Estate and Divorce

Australia's #1 for Law
Join 150,000 Australians every month. Ask a question, respond to a question and better understand the law today!
FREE - Join Now

BlueSkies

Active Member
4 January 2022
6
0
36
Hi,
Whilst my marriage continues on, it has been suggested that I future proof the inheritance from my Dad's estate in case that my marriage goes pear shape. My Dad is not yet deceased. I have no children of my own.
In my Dad's Will I will be a Tenant For Life in his home upon his passing. On my death, the property will revert to a nominated Trustee (Will Executor) who will then pass on the estate to my younger siblings. I will also receive money to pay for some upfront maintenance that will be needed to be done on the property. However, if Divorce does occur, I don't want this money to be considered in any Divorce settlement.
I have been told that the way to safeguard against this potential loss is for this money to go into a Family Trust, where I have no role (Trustee, Beneficiary etc)? If I have no role, this money can't then be classed as being part of my divisible assets?
Is this correct?
Alternatively, do we just ensure that the nominated Trustee does not include my wife or myself, and add a clause that the nominated Trustee will receive the money instead that will be used to pay for maintenance to the property?
The second option seems to make more sense, but who then pays tax on the potential earnings from this money? Will this become part of their own income, or will they needs to have a different TFN to attribute any interest back to the estate rather than themselves? Is this what a Family Trust is designed to do?
The third option is for the money to remain in the Estate until the maintenance is done. How long can the Estate of my Dad continue after his death?
Have I missed any other options or considerations?
 

Tim W

Lawyer
LawConnect (LawTap) Verified
28 April 2014
4,913
820
2,894
Sydney
You can't future proof "your inheritance".
That's because while your Dad lives, the "inheritance" it's his property, not yours - and so it's not something about which you yourself can make any arrangements.
Which also means that while he lives, it's not part of the asset pool of you and your eventual ex-spouse.

Your Dad, on the other hand, may well gain benefit from the case specific advice from a specialist Wills and Succession practitioner.
Such a practitioner will advise him on the suitability of a testamentary trust, a Life Estate and remainder arrangement, etc,
and prepare for him (for him, not for you), a will that will suit everyone.
He should do this while he has both time and capacity. In other words - do it tomorrow.

Let me be clear - this is not a job for DIYs and amateurs.
 

BlueSkies

Active Member
4 January 2022
6
0
36
Thanks, I didn't realise that even if I was a Tenant for Life, that this could also be classed as Income for me, and an estimate for this would also be subject to any potential Divorce settlement.

So, looks like we are back at square one.

I'll look into the option of a testamentary trust, not sure of the difference between a testamentary trust and a Family Trust, but will do some research into this now.
 

Tim W

Lawyer
LawConnect (LawTap) Verified
28 April 2014
4,913
820
2,894
Sydney
Thanks, I didn't realise that even if I was a Tenant for Life, that this could also be classed as Income for me, and an estimate for this would also be subject to any potential Divorce settlement.
Where do you get that from? I don't see where I used the word "income"?
The cash gift ("this money...") is the thing you want to keep out of the asset pool, isn't it?
 

BlueSkies

Active Member
4 January 2022
6
0
36
Yes, the cash is what I want kept out of the Asset pool.

There is a separate question about how much I would need to pay from my own assets, based on current/future Income. A guide from another Lawyer indicated that if I was effectively getting "rent free" accommodation, an amount could be added into my assessed income to represent the benefit that I am gaining from this arrangement. Thus, this could affect any settlement determination.
 

Tim W

Lawyer
LawConnect (LawTap) Verified
28 April 2014
4,913
820
2,894
Sydney
Yes, the cash is what I want kept out of the Asset pool.
Without knowing all the ins-and-outs... such things are possible.
But it can take some setting up. While your father lives, his assets are a matter for him.
So, it's a question of his will.
There is a separate question about how much I would need to pay from my own assets, based on current/future Income. A guide from another Lawyer indicated that if I was effectively getting "rent free" accommodation, an amount could be added into my assessed income to represent the benefit that I am gaining from this arrangement. Thus, this could affect any settlement determination.
Kindly refer to
"...this is not a job for DIYs and amateurs"
above.
 

Atticus

Well-Known Member
6 February 2019
2,011
294
2,394
A testamentary trust is what we need
I think you're right ... be aware though that in the breakdown of a relationship subject to property division, that the trust, though not included in the settlement, can still be considered a financial resource available to you but not the other party ... That *may* mean an adjustment in the division towards the other party.... AFAIK, there is no remedy for that, it's entirely up to the court in a contested hearing if it were to go there.
 

BlueSkies

Active Member
4 January 2022
6
0
36
Thank you for that. The idea was going through my mind that if the trust didn't actually mention me at all, just that there was someone else who was Executor, who had responsibility for maintenance for the place, that the court may assume that I may be the tenant. It would then be up to the other side to prove that I was actually living there.
 

Atticus

Well-Known Member
6 February 2019
2,011
294
2,394
The idea was going through my mind that if the trust didn't actually mention me at all
I don't think it would be possible to NOT mention you if you're a beneficiary.

As for a property settlement, there are rules around full & frank disclosure. Basically both parties are required to fully declare all assets, trusts, shares dividends, etc etc. If an order is made & it's later discovered that one party did not declare something significant, then it may be grounds to have it taken back to court with the possibility of the non declaring party being ordered to pay the other parties costs ...

Basically, if by having a testamentary trust (or whatever is recommended) you can prevent the asset from being included in the 'pot' of any possible settlement, then that's the main game .... If you ever separate & it goes to court, declare it if that is the legal advice, any adjustment to the other side by virtue of you having that financial resource is not likley to be anything significant.