How to rectify a trust deed
As an accountant, financial planner or someone with your own trust, you may wonder what lawyers look for when rectifying a trust deed or how they go about it.
Rectifying a trust deed corrects one or more mistakes in the trust deed which does not accord with the original intention of the parties.
The process involved in rectifying a trust deed is as follows:
- review the trust deed and identify the relevant mistake(s); and
- confirm with the parties to the relevant trust deed, for example:
- in relation to an original trust deed – the settlor and the initial trustee(s);
- in relation to a deed of variation – the trustee(s) and the appointor(s)/principal(s)/guardian(s); and
- in relation to an SMSF bare trust/holding trust arrangement – the SMSF trustee(s), the bare trustee(s)/holding trustee(s) and the SMSF member(s),
their original intention with regards to the subject-matter to which the mistake(s) relate.
After this process is complete, the parties to the trust deed enter into a Deed of Rectification that:
- identifies the mistake(s) in the trust deed;
- outlines the original intention of the parties with regards to subject-matter to which the mistake(s) relate; and
- rectifies the trust deed by correcting the mistake(s) therein so as to align with the original intention of the parties as always intended.
Common reasons to rectify a trust deed
Trust deeds are often rectified for the following reasons:
- original trust deeds incorrectly spell the name of a relevant stakeholder (this is often an issue for lenders if the trust is seeking to borrow);
- original trust deeds do not refer to the full legal name of a relevant stakeholder (again, this is often an issue for lenders if the trust is seeking to borrow);
- deeds of variation incorrectly refer to:
- the parties to the original deed or previous deeds of variation;
- the establishment date of the trust or previous deeds of variation;
- clause references pursuant to which specific actions were purportedly carried out; and
- SMSF bare/holding trust deeds refer to the incorrect asset.
With the prevalence of trust deeds, deeds of variation, SMSF deeds and SMSF bare/holding trust deeds, mistakes can occur and deeds of rectification are a formal way to highlight the mistake, identify the original intention of the parties in that regard and fix the issue.
If you or your clients need any assistance to rectify a trust deed, contact firstname.lastname@example.org.