This is a sad trust story and a true case study, the opposite of our happy story Family trust: car for granddaughter. 

Background

In this instance, the farmer had two children, a son who worked on the farm and a daughter who went to university and ultimately moved off the farm and got married.  During the years the daughter was studying, the farm (operated through a family trust) distributed income to the daughter for tax purposes and used the tax savings to pay for the cost of her tuition as well as buying her a car.  This is of course great use of trust, so where did this go wrong?

The issue

The problem arose due to the amounts paid to the University, the car dealer and her living expenses, all legitimately paid on her behalf, were not allocated to her loan account in the Family Trust financial accounts. As a result, her loan account grew to $80,000 over this time.  When she got married her husband happened to see a copy of the family trust accounts and noted that the trust owed her $80,000.  She then spoke to Dad who explained that yes, the trust had distributed income to her, however, this was offset by the costs of her study, vehicle and accommodation in Perth during that time.  

Unfortunately, she insisted on being paid out the balance of her loan account as it appeared on the balance sheet as a liability of the trust, owing to her.  We understand that Dad paid her out the $80K she thought she was owed and they have not spoken since.

Disclaimer: This information is general in nature, and this is a complex area of law, and you should examine your eligibility for these concessions carefully under the criteria set out in the legislation, so before acting it is important to seek professional advice related directly to you and your circumstances, contact your Primarius team leader, or email us at info@primarius.net.au if you require assistance.