Publications and News

Trusts

19 November 2014

Trusts are widely used for asset protection, succession planning and tax planning but they can be a complex area of law and are often poorly understood.

Trusts need to be considered in any estate planning process. Trusts are a separate legal entity and the wealth in a trust cannot generally be given to loved ones via a will.

When we review a trust deed, we ensure it has been signed, witnessed, dated and stamped at the outset. This is important to ensure that it has been created properly. We also ensure any amendment or change in trustee has been carried out according to the trust deed. It is best practice to register a change of trustee at the Land and Property Information to ensure its validity (Retravision (NSW) Ltd v Copeland) unless the trust deed waives the requirement to register.

Up until recently trusts could not be amended, other than for minor administrative purposes, without the real risk of triggering a resettlement in the eyes of the ATO i.e. creating a new trust with often adverse tax implications.

However, since a number of court cases particularly FCT v Clark [2011] FCAFA 5 where the Full Federal Court decided that significant amendment to a unit trust deed did not amount to a new trust being formed, the position has changed.

After Clarke’s case, the ATO produced TD 2012/21. While TD2012/21 does not specifically cover all possible changes to trusts and their consequences, the view of the ATO is that provided the amendment clause is strictly followed, the trust continues and the effect of the change does not lead to a particular asset being subject to a separate charter of rights and obligations, there will not be a creation of a new trust for trust law or tax law purposes.

Trust amendments and NSW stamp duty implications was dealt by the High Court in Chief Commissioner of Stamp Duties v Buckle (1998) 37 ATR 393 and Revenue Ruling No. DUT 017. In a nutshell, a trust deed amendment will not trigger a stamp duty liability unless in that deed another declaration of trust is made over the trust assets.

We strongly recommend a business lawyer is consulted when any amendment to a trust is made to ensure the trust deed is in order and that an amendment is done properly.

This article is general information only and should not be relied on without obtaining further specific information.

Author: Linda Alexander

 

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