Not all Discretionary Trust Deeds are created equal

There is a common misapprehension that Discretionary Trust / Family Trust documents are essentially the same and therefore the cheaper the better.

This is a dangerous and sadly often expensive misapprehension as it is inevitably significantly more costly to seek to patch up documentation later that does not achieve the intentions of the maker at the time it was made.

Here are some matters to look out for:

1. The Trustees cannot be the same people as the Default Beneficiaries as they are then essentially declaring that they hold property on trust for themselves (which is not a trust);

2. The Principal / Appointor essentially controls the trust as he/she has power to hire and fire the trustee. Issues of the succession of the control of this power on death, bankruptcy or incapacity must be addressed for operation, sucession and asset protection reasons;

3. Powers of amendment of the Deed need to be sufficiently broad (particularly when the Principal / Appointor clause is to be amended) especially in light of the recent decision of Jenkins v Ellett [2007] QSC 154;

4. Mechanisms for the adding of additional discretionary beneficiaries need to be administratively simple rather than a Deed of Amendment being necessary;

5. A broad class of discretionary benficaries to facilitate ease of giving to churches and missions is also included in our Deed (if desired) without the need for complying with each time the additional beneficiary appointment mechanisms in the Trust Deed;

6. Careful consideration needs to be given to who are Default Beneficiaries as they usually cannot be changed without triggering a resettlement of the trust on which transfer (stamp) duty and Capital Gains tax will be payable;

7. Careful consideration needs to be given to the succession of the control of the trust and its assets to the next generation as trust assets are not the personal assets of a Will maker.

All very good reasons to see us before putting a Discretionary Trust in place to ensure that the documentation is right from the outset.