Legal Tip 294: Beneficiaries of Trusts and Sexual Affairs

Discussion in 'Legal Issues' started by Terry_w, 26th Jun, 2020.

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  1. Terry_w

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

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    Some clients have asked to exclude children of one of them and their spouse but not both of them from being a beneficiary of a trust.


    Example

    Homer and Marge are a defacto couple with 3 kids.

    They set up a discretionary trust with a wide class of beneficiaries.

    Marge has been making sexy time with Barney for years now, in secret, and has a baby with him.

    Coincidently Homer has been mowing Ned’s grass while he was in prison and one day was seduced by Maude, Ned’s wife. Maude gets pregnant and has a baby.

    Both of these children would be beneficiaries of the trust set up early as the deed names both Homer and Marge and states ‘the children of the above named beneficiaries’ are also beneficiaries of the trust.



    I have had some clients specifically ask about ways to avoid this sort of thing and the way I have drafted the trust deed would be to exclude children of just one primary beneficiary but not both.

    This would prevent children born as the result of an affair from being beneficiaries. But it would also prevent children born after the death of the survivor from being able to benefit from the trust – which might be what is wanted. The clause could also be modified to allow post death children of one of them.

    For added protection you could also make this clause being one which cannot be amended.


    Also see

    Legal Tip 59: Excluding Beneficiaries from Trusts Legal Tip 59: Excluding Beneficiaries from Trusts

    Legal Tip 234: How do you feel about your spouse remarrying after you death? Legal Tip 234: How do you feel about your spouse remarrying after you death?

    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?

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

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