Mr Farmer died in 1988 leaving the farm to his wife during her life time and then to his son after her death. The son has worked on the family farm since childhood and is now in his late forties.
As the son does not own the family farm, he has had difficulties negotiating funding with his bank because of his mother’s life interest.
His mother agrees to surrender her life interest in the family farm during her lifetime, to enable the legal estate in the family farm to be passed to her son.
Stamp duty on the transfer of mum’s interest to the son is exempt under the inter-generational stamp duty exemption for primary production land.
The family farm is transferred to the son and the family is happy.
Are there any tax consequences of the release of the life estate?
Unfortunately, yes.
The mother’s surrender of her life interest constitutes a capital gains tax event and a market value is attributed to the mother’s surrender of her life interest. That gain must then be included in the mother’s taxable income for that tax year.
As the son has paid nothing for the land, the mother will need to find the money to pay the capital gains tax on the deemed gain on the disposal of her life interest.
The family particularly mum, are no longer happy.
Unfortunately, in this situation, it may have been better for the son to wait until the mother’s death so that the ATO would disregard any capital gain on the death of a life tenant.
Transfer of farming assets between family members is complex and professional advice should be sought.
At Everingham Solomons we have the expertise to assist you because Helping You is Our Business.
Making a Will is one of the most important things a person can do during their lifetime. Like many things in life though preparation is the key and very often people fail to take the time to put in place a Will that carries out their wishes. An integral part of making a will should include seeking legal advice. Why? The reason is simple. Whilst the law recognizes a person’s right to decide who inherits their estate, the law equally recognizes a person’s right to contest or challenge a will. Also failing to make a will at all can be a time-consuming and expensive process for family members that can be avoided if an up-to-date will is in place.
There are often genuine reasons why a person should contest a will. For example a will made out of spite can have devastating effects for a family. Likewise a will that is so far out of date that it fails to take into account the person’s true circumstances at the time they die can have similarly devastating consequences for an already grieving family.
Typically a will may be challenged on two grounds. Firstly, because a person has been left out of will or unfairly provided for in a will. Or secondly, because the person who died left a will in which they did not have the mental capacity to understand what he or she was signing.
There are strict time limits that apply for challenging a will and it is essential that legal advice is sought.
Whether you are a person seeking to make a claim against another person’s will, or the executor named in a will, or a person needing to make a will, obtaining legal advice is essential.
At Everingham Solomons we have the expertise and experience to assist you with your Estate Planning needs and claims for a more equitable share in a person’s estate. We can work with you to identify the legal issues relevant to your situation and advise you of the options available so you can make an informed decision that’s right for you, because Helping You is Our Business.
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There are instances whereby parents assist their children financially even when those children are grown up and have families of their own. Whether it be helping with mortgage payments, providing rent free accommodation, helping out with the groceries or an inheritance at the end, these may be significant from a Family Law perspective.
Parents usually don’t mind helping their children, but what happens when your child separates from their partner and they want to benefit from your generosity?
This was argued recently in the matter of Ross & Audley [2011]. The parties commenced cohabitation in 1986 and were married in 1987. There were 4 children of the marriage plus the wife had a child to a previous relationship who resided with them.
When the parties commenced cohabitation they lived rent free at property P, which was owned by the wife’s mother. In 1987, the parties moved to property C, also owned by the wife’s mother, and again rent free. The parties continued to reside at property C until 2011, when the house was demolished and another one built. During the time that the new house was being built, the parties resided at property T, also owned by the wife’s mother, and again rent free.
In 2004, the wife’s mother passed away and the wife received an inheritance of property C, a half interest with her brother in property T, a considerable share portfolio and antique furnishings.
The parties separated in 2008 and the wife remarried. The wife claimed that she should be entitled to 80% of the assets as it was her mother’s inheritance which provided much of the pool.
The husband argued for an equal split for many reasons but mainly that he had cared for the wife’s son from a previous relationship, he provided care of the wife’s mother in the 4 years leading up to her death, the length of the relationship, his earning capacity of working full time plus being the primary caregiver when the wife was in ill health, and his contribution to the care of the children when the wife left.
It was also argued by the husband that the parties were always aware that the wife would inherit from her mother’s estate and this is the reason why the parties never purchased their own real estate or shares. The husband also submitted that the inheritance was for the benefit of not only the wife, but him and the children as well.
Federal Magistrate Bender concluded that “whilst the husband argued the wife’s mother intended to benefit the family as a whole, I am of the view that the wife inherited from her mother because she was her mother’s daughter.”
In that regard, the Federal Magistrates ordered that there be a 75/25% split in favor of the wife.
When you are considering separating or have separated, and you have received financially from your parents, you should seek legal advice from Everingham Solomons because we have the experience and expertise to assist you. Helping You is Our Business.
As the year draws to a close, it is timely to commit to new goals for the coming year. As you spend time with family and loved ones this Christmas, we encourage you to consider estate planning as one of your goals for the coming year.
This could mean one of two things. It could mean making a will for the first time which is tailored to suit your personal and financial circumstances. Or updating your current will in case your circumstances have changed since the last time you made your will.
