Case Study


Jim's Farm - Case Study

Jim was running his very large farming operations through his Family Trust (which also owned all of the land).

The farm had originally belonged to Jim's parents and the running of the Farm had passed to Jim and his brother Mark when Jim's father passed away 10 years ago. Several years after, that Jim had bought Mark's share from him, and Mark had moved on.

After we investigated the Family Trust Deed, Jim was horrified to learn that control of the Trust rested with the Appointor (the person who can hire and fire the trustee). While Jim was Trustee of the Trust, Jim's Mother Iris was the Appointor of the Trust. Her Will left everything (including her Appointor role) equally between her two sons, Mark and Jim. This meant that if Iris passed away with the existing documents in place, then Mark could potentially inherit 50% of the control of the Trust back again. Fixing this issue now was fairly straight forward, fixing it in the event that Iris had passed away could potentially be extremely costly and time consuming and would probably end up in the courts.

Mike versus Mary - Case Study

A number of years ago, I came across a business owner who while running a profitable business was still struggling to pay off his deceased business partner's wife.

I found out that Mike had a hand shake agreement with his business partner Dan that if either of them passed away, their life insurance would be paid to their wife and the business would go to the surviving business partner.

When Dan passed away, his wife Mary was paid the life insurance as she was the beneficiary. Mary then also asked Mike to either accept her as a half owner of the business or pay her out another $600,000 for "her” share.

As there was no written Partnership Agreement, Mike had no option but to spend the next 5 years paying off the "debt” he now owed to Mary. This significantly affected him and his family, and could have been avoided by having a planned Exit Strategy and Succession plan and a signed Partnership Agreement.


 
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