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Information Case Studies Case Study 5

Case Study 5: Trust Mistakes Could Have Sunk Farming Brothers

A successful couple working in primary industry decided to give a block of land to their two sons to set up a orchard business.

The land was owned by a trustee company as trustee for a discretionary Trust . The shares and directorships had been correctly resigned and taken up by the two sons. Based on this, the sons had borrowed some $800,000 from a big four bank to develop the business. One son also sold an asset and invested in excess of $350,000 to build a home for his wife and two children on the land.

Knowing the two boys could be a bit fiery, the parents instructed BizSuccession Solutions to set up an exit strategy in case the arguments between them became too damaging and one brother wanted out. In the process of doing this all structures were examined and it was apparent that the family accountant had omitted to change the appointors of the Trust holding the land; they were still the parents, acting jointly. The deed allowed one to succeed the other. This meant if the parents had a change of heart, or the first parent survivor had a change of heart, they could replace the existing trustee overnight. This new trustee would have full control and could put the land on the market.

The two sons stood to lose the land, one brother his home, and the bank its $800,000. The sons would have no asset (other than a $4 P/L company), no home, no income and a pending legal action initiated by the bank.

BizSuccession was able to implement all immediate exit strategies and also fix the appointors of the Trust jointly to the two sons.

Within a year of getting the final signatures, the younger brother found a new life partner who insisted they move to another state. The 'buy out' went exactly as planned.


Julie Says

We are in a syndicate raised by us to purchase a commercial winery. Our accountant was concerned about potential withdrawal of capital and the effect this would have on our bank and remaining backers. Jim was asked to come in, sort it out and get written agreement from all parties as to the movement of capital. He delivered everything we needed and more. Every syndicate member was relaxed and so were our bankers. The legal side was set up by a solicitor of Jims suggestion and it was the simplest set of actions for us all to achieve security of investment.