Private ruling: Present entitlement to income of a deceased estate
Published: March 2013
Ruling period: For year ended 30 June 2013 | For year ended 30 June 2014
Date scheme commenced: 1 July 2012

Ruling: Q1: Are the relatives mentioned in the Will presently entitled to the income earned from the assets in the deceased estate? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1936 Section 99 | Income Tax Assessment Act 1936 Section 99A

Reasons for decision: Summary: The wording of the Will indicates that the assets of the deceased will remain in the deceased estate until the potential beneficiaries individually meet the conditions set out in the Will. Upon meeting these conditions they will be then entitled to their share of the assets or monies held in the deceased estate. This has been evidenced by the parent meeting the conditions and they have been paid out their share. The two conditions are: they have to survive the deceased by a period of thirty days; and they have to attain the age of twenty five years. If any of the beneficiaries do not meet these conditions their potential share of the assets do not go to their estate, but they will remain in the deceased estate and be divided amongst the other beneficiaries who do meet the conditions. The potential beneficiaries are not currently presently entitled to the income of the deceased estate. There are no clauses in the Will that gives them entitlement to income from the estate. The potential beneficiaries do not have an indefeasible, absolutely vested interest in the income under the terms of the Will. They do not have the right to demand income. The income earned will become part of the residue of the estate. A testamentary trust cannot be formed for the potential individual beneficiaries. A testamentary trust is created where there is a condition in the Will of the deceased client that requires that a bequest is to be held in trust for a beneficiary until some future date. For example, an asset or money being left to a grandchild, but is not available until they attain the age of 18 years. A testamentary trust is not the same trust as that for the deceased estate. In this case the potential beneficiary has conditions to meet before the assets or money will be left to them. Their share is not being held in trust for them until they attain a certain age, they do not become entitled to it until they reach that age. Because no one is presently entitled to the income the trustee will be assessable on the income of the estate.

Relevant facts: The relevant trust tax return will exceed three years from the date of death. | The Will of the deceased was probated in 20XX. | The Will contained only five clauses: | · Clause 1 revokes previous Wills and declares this the last Will; | · Clause 2 appoints the executor and trustee; | · Clause 3 allows for alternative executors/trustees; | · Clause 4 deals with the disposition of the assets: | (a) to pay my funeral expenses, my testamentary expenses, proved debts and all costs of administering the estate. | (b) to hold the rest and residue upon trust for such of them my parent and certain relatives as shall survive me for a period of thirty days and attain the age of twenty five years and if more than one in equal shares.; | · Clause 5 directs that the remains be cremated. | The parent's share was paid out shortly after the grant of probate.