PROTECTING INHERITED ASSETS AGAINST FAMILY LAW CLAIMS

Case Study – 

Jane’s only significant asset is her primary residence, which is a modest 2-bedroom apartment worth $800k. Jane leaves everything to Mary who is her only child. Mary has a job paying $120k p.a. and 2 children who are still in school.

Mary lives in a 3 bedroom townhouse, which she rents as she can’t yet afford to buy her own home. Once Jane’s apartment passes to Mary, to help pay the bills, Mary rents out Jane’s old apartment as an investment property, which earns $40k p.a. in rental income.

Mary holds Jane’s apartment as an investment property for 10 years and then sells it for $1M, making a $20k capital gain on the sale.

To see the tax rates that apply, look at the following table in the “Testamentary Trust’ column, where you can see the rates are the same as the normal adult rates. With a smarter will, those rates can also apply to children under 18 years old who otherwise have no income.

Mary’s circumstances with a Simple’ Will:

With an existing income of $120k p.a. from her job, the additional $40k p.a. in rental income from Jane’s old apartment all falls within the $80,001 – $180,000 tax bracket, the rate for which is 37%. 37% of $40k is $14,800, which is the extra tax that Mary will pay on the additional rental income every year.

In the final year, the $40k rent + $100k capital gain (after the 40% CGT discount) will all add to Mary’s income, pushing her total taxable income up to $260k, taking her well into the top tax bracket of 47%.

Mary’s circumstances with a ‘Smarter’ Will:

Mary streams the additional $40k in rental income to her 2 children, splitting it equally between them (i.e. $20k each). Her children each pay only $342 in tax as the first $18,200 for each of them is tax-free.  Instead of paying $14,800 in extra tax every year. Mary reduces the extra tax down to only $684, which is a saving of $14,116 per year, every year.

In the final year, the additional $140k income (i.e. $40k rent + $100k taxable capital gain) can similarly be split equally between Mary’s 2 children $70k each. This way, nothing falls within the top 47% tax bracket at all.

Asset protection against Family Law claims

Based on this case study if Mary, Jane’s beneficiary is involved in a marriage or de facto relationship that breaks down, then Mary’s former spouse may make claims against Jane’s apartment. The Family Court of Australia has broad powers to divide the beneficiary’s property between the spouses and require the payment of maintenance (i.e. alimony).

By placing her assets in a testamentary discretionary trust it may help to insulate Jane’s hard-earned asset from such claims. This is because technically the trust owns the assets and, as it is a discretionary trust, the beneficiary (Mary) does not have a fixed entitlement to the assets.

QLD Law Group’s Estate Planning and Family Lawyer Simon Pattison can assist with ensuring your assets are protected as per your wishes. Contact Simon today on simon.pattison@qldlawgroup.com.au or 3226 1733.

Please note: This guide should not be relied on as a substitute for obtaining legal, financial or other professional advice. This case study is intended to provide a general example in relation to income tax only and is not comprehensive. Other taxes also need to be considered – e.g. GST, stamp duty, land tax, etc. You must seek your own tailored professional advice.

Omar Sarac admitted as a Solicitor!

A huge congratulations to our newly admitted Solicitor Omar Sarac! Omar was admitted yesterday as a Solicitor to the Supreme Court of Queensland after completing a Bachelor of Laws / Bachelor of Business and Practical Legal Training at the Queensland University of Technology.

What If my Landlord enters without giving me notice

When can the Landlord enter my Place?

The Issue

What if the landlord wants to enter my place?

What rights do I have? Can the landlord just walk in when the landlord feels like it?


The Law

There are rules when renting a place to live in Queensland whether it’s a house, unit, share house room, caravan or houseboat that protects you as a tenant.

These rules are set out in the Residential Tenancies and Rooming Accommodation Act 2008.

These rules are administered by the Residential Tenancies Authority (RTA) which is a government body responsible for the fair operation of these Rules.

Your landlord does have the right to enter your place but only as allowed in the Rules, including for completing a General Inspection.


The Solution

The landlord can only come into your place only if you have been given prior written notice.

Prior written notice is most commonly issued by a form called an Entry Notice (Form 9).

You must be given a minimum of 7 days prior written notice of entry for a General Inspection and a minimum 24 hours prior written notice of entry for maintenance repairs to your place.

Your landlord cannot enter your place on a Sunday, public holiday, or between 6pm and 8am, unless you have agreed.

Your landlord can enter your place at all other times as long as you have been given the required prior written notice within the stipulated timeframe.

The Residential Tenancies Authority can provide you with general information as well as answer specific questions about your rental rights and responsibilities.  The RTA Client Contact Centre can be contacted at the cost of a local phone call on 1300 366 311. Alternatively you can refer to the RTA website at www.rta.qld.gov.au/renting.

If after contacting the RTA you still require legal advice, please contact Qld Law Group for assistance on 1300 Qld Law.


Yellow Rhino - Diamond 65The Rhino Rule

What if the landlord knocks on my door and wants to come in to my place without telling me first?

The Rhino Rule is be polite and ask if there is a reason and if there is a good one, the place is clean and tidy and you have time let the landlord in but don’t let this become a common thing.

A Rhino on the LAW Executive Council

The Qld Law Group is the Qld representative office of the prestigious Lawyers Associated Worldwide group (LAW).

LAW is a global association of more than 100 independent law firms located in more than 50 countries.

At the October 2016 annual general meeting held in London the members of LAW elected the Qld Law Group’s own Steven Johnson to LAW’s Executive Council.  Mr Johnson, pictured here with the new Executive Council said he was honoured to be given the trust of over 4000 lawyers worldwide to guide LAW into the future and to help them service the legal needs of clients that are expanding their operations and relationships into new domestic and foreign markets.

law-20-10-16-59

Mr Johnson returning this week from his first Executive Council meeting held at Xiamen China and also said that it was an exciting time to be part of a changing of the guard of the LAW Executive Council.  The meeting has set down a very strong platform for LAW to stay innovative in a fluid market place he said which will ensure the Qld Law Group’s own clients doing business off shore or bringing foreign business on shore will be well cared for.

The meeting also confirmed these venues for LAW’s members’ meetings in 2017.

68 April 2017
Americas Regional Meeting
Atlanta, Georgia, USA
Hosted by Morris, Manning & Martin, LLP

4-6 May 2017
Asia Pacific Regional Meeting
Adelaide, Australia
Hosted by Clelands Lawyers

18-20 May 2017
Europe, Africa & Middle East Regional Meeting
Aberdeen, Scotland, UK
Hosted by Ledingham Chalmers LLP

18-21 October 2017
Annual General Meeting Miami, Florida, USA
Hosted by Broad and Cassel

If anyone has potential business in these regions then it would be an ideal time to contact the Qld Law Group as with Mr Johnson’s election to the LAW Executive Council the Rhino now has even more global grunt!

Qld Law Group makes Legal History

In late 2010 the State Government reviewed the limits of damages that various Courts could award.

This included increasing the amount of damages that the Magistrates Court could award to $150,000.00.

This meant that a significant number of compensation trials could now be dealt with in the Magistrates Court rather than the District Court.

The Qld Law Group had the distinction of acting for the first Plaintiff to go to trial in the Magistrates Court in a personal injuries action under these new limits.

The case was closely watched by insurance companies and their lawyers to monitor if there was any change in approach to the manner in which decisions were made in the Magistrates Court compared to the higher courts.

The good news was that the Qld Law Group not only made history but was successful for the client.