Steps 1, 2, 3, 4 …10 – always(!) – Review the Trust Deed!

With so many businesses using a trust to operate their businesses for asset protection and tax planning purposes, it is very easy to overlook the importance of the trust deed. The terms and conditions of the trust deed should always be at the forefront of every practitioner’s and accountant’s mind.

The trust deed should be reviewed for matters such as:

  • has stamp duty been paid on the deed?
  • who is the trustee?
  • who is the appointor/guardian? What is the succession of these roles?
  • who are the beneficiaries? Are they the same for distributions of capital and income?
  • does the trustee have the power to undertake the transaction contemplated?
  • when does the trust end (ie. vest)?
  • is the distribution of income / capital discretionary or subject to prescribed classes?
  • has a section 95 definition of income been adopted for the operation of the deed?

There is nothing more alarming for all involved to find that the beneficiaries do not include a corporate beneficiary when distributions have been made to the “bucket company” for years! OR that a named beneficiary is in fact excluded as a beneficiary whilst acting as a sole trustee! OR that the deed prohibits the trustee from self-dealing whilst the trustee/beneficiary loan account sits at $400,000!!

Whilst the operation of the trust is primarily governed by the terms of the deed, the trust is a creature of equity and is subject to the rules of equity and the Trustee Act, as such, we suggest that an experienced solicitor be asked to review the terms of the trust deed when any transaction or dealing with the trust or its assets is contemplated.

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