LOCHDOWN FLICKS: ESTATE PLANNING MOVIES THAT MIGHT COUNT AS CPD (BUT PROBABLY WON’T) – PART 6

Christian Chenu

Film: Secretariat – Death Taxes 

Starring: Diane Lane, John Malkovich

Because a legal review of Seabiscuit would take too long

In honour of Melbourne’s Spring Racing Carnival, this week in Lochdown Flicks we’ve decided to adopt an equine theme and explore the 2010 movie Secretariat.

In real life, Secretariat was arguably America’s greatest racehorse. He is one of only thirteen horses ever to have won the ‘Triple Crown’, being the title given to horses that win the Kentucky Derby, the Preakness Stakes and the Belmont Stakes in a single year. Dubbed the ‘tremendous machine’, Secretariat ultimately won the 1973 Belmont Stakes by a staggering thirty-one lengths.

When horses and taxes collide

The move Secretariat is much more concerned with the travails of the horse’s owner, Penny Chenery. Penny is the daughter of an established stud owner, however both her father and his stable are in terminal decline. In short order, her father passes away and his estate receives a $6 million estate tax bill. Short of selling the promising but as yet unproven Secretariat, Penny has little option but to syndicate breeding rights to the horse. The catch is that those breeding rights are only worth enough money to cover the tax bill if Penny gives performance guarantees that Secretariat will win the Triple Crown. And therein lies the drama of the movie – Penny needs to win the Triple Crown, or literally lose the farm.

If you find a legal cliché that wasn’t thrown into this movie, please let us know

The horseracing in Secretariat is dynamic and filmed with a kinetic energy that lifts the rest of the movie.

In its early sequences, though, the story focuses on estate taxes and other legal cliches, including family disputes, testamentary capacity and fraud. These are usually dished out by Penny’s husband, a lawyer whose defining personality trait is providing generic legal insights (including pearls of wisdom such as “they could be held liable in breach”, “the estate is vulnerable” and “tax issues!”). You can tell he’s a lawyer because he always wears a suit, even when barbecuing.

Frankly, Penny’s family would have been much better advised to consult Sophie Cohen’s excellent webinar presentation on the tax implications of estate planning.

Just because there’s no inheritance tax, doesn’t mean you can’t make a mess of it

Famously, Australia does not have an inheritance tax (in contrast to America and other developed economies). However, tax is a central consideration in any carefully prepared estate plan.

Testamentary Trusts (being discretionary trusts created under a deceased’s will) and superannuation are obvious examples of how tax can come into play. Other issues to consider include state-based taxes such as transfer duty and land taxes, as well as outstanding loan accounts and unpaid present entitlements between the deceased and their related companies and trusts.

Penny’s husband: barbecue maestro or suspender-clad hipster?

These issues are beyond the scope of this short article. Nonetheless, the essential piece of advice remains as it always has been: an effective estate plan requires considered input from both financial and legal specialists. In particular, the use of testamentary trusts should be carefully considered where the estate is likely to continue to earn income or where there is a genuine asset-protection need.

Loch Legal will be happy to consider all of your estate planning requirements. Please contact Sophie Cohen (sophie@lochlegal.com.au) on 0411 866 505 or Christian Chenu (christian@lochlegal.com.au) on 0417 015 997 to discuss how we can help.

Secretariat is now streaming on Disney+

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