'Many people, particularly the wealthy, have structures in place but little idea how they are set up, and therefore little idea how to protect themselves against issues that can, and do, come up over a lifetime.'
A woman once came to see me about purchasing an annuity and, to make sure I could offer her the best advice, I began asking a few questions about her financial circumstances. She told me her income largely came from commercial properties owned by a family trust and, when I questioned her further, it turned out that she had split with her husband 15 years earlier and even though she was a director of the trustee company, her ex-husband was the sole appointor of the trust which she didn't realise. This meant that her ex-husband was in total control of the trust.
I decided to dig a little deeper and when I saw copies of all the documents it confirmed two things that were a problem. Firstly, as he was the sole appointor of the trust, he could hire and fire the trustee, get rid of the trustee company and even install his new partner - with whom my client shared a mutual loathing. On top of that there was no reference at all to what happens if her ex-husband died - would his new partner take control of the trust - who arguably wouldn't continue paying income to my client? This type of example is incredibly common.
Those who own assets in a Family Trust must ensure their adviser has recently read the trust deed to make sure that the deed continues to be appropriate for the present time.
Everyone needs to ensure that they understand the nature of ownership of all of their assets and how differing forms of ownership can impact the ability to control those assets both while you are alive and upon death.
'If you own assets through a legal structure (such as superannuation or a family trust), make sure you understand exactly what it is and - just as importantly - what happens to that legal structure in the event of the death of any one of the parties.'