Ruling From the Grave Requires an Undertaker

There is nothing wrong with ruling from the grave!  But, without an undertaker – your plans may be buried with you!

Are you scratching your head, wondering what in the heck I am trying to say?  Probably – so let me tell you what I am talking about.  Our clients have authorised us to discuss this case, so no confidentiality has been violated in the publishing of this article…here it goes…

Mr Smith (he’s always our favourite when it comes to grave stories) was a wealthy man, with his own ideas on investing money, family and friend relationships, and who could be trusted.  Lawyers, not unexpectedly, was not high on that list!  Mr Smith, bless his heart, loved looking the top of his game – and so employed a number of advisors, to do important things…he just did not tell the various advisors he had others, and he did not share with one advisor what he was doing with another.  Mr Smith, being the important person he was, hired a typist from time to time to record his directions for his various estate matters.

I do not know at this stage he decided lawyers were not to be trusted, but he had purchased a Family Trust Deed in the mid-1990’s from one Law Firm, had it varied by another Law Firm later in the 1990’s and then lodged it with yet another office in the mid 2000’s. He had his first Will drawn in mid the mid 1990’s.  It would appear that in the mid-2000s Mr Smith was advised of the benefits of tax planning through the use of “bucket companies” and so opened a company.  Now, Mr Smith was later in his life, and whilst I am told he had capacity, he certainly had a difficulty understanding what assets he had and where, which was evident especially in the last two decades of his life.

To help this illustrate, we will call Mr Smith’s Family Trust – the Smith Family Trust.  We will call Mr Smith’s Company – Smith Company.  Unfortunately, Mr Smith could not keep these names straight, and he certainly did not take advice on how these vehicles worked because by the time of his death, he had “Directions” to the Executors of his Estate with incredible and bizarre stipulations.

Now, Mr Smith owned his waterfront home in his own name.  He also owned all the shares in Smith Company.  He was the “Apppointor” of the Smith Family Trust (see our Article Page on the discussion of Family Trusts and the use of Appointors).  Within the Smith Family Trust, he had approximately $2M in mixed currencies.  There was a small parcel of shares in the Family Trust as well.  Smith Company’s only asset was unpaid loan accounts due from Smith Family Trust.

Mr Smith, just to be thorough, over the years had written a number of “Directions” to the Executors and/or Trustees of the Smith Company Trust (remember, it doesn’t exist – it is the Smith Company or Smith Family Trust…so go figure, which was he referring to?!).  In the last valid Deed, he completely rewrote the entire Smith Family Trust…permitting only five beneficiaries of the Trust.  The the following years, however, he distributed income from the Trust to Smith Company – even though the Smith Company was not a beneficiary as a result of his Deed.  (Quite a problem when he did not inform the various accountants, that another of the accountants had varied his Deed, whilst another created a new beneficiary to distribute funds to.)  Then, the fun really started, because he strated to write “Directions” appointing different people to do different things after his death – but again, with no communication – who knows what was a wish and what was a proper direction by Deed.  Without boring you, it turned into a mess.

The only thing that was consistent between his last valid Will and the last valid Deed, was that he had nominated his sole child and the child’s children as equal beneficiaries of his Will and Trust.

Now, for whatever reason, his list of nominees to work on the Will and Trust remained a long list in his planning.  Over the year following his death, and over $125,000 in legal costs (charged by the Executor and the various people competing to have control over the structures — IMPORTANTLY, none of which were the beneficiaries who had been left out by Mr Smith in terms having any control, even though they were the beneficiaries) – the Court found in favour of our clients and passed the Estate and Trust over to the beneficiaries to with as they wish.  So how were these costs incurred, well the Executors contacted the various accountants and house keeper nominated by Mr Smith and asked if they wanted to act, then the Executors engaged in a costly (and unnecessary, benefitting only themselves) investigation of what they should do to “help” these four beneficiaries – whilst refusing to relinquish control to the four beneficiaries and/or make any distributions to the four beneficiaries.

Do you want to know the funniest part of this story (if there is one)…Mr Smith’s neighbor, oddly enough, is a client of mine.  On the eve of the hearing in this case, it dawned on me, that my client had told me about Mr Smith a few years earlier and had told him to come see me – but he had told her he didn’t trust lawyers, and never came.  Had he come, I would have fixed his Estate and Trust and ensured the total wastage of over $125,000 by the Executor and their merry crew of advisors would not have resulted, but instead of a proper estate plan, with legal tax planning and asset structuring protocols would have been implemented.