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Common trust deed issues are easy to avoid. Here are 9 issues that often come up.
Common Trust Deed Issues
Common trust deed issues cost you time and money and hence best to be avoided. In this episode Emily Pritchard of ACIS will walk you through these 9 issues.
Here is what we learned but please listen in as Emily explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Common Trust Issues
Here are 9 issues that often come up in trust deeds.
1 – Names and ACN’s
Make sure you get the name right. If somebody has a middle name include the middle name. Don’t change William to Billy and other endearments. Don’t turn the middle name into the first name, even if the preferred name.
2 – Stamping
Depending on in which state or territory the deed is stamped, stamp duty on establishment of the trust might apply.
3 – Automatic Removal of Trustee Clause
Banks hate this one. Because it means that they can’t step into the bankrupt trustee’s shoes to liquidate trust assets. So banks will often not lend unless this clause is removed.
4 – Powers
Older trusts often don’t give a trustee the power to trade in derivatives, so make sure you amend the deed before you trade in derivatives. And look out for a conflict of interest clause.
5 – Vesting Date
Check that the trust hasn’t vested yet and is not close to vesting.
6 – Read the Deed
Easily said, but we all know that deeds are not a great read. So look out for the vesting date, what happens to appointor and/or trustees when they lose capacity or die and check that whatever the trustee wants to do (sell or buy assets and distribute profits), they are authorised to do so by the deed.
7 – Execution
If you have a corporate trustee, make sure the right people sign the trust deed. When the constitution says 2 directors need to sign, then well, 2 directors need to sign. If the constitution says 1 director and the company secretary, then just the director signing is not enough.
And make sure that the person witnessing the deed is not a person party to the deed, ie a beneficiary or trustee etc.
8 – Settlor of a Unit Trust
A unit trust can be set up with or without a settlor. If you have a settlor, then you have trust property from the start. And that is the safer approach.
If you don’t have a settlor, then you only have trust property when the unit holders pay their subscription fees. And that can be an issue if the unit trust signs a contract before subscription fees have been received. Because then you don’t have trust property and hence you don’t have a trust. This can potentially mean that you have two transactions, both attracting stamp duty, instead of just one.
9 – Change in officeholders of a trustee company
Changing the office holders of a corporate trustee does not require amending the deed.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 15 March 2021
Tax Talks spoke to Emily Pritchard - Legal & Client Services Director at Acis. - for more details.
