Implications for Discretionary Trusts
Our Partner Peter Griffin and Associate Chloe Whereat recently attended a webinar by Dr John de Groot, where they gained some valuable insights on the subject of trust deeds.
One of the key takeaways was that there is a wide variety of trust deeds for discretionary trusts, and it should not be assumed that certain "standard" terms are present in a trust deed. This is particularly important for legal practitioners to bear in mind when reviewing trust deeds and advising clients.
Another point made by Dr de Groot was that many of us think of the Appointor or Principal of the trust as the person who controls the trust because they have the right to remove or replace the trustee. However, many trust deeds allow the trustee to amend the trust deed without any consent or input from the Appointor or Principal. This means that the Appointor's right to replace the trustee can be of no use if the trustee has already distributed the trust assets or amended the trust deed to remove certain beneficiaries. This is of particular concern where the trustee or director of a corporate trustee becomes incapable or dies. Given this knowledge, we suggest to clients that the deed be amended to only allow the trustee to amend the trust deed with the consent of the Appointor or Principal. This provides a good safeguard to ensure that the client's intended beneficiaries are protected, and the trust is managed in accordance with their wishes.
Dr de Groot also emphasised the importance of regularly reviewing trust deeds and ensuring they are up to date with current laws and regulations. This is especially important for discretionary trusts, given Draft Taxation Ruling TR2022/D1 and Practical Compliance Guideline 2022/2 which could affect the tax treatment of these trusts. It is essential that legal practitioners keep abreast of these changes when reviewing trust deeds.
Overall, the webinar was a valuable learning experience and highlighted the need for legal advisers to be diligent in reviewing trust deeds and ensuring they are tailored to the client's specific needs and objectives. This diligence ensures clients can protect their assets and ensure their beneficiaries are provided for in the way they intend.
This article is general in nature and does not constitute legal advice. If you require legal advice in relation to your personal circumstances, you must formally engage our firm, or another firm to provide legal advice in relation to your matter. Bradley & Bray lawyers takes no responsibility for any use of the information provided in this article.
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