In recent months, we have been approached by several accountants to either rectify mistakes in Trust Deeds, update Trust Deeds, or reconstruct lost Trust Deeds. Apparently, this is at the behest of banks which are starting to become a great deal more stringent in their review of their customers’ Trust Deeds.
In some cases, this can be an easy fix as certain trust updates are fairly common, such as:
- Changing the Appointor/Guardian of a Family Trust;
- Changing the Trustee of a Family Trust;
- Streaming & Bamford Updates for Family Trusts;
- Change of Name of Family Trust;
- Vesting of a Family Trust;
- Excluding Foreign Persons from a Family Trust ; and
- Updating the Rules of an SMSF.
For other circumstances that are more complex, such as adding or removing beneficiaries, reconstructing lost trust deeds or rectifying errors in the trust deed, it is best to have a lawyer review your client’s trust deed and draft a customised document.
To help you know here to help you stay on top of your Trust Deed knowledge. We have taken some of the Top 10 frequently asked areas of Trust:
- Adding and excluding beneficiaries
We find that many people are intimidated by this process. However, this is not necessary. Removing and adding beneficiaries does not have to be a complicated process. When it comes to adding, this will depend on the wording of the personal Trust deed (something a lawyer knows best), we recommend preparing a deed variation as this gives the trustee permission to amend and change trusts at the trustee’ discretion. For excluding trusts, look to the trust deed first to assess how the trust can be changed in relation to beneficiaries. Then consider if the beneficiary is renouncing his or her interest as a beneficiary (can be mandatory if the change is made in conjunction with a Centrelink Declaration). Otherwise, consider if removal can be acquired when a Trustee makes a declaration that a particular Beneficiary will no longer be a beneficiary.
- Amending trustees’ powers.
There may be times in your life when you amend powers in your trust – planning for succession, changing an appointor or removing a beneficiary. When we change or administer a trust, think about whether they are an individual or a corporation that has the power to amend. Typically, an appointor can amend powers in a trust, but sometimes there may be ambiguity in the trust deed and the trustee may be unsure as to the correct interpretation to be placed on a particular provision of the deed (if this is you, we recommend getting directions from the Court about the interpretation of a trust deed).
- Bamford amendments (for older or more complex deeds);
The amendments stem from The High Court’s changes to the Tax Laws Amendment Act 2011. However, all you really need to know is that for a beneficiary to be presently entitled to a share of the income of the trust estate, that beneficiary must have a vested interest in the income and demand immediate payment from the trustee.
- Extending vesting date.
If the trust deed does not provide you with the superpowers to extend or bring forward the vesting date, you will need to approach the supreme court in your state or territory to make certain changes to the vesting date.
- Contingent vesting deeds.
This is typically when a trust interest in a property is transferred to a person. Contingent interest is defeated by the death of transferee before he obtains possession.
- Unitholder agreements.
A unit trust deals mostly with commercial projects or investments that features one unrelated interest or party. Beneficiaries of a unit trust have a fixed interest in all property that is the subject of the trust. A unitholder trust differs from a discretionary trust as beneficiaries’ rights to income and capital are not fixed and not at the trustee’s discretion.
- Lost Trust Deeds.
A replacement deed can be entered into between the trustee and beneficiaries, there is no longer any evidence of its terms, the trustee will usually be unable to carry out activities such as:
- Opening a bank account
- Gaining finance
- Land title registration
- Testamentary Trusts.
These can be confusing, but ultimately, allow trustees of each trust to decide, from time to time, which of the nominated beneficiaries (if any) may receive the benefit of the distributions from that trust for any given period.
- Trust acknowledgements; and
The Acknowledgement of Trust does nothing other than document what has happened in the past. It is not trying to rectify or change anything; it is merely recording what happened in the past.
- Legal opinions on trust problems
Overall, we hope this list has enhanced your knowledge on Trust Deeds and all the caveats that follow.
If you are not sure where to start, contact Nevile & Co. today.
The information contained on this page is general in nature and does not take into account your personal situation. It is not intended to be relied upon as, nor is it a substitute for specific legal advice. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice.
