Family Wealth Protection – the Greatest Adviser Gift of All

I make it a habit of reading at least two cases a day – one usually dealing with a family provisions claim in a Supreme Court and the other a trust, trust deed, family law or asset protection case. And what I am seeing is alarming. Our clients hard earned wealth, whether it is in a company, trust, their own name or superannuation fund is the target of litigation not only during life but after death. Forget the idea of ruling from the grave unless you have an adviser, whether accountant or financial planner who knows their family wealth protection solutions.

Yesterday I came across a NSW Supreme Court family provisions case - Megerditchian v Khatchadourian [2019] NSWSC 1870where the surviving parent had transferred his son onto a joint title of the house he owned in Willoughby in 2007. In his Will, also completed in 2007, he left a legacy for his daughter of $10,000 (they had been estranged for decades) with the residue going to his son. When their father died, the joint property was transferred to the son as the sole surviving joint tenant of the property and there was little left in the estate. Normally joint tenancy puts property out of the reach of the estate.

But not so fast.

The daughter, who was an ‘eligible person’ under the family provisions part of the NSW Succession Act, made a claim on the estate and sought a half interest in the property which in her estimates was worth between $900,000 and $950,000.

So, what did Justice Parker in the case decide……

Conclusions and orders

I have concluded that:

1. the testator’s will failed to make adequate provision for the maintenance, education and advancement of Vanoush (the daughter);

2. prima facie, the amount of the provision which ought to have been made is, in my judgment, a legacy of $100,000;

3. this legacy, together with any costs which it may be appropriate to award, can be met by designating the half share in the Willoughby property as notional estate.

To be as blunt as I can the family provisions laws across the various States of Australia are very generous to ‘eligible persons’ which include children, ex-spouses, grandchildren and believe it or not there was a recent case in NSW of a friend making a family provisions claim. So the $100,000 legacy for the estranged daughter (who was on the pension) is not unexpected when you look at all the cases. But the way the Court got there was. Justice Parker used the concept of a notional estate, which was also applied in Kelly v Deluchi [2012] NSWSC 841 to split up a deceased’s superannuation in a SMSF. By declaring the joint interest the father had at the time of death a notional estate, the Court was able to order the son to pay the daughter $100,000 and also costs of the proceedings, which would have not been cheap with barristers, solicitors and a multi-day trial in the Supreme Court.

Let me remind you this was not from the estate, the son had to pay his sister and legal costs!

Now am I alone in wondering whether estate planning or suburban lawyers drafting up Wills, and in some cases, very expensive Wills with testamentary trusts (up to $50,000) even warn their clients about a potential family provisions claim? Can you imagine if we as advisers did not warn clients about the tax or compliance risks of any advice we gave?

Which is why there is a place for Family Wealth Protection advisers. Advisers who can pull together succession, asset protection, family provisions, SMSF and estate planning strategies for a client and ensure that their solutions do what they say they do. The case above would not have been a problem if some simple strategies had been put in place, particularly knowing that there was a family problem.

On the family wealth protection adviser front there are less than 50 in Australia and with more than $7.2 Trillion of family wealth potentially in the firing line of litigation the opportunity of becoming a fully-fledged, accredited and certified succession, asset protection and estate planning adviser is just too exciting to not take full advantage of. In 1998 I gave away my tax and superannuation practice to focus fully on SMSFs and I certainly was in front of the trend at that time and have reaped the rewards. But I am here to tell you that SMSFs will always be in my armoury but 90% of my time is spent of protecting the wealth of families across Australia. It is highly rewarding and the clients love it. After all who does not want to protect their bloodline?

If you are interested in becoming a family wealth protection adviser then start with a certification with the Succession, Asset Protection and Estate Planning Adviser Association (SAPEPAA). The LightYear Training Group is holding Australia’s first-ever certification course which covers fourteen specific modules mapped to SAPEPAA adviser competency standards. For more details click on the image below: