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The Settlor is the person who "settles" or creates a trust, by providing the settled sum to the Trustee. The settled sum is the initial trust property.
When selecting the settlor, the best practice is to have an unrelated person act in that role e.g. a close, though unrelated, family friend.
We do not accept relatives of the beneficiaries or trustees as Settlors.
It is possible, and we can include this in the deed if you like. (for an additional fee)
It's also important to note that, although a person may be included as a "beneficiary" of a discretionary trust, they cannot actually benefit from the trust unless the trustee actively exercises its discretion to make a distribution to that beneficiary. Until such a point, all "beneficiaries" are more appropriately called "potential beneficiaries", or mere "objects", of the trust.
However, since it can be difficult to add beneficiaries to a trust after it has been set up, it is generally better to have the class of potential beneficiaries as broad as possible. Therefore, it shouldn't be a problem if an ex-spouse is included in the class of general beneficiaries unless there is a chance that he or she could become a trustee or appointor of the trust.
The trustee of a discretionary trust generally has complete discretion each income year when determining which of the objects of the trust (commonly called the "beneficiaries") will benefit from the income of the trust. The Beneficiaries clause of our trust deed is very broad and includes most, if not all members of a family, including great, great, great, great grandchildren (and even further) as well as companies and trusts the beneficiaries are involved with, various charities, and more.
As an example, in one year, the trustee could resolve that each of the children under 18 receive $1,666, Dad receive $20,000, and Mum the remainder. The following year, Dad could receive $50,000, an uncle $10,000, and a related company receive the remainder. The next year, all Dad's living relatives could receive, say, 5% of the trust's income. Provided the trustee meets its duties under the trust arrangement, the distributions are entirely up to him/her/them.
Please note that distributions are generally relevant for tax purposes (i.e., they determine who pays tax on the income), and that they do not necessarily depend on cash moving between the relevant parties.
The trustee also generally has equal discretion regarding distributions of capital, whether during the life of the trust, or when the trust eventually vests (i.e., when it effectively "winds up" and comes to an end).
Please note that trusts and trust law can be quite complex, and there are many more issues involved than those set out above. In addition, how the trust can be run can very much depend upon the terms of the individual trust deed. Therefore, we recommend that you obtain professional independent advice before ordering and operating a discretionary trust.
Yes. The deed specifically provides a number of ways that the trustee can apply distributions on behalf of a beneficiary. This includes "paying the income or capital to a parent or guardian of the Beneficiary or any other person where the income or capital will be applied for the benefit of the Beneficiary, if that Beneficiary is a minor or is otherwise under a legal disability".
The trust effectively has a maximum life of 80 years. This is because most States and Territories require trusts to vest (or wind up) after a maximum of 80 years. This is called the rule against perpetuities, and basically exists so that a person cannot tie up assets forever in a trust.
The rule against perpetuities was abrogated in South Australia and in that State any beneficiary can apply to have the trust wound up after 80 years, but every other State has retained the rule.
Our deed does require the trust to vest within or at the end of 80 years (the trustee has discretion to vest it earlier than 80 years).
The trustee is not prevented from using trust assets for paying debts incurred as trustee - in fact, the exact opposite is provided for. That is, the trustee is explicitly authorised to use the trust assets to pay the debts of the trust.
The trustee cannot use the trust assets to pay personal debts - to do so would breach the trustee's fiduciary obligations.
The wording does periodically change. You must be very careful that by taking this course of action you are not inadvertently backdating the trust. It is, of course, illegal to backdate such documents, and backdating is not effective in any case.
This is because a trust comes into existence when there is (a) a trustee, (b) beneficiaries, and (c) trust property, whether or not there was a signed trust deed as at that date. Simply backdating a document does not satisfy these requirements if it cannot be proven that they were in existence as at the correct date.
We do not date deeds (the clients fill in the date on the date of execution), but we also only provide our most current deeds - i.e., we do not provide our earlier deeds.
If you want anything other than our most current deed, you should seek legal advice from a solicitor who can tailor a deed to your specific circumstances, taking into account the above considerations.
We stopped providing restricted discretionary trusts from the 1st October 2004.
This product was designed to get around some of the problems with discretionary trusts being able to access the small business CGT concessions (due to an anomaly in the tax legislation which meant they were not ever able to satisfy the maximum net asset value test). Basically, it restricted the distributions that could be made to any one beneficiary of the trust to less than 40% of the income and capital of the trust (so that the assets of every single potential beneficiary were not considered assets of the trust for the purposes of the maximum net asset value test).
