Second sight The power of a review
The law is complex. It changes over time and relies on interpretation. And sometimes the weight of those changes can be costly depending on which side of the ledger they fall.
Equity Trustees National Manager, Continuing Trusts, Jonathan Guthrie-Jones, says a client recently wanted to sell a property in their capital protected trust and use the proceeds to pay for their move into a residential care facility. Unfortunately, a capital protected trust (or life interest) imposes restrictions on the life tenant or beneficiary’s access to capital.
Their ability to sell the property and utilise funds appeared to be barred, at least according to the initial reading of the terms by the trustee. That was until Equity Trustees took over the trust’s management.
“It came down to the way they interpreted it,” Jonathan says.
“Some wills are very specific and there's very little wriggle room, but with most wills there is that space in which your interpretation over time can shift to the benefit of the beneficiaries for whom the testator had wanted to provide for.
“Rather than just accepting what has been, we will review it each year in its entirety. We found the trust was able to make a loan to this individual so that when they went into the aged care facility, they could pay for the deposit.”
The review also led to another unexpected benefit.
“The life tenant received a substantial debt from Centrelink due to their income benefit exceeding Centrelink’s threshold. They had to pay back quite a substantial amount of money. But we found that specific interpretation also wasn't correct, so we've been able to get that pension repaid to the individual.”
“Any recommended changes will go through that committee to make sure that it's in the best interests of the trust to proceed with those changes.”
The annual review also includes the trust’s governing documents.
“If there's any part where it's perhaps a little bit grey or there's a question mark, we'll then turn it over to our internal legal team to provide advice as to the correct administration of the trust.”
Finally, the Equity Trustees team will reach out to the life tenant or any beneficiaries involved.
“We make sure that all is well with them and, as part of that, we determine what we want to try to achieve over the coming year.
“The annual process goes through many different eyes and sets of hands which is one advantage of using a professional trustee company as opposed to an individual trustee who will, more than likely, not see different options.”
Equity Trustees National Manager, Continuing Trusts, Jonathan Guthrie-Jones, says a client recently wanted to sell a property in their capital protected trust and use the proceeds to pay for their move into a residential care facility. Unfortunately, a capital protected trust (or life interest) imposes restrictions on the life tenant or beneficiary’s access to capital.
Their ability to sell the property and utilise funds appeared to be barred, at least according to the initial reading of the terms by the trustee. That was until Equity Trustees took over the trust’s management.
“It came down to the way they interpreted it,” Jonathan says.
“Some wills are very specific and there's very little wriggle room, but with most wills there is that space in which your interpretation over time can shift to the benefit of the beneficiaries for whom the testator had wanted to provide for.
“Rather than just accepting what has been, we will review it each year in its entirety. We found the trust was able to make a loan to this individual so that when they went into the aged care facility, they could pay for the deposit.”
The review also led to another unexpected benefit.
“The life tenant received a substantial debt from Centrelink due to their income benefit exceeding Centrelink’s threshold. They had to pay back quite a substantial amount of money. But we found that specific interpretation also wasn't correct, so we've been able to get that pension repaid to the individual.”
The benefits of a thorough review
Jonathan says Equity Trustees performs a comprehensive review of the trusts it manages every year.
The review includes areas of the trust such as the investment strategy and investment time frame – if any part of the portfolio hits certain thresholds, it will be reviewed by Equity Trustees’ investment committee.“Any recommended changes will go through that committee to make sure that it's in the best interests of the trust to proceed with those changes.”
The annual review also includes the trust’s governing documents.
“If there's any part where it's perhaps a little bit grey or there's a question mark, we'll then turn it over to our internal legal team to provide advice as to the correct administration of the trust.”
Finally, the Equity Trustees team will reach out to the life tenant or any beneficiaries involved.
“We make sure that all is well with them and, as part of that, we determine what we want to try to achieve over the coming year.
“The annual process goes through many different eyes and sets of hands which is one advantage of using a professional trustee company as opposed to an individual trustee who will, more than likely, not see different options.”
Last updated: 10 February 2025