Legal Tip 254: Should your spouse’s children with someone else be excluded from trusts?

Discussion in 'Legal Issues' started by Terry_w, 3rd Dec, 2019.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    A variation of Legal Tip 235 – Should Your Spouse’s New Spouse Be Excluded from a Trust you set up?

    Legal Tip 235: Should Your Spouse’s New Spouse Be Excluded from a Trust you set up?


    I have had a few clients ask that a discretionary trust be set up in a way that a spouse’s child with someone else (other than the current spouse) be excluded as beneficiaries of the trust. This is not just having the wording so that they don’t fall into the class of beneficiary, but actually having a clause to exclude them.

    Example

    Homer and Marge are happily married. Homer is having an affair with Maude Flanders after her husband’s recent death.

    Homer gets Maude pregnant and she has a baby boy. The baby is Homer’s child but not Marge’s child.

    A few years ago Marge set up the Marge Family Trust with Primary Beneficiaries being

    · Homer
    · Marge

    And Secondary beneficiaries being children of the primary beneficiaries. With the wording being such that children of just one of them would qualify as a beneficiary.

    But Marge was wise to this and, as she had caught Homer making sexy time with Edna Krapappel a few years ago so she included an exclusion so that any child that was the child of only one of them was excluded.

    This way that ******* that Homer fathered next door is not able to benefit from the Marge family trust.
     

The shift to the regions has been quite profound with Millennials and Gen X leading the way. It seems affordability, lifestyle, and working from home have been the key drivers from which these generations have been able to take most advantage.