One recent case serves as a timely reminder that just as life does not standstill nor should your will be locked away in a drawer and forgotten. Your will needs to be reviewed and updated regularly to ensure it carries out your wishes.
The Deceased made a Will in 1959. She died some 40 years later. The estate of the deceased consisted principally of a house and a bank account.
The applicant in this case was the grandson of the deceased (the Plaintiff).
There was a very good relationship between the Plaintiff and his grandmother.
Having been left out of his grandmother’s will, the plaintiff claimed that for a period of twelve years he resided in the same house as the Deceased, that for at least the last four years of her life he was the principal carer of the Deceased, looking after every aspect of her daily routine, recognised by him receiving a carer’s pension. It was submitted that that care was undertaken at a considerable sacrifice to the Plaintiff, who has been subsequently disadvantaged. Further, that in consequence of the efforts and activities of the Plaintiff there was a substantial contribution by him to the conservation of the assets which comprise the estate of the Deceased. The Plaintiff submitted that those contributions to the personal and financial welfare of the Deceased were such as would cause him to be generally regarded as a natural object of the testamentary recognition of the Deceased.
Taking into account all of the circumstances of the case, the Court agreed.
In so doing the Court emphasised that an order for provision is not made as a reward for good conduct. Neither is such an order withheld as punishment for perceived bad conduct on the part of an applicant.
As one of your goals for 2012, we encourage you to put your affairs in order for the benefit of your loved ones and for your own peace of mind. At Everingham Solomons we have the expertise to assist you with all matters relating to Estate Planning, because Helping You is Our Business.
Click here for more information on Lesley McDonnell
If you die, without a Will, or without an effective Will, your Estate is dealt with as set out in Chapter 4 of the Succession Act 2006.
If, when you die, you have a spouse (somebody to whom you are married or with whom you were carrying on a domestic partnership), the practical effect of the legislation is that your spouse will be entitled to the whole of your Estate.
If you and your spouse have children, your spouse will continue to be entitled to the whole of your Estate.
However, if you have children, who aren’t the children of your spouse, then your spouse is entitled to your personal effects, a statutory legacy and one half of the remainder of your Estate.
There is provision for your spouse to have a preferential right to acquire certain property from the Estate.
The legislation provides for the situation where there is more than one spouse. Your first reaction will be “How could that be? Isn’t it a crime to be married to more than one person at a time?” However, a person could be legally married and then also be living in a domestic relationship with another and thus have two spouses at the time of his or her death.
So the legislation makes provision for the distribution of the Estate amongst the spouses.
The legislation also makes provision for a distribution of the Estate where the deceased’s children are the children of either or both of the spouses.
But what happens if the deceased had children, but they are not children of either of the surviving spouses? The legislation makes provision for the Estate to be distributed between the spouses and those children.
Doesn’t all this sound complex? Wouldn’t it be easier to make a Will where you determine who gets the Estate and not the Government.
The Law Society of NSW has arranged for free seminars to be held across the state on Friday 19 August 2011 to better acquaint people with the need of having a Will. A seminar will occur in Tamworth on that day at the Community Centre commencing at 2.00pm and in Quirindi at the Quirindi Library commencing at 12pm. If you would like more information about making a Will please come along because Helping You is Our Business.
If you have some connection with a Family Trust, Centrelink will attribute to your assets, for the purpose of assessing your entitlement for a pension, all the assets of that Trust. This is so, even if you have never had any ownership or entitlement to the assets of the Trust.
If the assets are substantial, then attributed to you will be all those assets and hence you will be unable to qualify for those benefits from Centrelink which require you to satisfy the assets test.
Recently, there was a case which challenged this fact. The case involved a couple who were in receipt of a pension which they lost because Centrelink attributed to them the value of the assets of a controlled private trust.
They appealed that decision. The matter was reviewed, firstly by the Social Security Appeals Tribunal which found in favour of the couple, secondly by the Administrative Appeals Tribunal which held that the couple were not eligible to receive the benefits they sought, and lastly by the Federal Court of Australia which upheld the original decision. Accordingly, the couple were able to retain their pensions.
While the issues raised by the case are somewhat technical, the practical effect of the pensioner’s argument was that, until the trustees exercised their discretion to make payment out of the trust fund to them, they had merely a right to invoke the equitable jurisdiction of a court to ensure that the trust was duly administered and that the trustees exercised their discretion properly.
The Commonwealth Government have subsequently amended the Social Security Act to remove the practical effect of the court decision. The amendment made states that an individual passes the control test if it could reasonably be expected that the trustee of the trust would make an application of the capital or the income of the trust to the individual if the individual could not meet his or her reasonable costs of living.
So, we are back to where we started. That is, if you have some connection with a family trust, Centrelink will attribute to your assets, for the purpose of assessing your entitlement for a pension, all the assets of the trust.
The law, and its application, is not simple. We have the expertise to assist you in understanding the law, because Helping You is Our Business.
Mr Farmer died in 1988 leaving the farm to his wife during her life time and then to his son after her death. The son has worked on the family farm since childhood and is now in his late forties.
