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TESTAMENTARY DISCRETIONARY TRUSTS

Increasingly, I’m discussing with clients the benefits of Testamentary Discretionary Trusts.

Testamentary Discretionary Trusts provide a valuable tool in estate planning that offers increased protection, flexibility and potential tax benefits for your beneficiaries.

Legally a trust separates the legal and beneficial ownership of the assets held by the trust to be inherited by your beneficiaries. This separation of ownership protects the assets from third-party claims, including creditors, if any beneficiaries encounter financial difficulties or even bankruptcy. A trust may help protect a beneficiary from losing trust assets when claimed by an ex-spouse in family law matters.

Testamentary discretionary trusts provide flexibility regarding how and when your beneficiaries receive their inheritance. You may stipulate that assets are distributed as a regular maintenance payment rather than allowing the beneficiaries to receive the assets held in trust. A trust can also be used to protect the trust's assets from misuse by the beneficiaries, particularly where there are concerns about a beneficiary’s ability to manage money.

There are many potential tax benefits available with testamentary discretionary trusts. Dividends from shares can be distributed yearly in the most tax-efficient way. The trust may pay mortgages on property rather than beneficiaries receiving the money as income. Testamentary discretionary trusts are also very beneficial for minors who may receive payments up to the amount of the tax-free threshold currently ($18,200) before any tax is payable. 

Although there are many benefits to testamentary discretionary trusts, there are some ongoing administrative costs, and it is helpful to consider if a testamentary discretionary trust is right for you. If you would like to know more about testamentary discretionary trusts, I would be happy to advise if a testamentary discretionary trust is right for you.

Remember, anyone over the age of 18 should have a Will regardless of the size of their estate. It is equally important to always keep your Will up to date, ensuring any changes in assets or family relationships are properly accounted for. If you wish to do a new Will, update an existing Will or have any questions regarding Wills and Estates, please don't hesitate to contact me.

 

COMMERCIAL AND RETAIL LEASES

Whether you are a landlord or a tenant, navigating the intricacies of leasing a commercial or retail property can be challenging. Below is a list of key matters that affect commercial and retail leases, including:

• Costs and Outgoings

It is crucial to consider the amount and frequency of payments, including how and when rent increases can be imposed. There are often other costs in the lease that are important to clarify before signing, such as the outgoings, promotion fund payments, utilities and property management fees.

• Term/ Duration

Leases can be short-term or long-term, and you will be legally bound for the duration of the lease. Therefore, it is crucial to understand the length of the lease and any options for renewal and notice periods.

• Assignment and Subleasing

Some tenants may wish to sublet to another party or assign the lease if they choose to sell their business or outgrow the premises. It’s important to understand what is required in those situations before commencing the sublease of the premises or attempting to assign the lease.

• Regulations and legislation

Depending on the location, duration of the lease or intended use of the premises, it may be governed by various laws and regulations, such as the Retail Shop Leases Act 1994 (Qld). The Act also imposes obligations on landlords and tenants about entering into leases and their conduct during the term of the lease.

• Default and termination

Ending a lease can be challenging irrespective of whether the lease has run its term or one of the parties wishes to end the lease early. It is valuable to understand how the lease may end or be terminated, obligations of the parties on termination and any dispute resolution processes before entering into the lease.

• Security deposits or bonds

Security deposits are usually required when leasing commercial or retail premises and can be a large amount of money. How much has to be provided and the manner (e.g. a cash deposit, a guarantee issued by a bank, et cetera) must be understood and allowed for when entering into a lease.

• Insurance

Insurance is essential for any business, but minimum requirements are usually set out as part of the lease and may vary depending on the type of business.

• Other Matters

Other rights and responsibilities set out in the lease have significant implications for the parties (particularly the tenant). They will include the permitted use, each party’s right to alter the premises, permissible conduct on the premises and other limitations imposed by the lease.

If you have any questions or if you are considering granting or entering a commercial or retail lease, contact me for advice on your individual circumstances and let me help you by ensuring your interests are covered. 

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BUYING OR SELLING A PROPERTY WITH AN EXISTING TENANCY AGREEMENT

When buying or selling a property, it is not uncommon for it to have a tenant. If you are buying the property as an investment, it may be beneficial to continue the tenancy. However, if you wish to live in the property after settlement, notice to leave must be given to the tenants. Notification must be provided to the tenants in the required form, stating the reason for ending the agreement and giving the required notice period (generally two (2) months from the date of notice).

In October 2022, the Residential Tenancies and Rooming Accommodation Act 2008 (the Act) introduced new requirements for ending tenancy agreements. Although there is no longer an option to end a tenancy ‘without grounds’ there are still several specific reasons available to end a tenancy, including:

• a fixed-term tenancy is coming to an end;

• unremedied breach;

• the property is being prepared for sale or is being sold with vacant possession;

• the owner or their relative is moving in;

• change of use of the property;

• the owner is doing significant repairs or renovation, or the property is subject to demolition or redevelopment; or

• if the property manager/owner and tenant mutually agree in writing to end the agreement.

The above reasons are grounds to end a periodic or fixed-term agreement on the date of expiry. But it is important to understand that a fixed-term agreement cannot be terminated prior to the expiry date unless by mutual agreement.

If there is a fixed-term agreement that is due to expire within two (2) months before or after settlement, then it is generally best the seller, or their agent provides the required notice to the tenants. However, if the fixed-term agreement is not due to expire for more than two months after settlement, the fixed-term agreement would transfer to you as the buyer. It would then be you or your agent's responsibility to give the required notice to end the tenancy. 

Regardless of who will end the tenancy, the most important thing is that any tenancy agreements are properly addressed in the contract of sale to avoid unnecessary complications that may impact settlement.

If you are considering buying or selling a property with existing tenants, contact me to review the contract before signing.  

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CYBER ALERT

Every day cybercriminals are targeting businesses and clients through email scams. In recent years hackers have impersonated law firms by altering electronic communications, including email, social media, texts, and documents resulting in financial losses for people across Australia. The Australian Cyber Security Centre has identified an increased risk for parties buying, selling and leasing property and advises that law firms and clients must be vigilant when communicating via email, particularly where financial transactions are involved. This is why we always send an alert to clients when asking them to transfer funds.

There are a few basic steps you can take to reduce your risk of falling victim to a scam:

1. Verify payment details: If anyone asks you to transfer money, or provides you with updated payment details, take extreme care to confirm the sender's identity and bank details by calling the sender’s established phone number or meeting them face-to-face before transferring any funds.

2. Be Cautious: If you ever receive a suspicious email, do not click on any links or use any contact details provided in the email unless you have first confirmed the email is not a scam.

3. Secure your accounts: use strong passwords and multi-factor authentication where possible to prevent unauthorised access to your emails or other accounts. I personally use a password manager to simplify carrying out these rules.

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RECENT ACHIEVEMENTS

2022 was a big year for me. I was honoured to win the 2022 Volunteer Practitioner of the Year for My Community Legal, Robina. I was also elected to the Executive Committee as Vice President of My Community Legal.

Over the last year, I have redesigned my website and added new content. I am excited to share with you all the official launch of my new and improved website davidlobbezoo.com.au; you can now explore the new site, and if you have any feedback, please let me know.

Thank you for taking the time to read the newsletter. As always, please don't hesitate to contact me if you have any questions or require my assistance now or in the future.

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