIRM SURVIVAL"

Cassandra Townsend, Lawyer

On 7 July, 2013, I had the pleasure of leaving the Melbourne cold for the warmer climate of Coffs Harbour. The purpose of my trip was to spend my Sunday attending a legal conference, CLE by the Sea.

CLE by the Sea focussed on the unique challenges facing smaller law firms and the ways small law firms can be 'winners' in the changing legal landscape. The conference attracted expert speakers from varying backgrounds.

There were 12 speakers in the Sunday session who presented in 2 different streams on interesting and stimulating topics such as:

·         areas for growth and opportunity;

·         issues of profitability and cash flow;

·         effective marketing;

·         trends in regional practice; and

·         taking advantage of legal outsourcing.

The conference was an excellent forum for sole practitioners and practitioners in small law firms to meet with others in similar roles, share their experiences and obtain some tips for successfully managing their practice.

We hope to use the Masters Retreat learnings, information and insights to help develop products in line with small law requirements.

Bamford’s case: the full story and the new law

Belinda Thalakada, Customer Service

You can read an April 2012 updated version of this post here.


In the weeks leading up to the end of the financial year, many customers have been enquiring about:

• the effect of Bamford's case on Cleardocs Discretionary Trusts; and
• the change to the laws regarding streaming provisions for trusts.

The good news is that articles in our ClearLaw newsletter (see links in table below) specifically address these queries — both for customers with existing Discretionary Trusts and for those of you thinking about setting up a Discretionary Trust.
Since 2009, our lawyers at Maddocks have written 5 articles for our ClearLaw newsletter covering the evolving issues around Bamford's case. The latest article is about the June 2011 new law made in response to the case. The articles are listed in the table below, with links to where you can read the full article.
Our lawyers at Maddocks monitor developments in the law regarding trusts to make sure our deeds are compliant, up to date, and are as flexible as possible.

Trusts with Cleardocs deeds?

Maddocks outlines the position for:

• existing Discretionary Trusts with Cleardocs deeds in the April 2010 Maddocks article on the High Court Decision in Bamford's case. As the introduction to the article says: ”Basically, they [Cleardocs deeds] allow the flexibility which the High Court has confirmed is valid”. You can read the detail in that article here, under the heading “What does a trust deed need to contain? What do the Cleardocs deeds contain?”
• the current version of the Cleardocs deed in the June 2011 article on the new law made in response to the case. As the introduction to the article says: “The Cleardocs Discretionary Trust deed contains the necessary powers to allow trustees to stream capital gains, or franked distributions, to particular beneficiaries in the way clarified in the new law.”

You can order a Cleardocs Discretionary trust from us online here. You will need to log in first. If you are not yet signed up as a Cleardocs customer, then you can register with us here for free.

The Maddocks articles on Bamford's case

For the full story on Bamford's case, here are the 6 Maddocks articles in order — with the most recent one, about the new (April 2012) law, at the top.

Date of ClearLawBamford's case article	Bamford's event triggering article	Bamford's case article topic
April 2012	Ato Draft Ruling	Bamford’s case the ongoing wash-up: the ATO's view on the meaning of "income of the trust estate" – Draft Taxation Ruling TR 2012/D1
July 2011	The new law in response to Bamford's case	New law to clarify uncertainty on streaming of capital gains and franked distributions — Tax Laws Amendment (2011 Measures No.5) Bill 2011, Read more
March 2011	Government Discussion paper in response to Bamford's case	Government releases Discussion Paper in response to Bamford's case, Read more
July 2010	ATO responds to High Court decision in Bamford's case	The ATO responds to Bamford's case on Discretionary Trust, Read more
April 2010	High Court decision in Bamford's case	Definition of "income" in a trust deed prevails - Bamford's case approach confirmed by the High Court, Read more
June 2009	Full Federal Court's decision in Bamford's case	The definition of 'trust income': the trust deed prevails, Read more

Guide to the differences between types of trusts: discretionary, hybrid, unit (fixed and non-fixed)

Our lawyers at Maddocks have also written articles explaining the differences between the different types of trusts Cleardocs provides. You can read a guide with:

• a comparison table of key benefits and things to be wary of in each type of trust, here; and
• a comparison table of the key features of each type of trust, here.

Order a Discretionary Trust online

You can order a Cleardocs Discretionary trust from us online here. You will need to log in first. If you are not yet signed up as a Cleardocs customer, then you can register with us here for free.