However, an amendment was made in 2004 to the control test in Division 152 of the ITAA 1997 (refer Tax Laws Amendment (2004 Measures No.1) Act 2004), removing this anomaly and making it easier for discretionary trusts to satisfy the small business CGT concession requirements without needing to have this restriction in the deed (the control test for discretionary trusts now generally looks at actual distributions, rather than potential distributions). This effectively eliminated the need to have a restricted discretionary trust.
Yes we can provide Hybrid Trusts.
These types of trusts involve both fixed elements like a unit trust (and may even issue units), but also give the trustee an element of discretion in relation to the distribution of income and/or capital.
Although these types of trusts have their uses, they are often quite specific to the needs of the relevant individuals setting them up.
We can prepare a deed of vesting and supporting documents to wind up a trust. These documents will be prepared by our in-house legal team in accordance with the terms of the deed, so we ask that you upload an executed copy of the original deed to the online order form.
If the trustee is a company and it is also going to be wound up, this should not happen until after the trust has been vested, as the trustee will be a party to the Deed of Vesting.
To order a deed of vesting online, simply log into your account.
If we have recently established a trust for you, and you discover that you want something changed in the deed, we can generally make the change and update the documents for you in some circumstances. We can only do this if:
· The trust deed has not been signed.
· If already signed, the trust deed must not have been provided to third parties.
· The trust has not opened a bank account.
· The trust has not entered into any contract or arrangements with third parties.
· The trust deed has not been stamped.
A fee may apply, and changes must be made within 7 days after the initial completion of your order.
Any changes in other circumstances will require a deed of amendment. Please contact us at info@docscentre.com.au if this is the case and our team will send you the appropriate order form.
In general, only lawyers are able to draw up legal documents (and do other "legal" work) for a fee, under the Legal Practice Acts of the various States and Territories. Therefore, only a lawyer can be paid to prepare such documents.
However, a person is entitled to draw up their own documents for their own use, but it is important to ensure that, when non-lawyers draft legal documents, the documents are still legally effective.
The fact that a legal document is not drafted by a lawyer does not make it "illegal" as such, although a non-lawyer who does so, for a fee, can be subject to prosecution (for example, S.21 of the Legal Practitioners Act 1981 (SA) states that a person who does something that only a lawyer should do, for a fee, can be fined $10,000).
Leave the legal work to us. We operate an internal legal practice to minimise the risks to your firm. Our deeds and documents are regularly reviewed and updated by specialist tax, corporate and trust lawyers.
Changing the trustee normally requires a deed of variation. To do this, we need to see the existing trust deed, establish how a variation of the deed can be accomplished, and then, usually, prepare the deed of variation, often to be signed by the trustee (sometimes the appointor (or equivalent) also needs to consent in writing - we provide this, too). The deed of variation needs to be prepared on the basis of the client's deed - we cannot really use a "pro-forma" deed.
We offer this service using our standard writable PDF forms. This amendment will be prepared by our inhouse legal team in accordance with the terms of the deed.
As a registered Duties Online organisation, we can process the duty in Victorian and New South Wales for deeds that we have established. (Please note that for NSW stamping, we need the executed deeds in hard copy to process the duty and unfortunately cannot accept a scanned copy.) For Victorian stamping, we encourage you to email us a scanned copy.
Read more about our optional stamping service for Discretionary, Unit and Child Mainentance Trust establishments.
We can prepare a trust deed amendment to make the following changes to an existing trust:
Our legal team will review your existing deed and prepare the amendment as a supplementary deed to be kept with the original trust deed. The deed and supporting documents will be prepared in accordance with the rules as set out in the original trust deed.
Where more than one of these changes is to be made, we provide bundled pricing. The price is $350 for the first amendment, $220 for each additional change requested.
In some rare cases an initial deed of amendment may be required to add the power to make the amendment. In these cases a further $350 applies to make that amendment to the deed to enable the change you want to make.
Yes, we do offer trust deeds that specifically exclude ‘foreigners’ (as defined in the respective States) from being General Beneficiaries of our discretionary trusts.
You can indicate this on your online trust form by answering the relevant questions regarding the intention to purchase property and exclude foreign persons.
A discretionary trust is created when a person known as the “settlor” gives the trustee money or property for the benefit of the beneficiaries. This “settled sum” is the original trust fund.
It is often a good idea for the trustee to open a bank account to deposit the settled sum shortly after the deed has been executed (if the trustee is a company set up by Constitute, the included directors’ resolution assumes this will be done) – this can provide further evidence regarding the date the trust was settled. Some trustees prefer to staple the settled sum to the deed, so as to ensure it is not eroded by bank fees, but this can also be dangerous if the original deed is lost (meaning the settled sum is completely lost). However, if a corporate trustee would prefer to take this alternative option, they should amend the directors’ resolution accordingly.
