We recently acted for clients who successfully applied to the Supreme Court of Queensland to have permission to have the vesting date of their trust extended for forty more years than what was provided for in the trust deed.
The case is a first of its kind for Queensland and its successful outcome potentially saved our clients from incurring around one million dollars in stamp duty and capital gains tax in the very near future.
The trust deed provided for the trust to vest forty years after the original start date. This forty year deadline was coming up in 2017. In Queensland, the maximum term which a trust can run for is eighty years (which is the common period stated in many trust deeds).
Normally, where a trust deed has a shorter life specified, a trustee still has the power to amend the trust deed to extend the vesting date to the end of the maximum 80 year period. However, our clients’ deed specifically prohibited this.
Often, after a trust deed is signed, no further thought is given to the terms of the deed. It should not be assumed that trust deed clauses are “standard” and allow the trustee to always do what they intend to do, or make any amendments needed. The deed should always be checked by a lawyer. Some issues which we have come across in reviewing discretionary trust deeds include:
- Certain clauses in the deed are specifically not allowed to be amended;
- The ability to amend the deed refers to clauses “hereinbefore” being able to be changed, which on strict interpretation means only the clauses above the amendment clause (and not after) can be varied;
- There are restrictions on being able to distribute income to the trustee, when the trustee had previously been treated as though they are a beneficiary of the trust;
- The definition of “spouses” does not extend to de facto partners and so they are not included as beneficiaries; and
- The deed does not adequately deal with who manages the trust after the death of the principal or appointor.
So, in essence, trust deeds should be reviewed periodically and not forgotten about