LAW MATTERS
What happens if a beneficiary under a Will is bankrupt? Whilst it is common for professionals to take care not to own assets in their own name, what happens if they receive an inheritance? Savvy business people often structure their affairs by holding minimal assets in their own name, preferring to keep assets out of their own and their creditors’ legal reach. This is particularly so for individuals at risk of being sued, such as company directors and business owners. Any legal action taken against them personally does not normally extend to assets owned by others, such as a spouse or a trust.
The bankrupt beneficiary Consider this example. John has retired after a successful career. He owns his home, several investment properties and various other assets. John is a widower and has two adult children, Vanessa and Peter. Upon his death, John would like to pass his assets to his two children equally. Peter, the son, runs a business which is on the brink of failure due to reduced revenue, rent increases and unpaid tax. The ATO is threatening legal action and other creditors are now coming after Peter, who has provided
personal guarantees. Peter is considering bankruptcy as a way to ease his financial and emotional stress. Although Peter has very few assets in his own name, if he is bankrupt when John dies, the share of John’s estate that would have gone to Peter is vested/paid to his bankruptcy trustee and will be made available for Peter’s creditors. Property that falls into a bankrupt’s hands after the commencement of the bankruptcy is called ‘after-acquired property’ and vests in the bankrupt’s trustee. There may be a temptation not to disclose after-acquired property to the bankruptcy trustee, but nondisclosure of after-acquired property is an offence, with penalties ranging from a fine, imprisonment and extension of the bankruptcy period.
The use of a testamentary trust With careful planning, a Will can be structured so that the potential for the Will-maker’s estate passing to a bankruptcy trustee can be avoided. A
Defibrillator investment pays dividends Following discussions with local sporting clubs, Lane Cove Council took the bold but very sensible decision to install defibrillators at all of its major sports grounds a couple of years ago. On Saturday 5th May, this paid dividends when an over 45s footballer collapsed during a game at Kingsford Smith oval in Longueville. The rapid and effective work of two doctors who happened to be playing in the game, and the use of the defibrillator, were paramount in saving the life of the player. As more older people participate in activities to stay fitter in their old age, there will be ongoing incidents of this type. Having the right equipment and expertise available is of huge importance. The vision and investment by Lane Cove Council is to be applauded. Sadly, we understand other Councils are resisting the need to do this at all sports grounds. Hopefully, incidents of the kind at Kingsford Smith will encourage them to re-consider. The season for Lane Cove FC is now in full swing with the usual ups and downs in results, but hopefully everyone is having fun! The women certainly are, and they had a great time at their recent ‘pink’ themed training night at Blackman Park.
testamentary discretionary trust can be used to benefit a person who is financially vulnerable because of alcoholism, a gambling problem, threatened or actual bankruptcy. A testamentary discretionary trust is a trust set up in a Will. It gives the trustee the power to decide how assets and income are to be managed and distributed to the beneficiaries. It allows the trustee to be flexible to address each beneficiary’s individual circumstances. Assets can be protected from external creditors and the bankruptcy trustee as the property is owned by the trustee and not the beneficiary. If beneficiaries are financially vulnerable or are at risk of bankruptcy, these issues can be addressed at the time a Will is made and can provide the Willmaker with peace of mind that his or her estate will be protected for the benefit of children and other family members. SRM LAWYERS
Renée Stevens - Lawyer. Level 1, 102-104 Longueville Road, Lane Cove NSW 2066. 9188 9631 www.srmlawyers.com.au
Noah’s Ark Toy Library for Children with Special Needs Inc is a registered not-for-profit charitable organisation based in Artarmon. Established in 1976 by educationalists, therapists and parents of children with special needs, the Library aims to help children learn through play, with the toys complementing the therapies that they may receive. Membership is open to any child with a special need, be it physical, intellectual, sensory or social; temporary or permanent. There is no age limit but the wide range of specialised toys are generally suitable for ages 0-6 years. Families can borrow toys and play equipment specific to their child’s needs and interests, promoting new skills development. Library services are available during the standard school term on Mondays, Wednesdays and Saturdays, 10.00am to 12.30pm. A yearly membership fee is applicable and members may borrow up to nine toys at a time. The library is staffed mainly by volunteers and is funded entirely by donations and membership subscription. The library is located at Artarmon Kids Cottage Community Centre, 18 Broughton Road, Artarmon. Further information is available at www.toys4specialneeds.org.au or phone 9411 4429.
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