Yes, we have specific deeds for the existing affected States for concerned members, and as legislation is passed for other States we will develop further products.
To establish a trust with the deed excluding foreign beneficiaries, simply indicate this option on the online form.
Yes, if the existing trust was set up with us, we can prepare a deed of variation to exclude foreign beneficiaries from the class of General Beneficiaries.
These documents are to address new laws in various States which impose a stamp duty surcharge and, in some cases a land tax surcharge, on certain foreign purchasers of residential land in that State. These laws may extend to discretionary trusts. Specifically, if any of the beneficiaries under the trust are ‘foreign’ (as defined by the relevant State Act), the trust could be deemed to be a ‘foreign trust’ (and, therefore, possibly subject to stamp duty and/or land tax surcharges).
We do this on the basis that your Trust has a standard Docscentre Trust Deed. In particular, clause 10.1 of our standard deed allows the Trustee, with the consent of the Appointor, to exclude a person from the class of General Beneficiaries under the Trust, and the documents rely on the exercise of these powers (note that it is not possible to exclude a Primary Beneficiary from being a beneficiary under this power, so if a Primary Beneficiary of the trust is a ‘foreigner’, the trust may still be considered a ‘foreign trust’).
If your trust deed is not a standard Docscentre Trust Deed, this variation will not be suitable for your Trust, and we recommend you seek independent legal advice for the preparation of resolutions specific to your trust deed.
If you would like us to prepare the documents, please email us at info@docscentre.com.au
Yes, we provide this service. Please send us an email to info@docscntre.com.au or call us on 1800 799 666 for more information.
We are able to stamp most deeds that are a little late, however if they are extremely late then we may not be able to assess online.
There may be interest to pay based on the time between signing the trust deeds and them being assessed for duty.
It's up the the relevant state revenue office to determine whether there will be penalties or interest to be paid for late assessments, and we are unable to calculate this until we attempt to process the duty online. As a guide, the VIC and NSW SRO will often waive penalty interest under $20 for deeds that are a few months late, but not if they are years late.
To avoid late interest fees from the SRO trust deeds should be stamped in Victoria within 30 days of signing and within 3 months of signing in New South Wales.
See more information about our trust stamping service.
It is generally preferable to have separate trustees for the following reasons:
Yes, we have deeds available that will exclude foreign persons that might otherwise be beneficiaries for this purpose. (There is a question relating to this on the online trust form so please complete this when ordering the trust establishment online.)
Note that, in relation to the ‘regular’ discretionary trust deed, all such persons are excluded from being beneficiaries at all, despite the fact that the Tasmanian legislation only looks at a foreign person’s ability to benefit from the “capital of the trust estate”.
However, because both the pedigree and the child maintenance trust separately define “capital beneficiaries”, for these Tasmanian deeds, we have only excluded foreign persons from being capital beneficiaries (and note further that, in relation to the child maintenance deed, this is probably unnecessary, since the children (and their LPRs) are the only capital beneficiaries under those deeds, anyway).
This means the persons listed, their children and their children's children - and so on.
If you would like us to remove "and their children and remoter issue" from the primary beneficiaries section of the schedule, please provide special instructions to this effect when ordering.
A discretionary trust can be categorised by its income earning activities:
Trading - where the main source of income is from trading activites
Investment - where the main source of income is from investment activities and includes charitable trusts (established solely for charitable purposes)
Services management - where the main source of income is from service and/or management activities
The appointors (or appointor) of a trust have the real power and control of the assets of a trust, since the appointors have the power to appoint and remove trustees. In most cases, the original appointors include the one or more of the parties for whose benefit the trust is established.
While we are able to assist in removing an appointor and other changes to trusts via a trust deed amendment, we are unfortunately unable to remove beneficiaries of an existing trust due to the risk of resettling the trust.
When a "resettlement" occurs, the old trust is considered to come to an end and a new one begins. This generally happens where the trustee undertakes to do something (a new "trust") not considered when the trust was first established by the original settlor - therefore, the trust has been "resettled".
Effectively, the old trust disposes of all of its assets to the new trust, giving rise to CGT and stamp duty issues.
We would recommend seeking independent legal advice in this situation.
Unfortunately, we’re unable to replace or modernise trust deeds of existing trusts (except for superannuation funds), as this is highly likely to resettle the trust.
It is commonly accepted that small changes to a trust deed, such as the addition of a trust power, will not resettle the trust, but that a change to the beneficiaries, and especially the adoption of an entirely new deed, can resettle the trust.
