Introduction

As an accountant, financial planner or someone with your own trust, you may wonder what lawyers look for when amending a trust deed or how they go about it.

The process

The process involved in amending a trust deed is as follows:

  • review the original trust deed and any previous amendments, changes of trustee or changes of appointor/principal/guardian (Consenting Party) to ensure:
  • all documents are legally valid and effective; and
  • that you are dealing with the current version of the deed and relevant stakeholders;
  • identify the amendment power in the trust deed;
  • identify the scope of the amendment power and confirm whether it is broad enough to cater for the intended amendment(s), this also requires specifically identifying any specific restrictions on the amendment power;
  • identify the process to exercise the amendment power, for example:
  • many discretionary trust deeds require any amendments to be approved by the Consenting Party; and
  • most unit trust deeds require any amendments to be approved by a designated percentage of unit holders; and
  • the relevant approval may be required before, concurrent with, or even after the amending document is executed in order to be legally valid and effective;
  • identify the form of the amending document, including:
  • by deed (revocable or irrevocable);
  • resolution; or
  • written statement;
  • identify whether there are any other requirements in order for the amendment to be legally valid and effective, for example, some trust deeds require that a deed of amendment must be:
  • registered with the relevant State/Territory authority; or
  • stamped with the relevant State/Territory revenue authority,

in order to be legally valid and effective;

After this process is complete, a tax lawyer will carefully consider the issue of ‘resettlement’ and whether the proposed amendments will trigger any tax or duty in the circumstances.

After considering the trust, tax and duty issues outlined above, a tax lawyer will draft the relevant document suite, including:

  • a trustee resolution approving the proposed amendment(s) and the execution of the relevant deed of amendment or other amending documentation;
  • any necessary approvals (e.g. the prior written consent of a Consenting Party); and
  • the deed of amendment or other amending documentation itself.

Common reasons to amend a trust deed

Trust deeds are often amended for the following reasons:

  • to remove a named beneficiary following divorce/relationship breakdown or for Centrelink purposes;
  • to insert specific powers relating to borrowing or providing security to meet particular lending requirements;
  • to exclude ‘foreign persons’ so as to avoid duty and/or land tax surcharges in various States/Territories;
  • to allow for the ‘streaming’ of capital gains and franked dividends separate to other categories of income;
  • the ensure that a unit trust deed meets the definition of a ‘fixed trust’ for NSW land tax purposes so as to ensure that the trust can access the NSW land tax-free threshold; and
  • to extend the vesting date of the trust.

Conclusion

 Although trust deeds are many and varied, it is first necessary to determine the ability to amend the deed and, if so, following the process outlined in the deed itself.

If you or your clients need any assistance to amend a trust deed, contact ineedachange@mosaictaxlegal.com.au.