CGT Hotspots in Restructuring Trusts in Estate Planning

Restructuring Trusts in Estate Planning

TEN Paper

There are significant tax issues, especially in relation to possible capital gains tax (CGT) liabilities, which should be considered whenever a client intends to restructure a trust.  This is particularly the case in the restructuring of entities, particularly trusts, in a family group. 
From the program for this event, this paper will consider the CGT perspective of:

  • Structuring trust deeds to minimise CGT problems;
  • Creation and extinguishment of rights – a CGT checklist;
  • Assignment of loan accounts and unpaid present entitlements (UPE);
  • CGT event C2 – when a taxpayer’s ownership of an intangible asset ends;
  • CGT event D1 – when a taxpayer creates a contractual or other legal right in an entity;
  • Promising never to make a claim and disclaimers – is this tax effective?;
  • Removing beneficiaries as discretionary objects – tax position explained;
  • Reimbursement agreements and s100A tax issues; and
  • Changing trustee or appointor – tax impact. 

When advising clients there is always a conflict between the twin agendas of control and asset protection.  There are always a number of often competing factors that should be considered in relation to estate planning and restructuring.  More often than not, as tax professionals, we will emphasise the asset protection benefits of estate planning structures, advising clients on things like relative tax benefit, business/family succession and risks relating to relationship breakdowns.  This usually involves careful consideration of the right combination and balance between those persons who are trustees, directors, shareholders, appointors and beneficiaries and choosing those who to fulfil these roles very carefully. 
Taking into account all of these concerns, if a client instructs to restructure a trust in order to concentrate the practical control of that trust in one individual, there are a number of ways in which this can be achieved.  Prior to the implementation of the instructions however, the related tax risks should always be considered to ensure any restructure does not bring about unforeseen and unintended tax consequences. 

Download the full paper to continue reading: CGT Hotspots in Restructuring Trusts in Estate Planning