QLD Will Brother's Business Put Testamentary Trust at Risk?

Discussion in 'Insurance Law Forum' started by M-VEEDUB, 18 January 2017.

  1. M-VEEDUB

    M-VEEDUB Active Member

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    Myself and 2 brothers own a home which is part of a Testamentary Trust. The home is in a residential zoned area. One of my brothers who is the primary occupant in the house also operates a motorcycle repair/restoration business from the garage. The business is small and I am pretty sure it is not a registered, licensed or insured business.

    I know that from the zoning standpoint that this business cannot operate and he would have problems if the council was to find out. My bigger issue is with liability and insurance. He works with fuels and solvents, etc (all flammable) under our house and while he is very careful, accidents can happen. If there was to be a fire, I am guessing our home fire insurance would not cover this, even though I am sure he would say that it was not a business in the garage. (There is typically 4 to 6 bikes there at a time in various states of repair as well as an industrial lathe, many parts etc and more.)

    Also, from the liability standpoint, if he was to make a mistake in one of his repairs and this repair caused accident or even worse a death, would our home be safe from a lawsuit since it is in a Testamentary Trust or since he is the primary resident of the home could we be looking at the scenario of loosing the home and any other assets associated with it?

    Could my brother's business be potentially put the Trust at risk or would the house be excluded from any claims against him since it is in a Testamentary Trust?
     
  2. Tim W

    Tim W Lawyer
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    What do you mean by "primary occupant" ?
    Who lives there? Just him, or both of you?
     
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  3. M-VEEDUB

    M-VEEDUB Active Member

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    He is the occupant of the house and uses the full double garage plus workshop area for his business. He lives there full time, the house does not produce any rental income, either from himself or any tenants. I live and work elsewhere.

    The 3rd brother has his own house but uses the Trust home as a base with his own job, stopping in at lunch time and dinner and doing some of his office work at the end of his day. He spends the night there occasionally but it is not his primary residence.
     
  4. Tim W

    Tim W Lawyer
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    Chances are, your biker brother doesn't even have contents insurance, let alone any insurance on the building.
    And almost certainly no business insurances.

    Start with first things first - speak to the trustee and get yourself informed about how the building is insured.
     
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  5. M-VEEDUB

    M-VEEDUB Active Member

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    My brothers and myself are the executors of a Testamentary Trust. My mother passed away in 2014 and she changed her Will from a regular Will (estate to be evenly distributed between 3 sons) to the Testamentary Trust in an attempt to protect her Estate from my ex-wife who I was separated from at the time but not divorced. (we are now divorced, officially, over 12 months).

    All 3 of us need to be in unanimous agreement before any disbursements can be done. The brother in question fancies himself as quite the businessman and has proven to become extremely defensive when challenged. He lives in the house rent free, meanwhile running his business rent free as well and claims he is entitled to this as he done the majority of the work in finalising the Estate. Meanwhile, I see no benefit from the Estate and my other brother is only using the home intermittently, so minimal benefit for him.

    I am pretty sure the home is insured, including contents, but I have major concerns about the impact my brothers business could have on our home if there was to be a 'problem'. I will find out what home insurance we have, but I think I will find that the home and contents are insured, most likely a continuation of the policy that my Mother would have had on her home.

    Before I question my brother and open a can of worms, let's assume that the home and contents are insured, but I am sure his business is not. If he was taken to court for liability reasons, could that impact our home which is in a Testamentary Trust of my deceased Mother, under our 3 names?
     
  6. M-VEEDUB

    M-VEEDUB Active Member

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    Sorry, the above should read -

    My brothers and myself are the executors and trustees of a Testamentary Trust...
     
  7. M-VEEDUB

    M-VEEDUB Active Member

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    Have confirmed that the home is insured with fire and contents
     
  8. Tim W

    Tim W Lawyer
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    Does that include disclosing to the insurer that he operates a business there?
    (an insurer might refuse to pay a claim where there is an undisclosed risk, such as a home business)

    Are there separate insurance policies for the business (eg public liability)?

    If you are joint trustees (legal owners), are all of you the insured?
    Or to put it another way - if the house burns down, who gets the insurance money?
     
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  9. M-VEEDUB

    M-VEEDUB Active Member

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    My brother claims his business is Pty/Ltd, therefore there is no threat to the Trust. As I asked, what happens if a customer was to trip on one of the many cracks in the driveway?

    He also claims that since there is minimal fuel stored there is no fire risk, even though there is fuel, electrical tools, solvents, rags etc. He does minimal welding(arc, not gas) so says there is no risk there. He said theft is not an issues as bikes are stored at risk of owners.

    I have asked my other brother for a copy of our latest insurance policy so I can discuss this in detail with our insurance provider. I have been advised the we are all named on the policy, not just one individual.

    I have some other questions regarding the Trust, I figure it best to post a new topic as they are not related directly to my brothers business.
     
  10. M-VEEDUB

    M-VEEDUB Active Member

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    I have spoke to our insurance provider. They told me that if there was a claim made, say, due to a fire, and the fire was found to have started downstairs that our policy would likely be voided, due to his business operations under the house violating zoning regulations.

    This alone is really enough to demand that my brother cease operating his business from our homes garage. (easier said than done) They also said that legally they could void any claim due to him operating such a business in a residential zoned area.

    My brother has no insurance on his business, and claims that we would be protected from any liability claims due to the fact that his business is PTY LTD. Is this correct that even though his business is uninsured and operating without permits in a residential zoned area that any potential liability claim could not effect the Trust or Estate due to him saying it is PTY LTD? Or since his business is technically operating illegally that he would have no protection at all from his PTY LTD status?
     
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