Wills, and Dealing With Spendthrifts

Discussion in 'Wills & Estate Planning' started by Ted Varrick, 27th Dec, 2019.

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  1. Ted Varrick

    Ted Varrick Well-Known Member

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    Hi All,

    One of the (many) elephants in the room in regards to wills, I presume, would be dealing with possible beneficiaries who might be considered spendthrifts.

    At the risk of unleashing all the hounds at once, feel free to add comments, anecdotes and opinions, as I'm sure there are many readers that would benefit from your collective expertise.

    Myself included.
     
  2. Terry_w

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

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    I have a draft legal tip on this, just did a will for someone. The solution is to drip feed them
     
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  3. Trainee

    Trainee Well-Known Member

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    Some form of trust with an independent trustee?
     
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  4. Mike A

    Mike A Accountant

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    Asked @Terry_w the same question the other day

    The primary concern is that the inheritance will be blown on hookers
     
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  5. Terry_w

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

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    And the rest might be wasted
     
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  6. ChrisP73

    ChrisP73 Well-Known Member

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    Another option is a Protective Trust

    Carfeful consideration needs to be given to the naming of trustee/s and appointer
     
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  7. Silverghost

    Silverghost Well-Known Member

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    I have a related issue that I have been mulling over for a while.

    I need to make a new will, and my main beneficiary is an adult with
    legal capacity who cannot manage their own finances (not a spendthrift exactly but for other reasons).

    I have been doing a bit of research around my options to inform myself before I see a wills specialist, and it seems a protective trust may be a good way to go.

    From what I have read though, I would need to have substantial estate assets to make this worthwhile. What does this mean in practice in dollar terms? Especially if I would need to appoint a professional trustee? Anyone have any thoughts around this?
     
  8. Terry_w

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

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    That is also known as the drip feed.
     
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  9. Terry_w

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

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    It doesn't need a lot. Get a trust worthy relo to be the trustee and the terms of the trust to allow what you want such as
    - income only each year
    - income and a % of the capital
    - income and an amount of capital at the discretion of the trustee if the beneficiary comes with a request for a worthy cause - such as uni fees or for a deposit on a house.
     
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  10. datto

    datto Well-Known Member

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    I've seen this with my own eyes and I believe it happens more often in our aging society.

    The stranger acquaints themselves with the elder who has few if any living relatives but has valuable assets. If there are any living relatives, they have been long out of the elderly's life.

    The stranger, be it a neighbour or someone else, then becomes more actively involved in the elder's life. On the face of it, nothing wrong with that, should be more of it. But, before you know it, a power of attorney is made and of course a will which doesn't favour the Royal Cat Society in any way. And the rest is history.

    I have witnessed a person "make" about 650K several years ago with this conniving scheme. I doubt this person would have gone to the trouble of looking after the eldery if there were no assets involved. He's never helped anyone else to my knowledge. Heck, he didn't even have the heart to take his own sick dog to the vet.

    I think the govt should have more stringent policies in place to stop this thing happening.
     
  11. Terry_w

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

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    A tax free capital gain too!
     
  12. ChrisP73

    ChrisP73 Well-Known Member

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    If the responsibility becomes too much for the trustee could they handoff to a public trustee? Or would you recommend another option @Terry_w
     
  13. Terry_w

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

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    A person can always resign as trustee so a plan needs to be put in place who the next trustee could be and who decides.

    I don't really see any other options - a direct gift or a gift with strings attached. Perhaps no gift at all is best in some cases. Bypass the child and give to the grandchildren etc.
     
  14. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    There are of course the 2 unprotected options of
    1. give them a smaller amount knowing they will blow it
    2. give them the amount you want and know they will blow it

    It really depends who that person is in relation to you. If it's your absolute favourite sister but you know she'll make poor choices with it then you need to discuss options with them and other family members to see what options might work. If it's cousin Joey who will blow it all on coke leave him $5k or leave him out entirely. If it's one of your own children then you might want to lump sum then drip feed
     
  15. SatayKing

    SatayKing Well-Known Member

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    I think this issue has been raised to State and Federal Governments as part of the approach to prevent elder abuse. I'm pretty sure the Council of the Ageing has it as part of it's policy issue.

    Unfortunately action will be at the same slow pace as Governments usually do or do not take - unless it becomes politically expedient or are embarrassed via a Royal Commission to take action after which vested interests will attempt and probably succeed in diluting any recommendations.
     
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  16. Silverghost

    Silverghost Well-Known Member

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    Thanks, Terry. "Not a lot" can be a pretty relative concept for different people. Any light you can shed on this in ball park dollar terms?
     
  17. Terry_w

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

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    $100,000 for example
     
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  18. Mike A

    Mike A Accountant

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    If he chose fanta id be more receptive
     
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  19. Silverghost

    Silverghost Well-Known Member

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    Yeah OK great, thanks Terry. Good to know I will be in the right ball park and can get this sorted.
     
  20. Terry_w

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

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    $10,000 could even work.
    Homer dies and leaves $10,000 on trust for Barney. Marge is trustee and the will instructs her to give Barney $100 per week until the money runs out.
    Barney still uses the money for that cheap beer from Aldi though...
     
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