As an accountant, financial planner or someone with your own trust, you may wonder what lawyers are looking for when changing a trustee or how they go about it.
The process involved in changing a trustee 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:
- the documents are legally valid and effective; and
- that you are dealing with the current version of the deed and relevant stakeholders;
- identify whether the trustee has the power to retire and appoint a replacement and/or whether a Consenting Party has the power to remove and replace the trustee:
- identify the process to effect the change of trustee, including any necessary Consenting Party approval, for example:
- many discretionary trusts give the Consenting Party the power to remove and replace the trustee; and
- many unit trusts require:
- written notice by the trustee to the unit holders to resign; or
- a special or unanimous resolution of unit holders to remove and replace the trustee;
- identify the form of the change of trustee documentation, including whether:
- by deed;
- resolution; or
- written statement; and
- if the trust deed is silent on a change of trustee, using the process available under the relevant State/Territory laws governing trustees (e.g. section 6 of the Trustee Act 1925 (NSW)).
After this process is complete, a tax lawyer will carefully consider any CGT or State/Territory duty issues in relation to the proposed change of trustee, for example:
- CGT event A1 will not happen merely because of a change of trustee; however,
- full ad valorem duty is payable in some States/Territories in relation to the transfer of dutiable property in that jurisdiction from an outgoing trustee to an incoming trustee unless a specific concession applies, for example, in NSW, one of the key conditions for concessional duty ($50) on a change of trustee is that:
- none of the continuing trustees remaining after the retirement of a trustee is or can become a trustee; and
- none of the trustees after the appointment of a new trustee is, or can become, a beneficiary under the trust.
In these circumstances, it may be necessary to specifically exclude the incoming trustee as a beneficiary of the trust prior to the change of trustee transaction in order to facilitate access to the concession.
Although trust deeds are many and varied, the process to identify the manner in which to change the trustee, is the same.
If you or your clients need any assistance to change a trustee of a trust, contact firstname.lastname@example.org.