When a "resettlement" occurs, the old trust is considered to come to an end and a new one begins. This generally happens where the trustee undertakes to do something (a new "trust") not considered when the trust was first established by the original settlor - therefore, the trust has been "resettled". Effectively, the old trust disposes of all of its assets to the new trust, giving rise to CGT and stamp duty issues.
If it’s a minor change you’re after (e.g. a particular clause that you are concerned about or a power you would like to include in the deed), then we may be able to assist. If this is the case, please send an executed copy of the deed and an explanation of the power you’d like to include/vary for our legal team to consider.
If it’s a full deed replacement you’re after, we would recommend seeking external legal advice.
Under our deed, Scott would be included as a general beneficiary, on the basis that he was the de facto spouse of Sarah, who was the sister of the primary beneficiary. Also, Scott continues to be a general beneficiary now, notwithstanding that Sarah is now deceased.
Therefore, the trustee of this trust is able to pay distributions to Scott as a beneficiary.
Our trust deed provides that general beneficiaries include (among others) “any………sister………of any of the Primary Beneficiaries and their Spouses………”. The words “and their Spouses” would include a spouse (as defined) of a sister of the primary beneficiary.
Under our trust deed, "Spouse", means any person with whom the person is or was living or cohabiting (or with whom the person was living or cohabiting immediately prior to the person’s death) in a bona fide domestic relationship.
Scott would be considered a spouse of Sarah under the trust deed, and he remains so notwithstanding that Sarah has died.
Yes. When you set up a Victorian or NSW trust with us, you can also order our Stamping Service. Once the trust deeds are signed, we can arrange for stamping in Victoria or NSW once they’re returned to us.
Our stamping service is only available to accounting and financial professionals. If you are not a professional adviser, please contact your local revenue office for assistance.
We believe that it should be fine to change the name of the corporate trustee, without any adverse consequences for the trust.
As the company itself will be remaining as trustee of the trust and only its name will be changing, we don’t think it should be necessary to prepare and documents for this change. When the company receives its certificate of name change from ASIC, a copy of the certificate should be kept with the trust deed to show that the trustee’s name has changed.
Note that some banks may insist on a deed on confirmation or similar to confirm that although the company name has changed, the trustee of the trust remains the same. We think this shouldn‘t be necessary, but can assist in this regard if so requested (our fee to prepare a deed of confirmation would be $350).
It is generally better to refer to the settlor’s address as it was in the deed of establishment, rather than the settlor’s current address (and this is the way we will prepare the documents).
We say this because the settlor’s only role is to sign the trust deed establishing the trust and pay the initial settlement sum. The settlor should have no other involvement with the trust, and if the settlor’s current address is referred to that may suggest that this is not the case.
Note that the situation is different in relation to the trustees, appointors, etc. of a trust – their current addresses should be referred to in any subsequent deeds or documents regarding the trust.
If a discretionary trust is established using our “foreign exclusion” trust deed, then it should not subsequently be varied so as to include foreign beneficiaries.
We say this because a subsequent amendment to include foreign beneficiaries may constitute a resettlement, which could have serious capital gains tax and stamp duty implications.
We understand that the State Revenue Office (SRO) may grant an exemption from the stamp duty surcharge and land tax surcharge to a trust using our foreign exclusion trust deed on the basis that the trust will never have any foreign beneficiaries. Therefore, if the trust deed was subsequently amended so as to include foreign beneficiaries, the SRO may then seek to impose penalties (and there is also the risk of resettlement, as stated above).
It's "allowed", but it means that the trust will be a "non-resident trust" for tax purposes (and this can lead to bad, or at least inconvenient, tax consequences).
Generally when we tell people this, they then change the trustee.
Refer to the following page on the Tax Office's website for more information:
Residency requirements for trusts:
https://www.ato.gov.au/business/international-tax-for-business/working-out-your-residency/#Trusts
Yes. The reason for this is often because the person with control over the trust is overseas, but they want the trust to be resident in Australia, meaning they need an Australian trustee.
The more important thing is that a beneficiary is represented as an appointor (though even this may not be crucial), because the appointor(s) can remove the trustee and appoint a new one if they like. This effectively means the appointor has overall control of the trust at the end of the day.
Yes, we can prepare a "foreign exclusion" deed of variation for any discretionary trust.
If you would like to order this variation to an existing deed, please complete this order form and email to info@docscentre.com.au along with a scanned copy of the executed deed.
Yes, our discretionary trust deed does enable the trustee to “stream” or categorise different types of income, to the extent that this may be done under the applicable tax laws.
However, restrictions apply in relation to the ability of a trustee to “stream” income of a trust, irrespective of the provisions of the trust deed.
Resettling a trust simply means that a new trust has been created out of an existing trust. This may result in the termination of the original trust or result in the original trust continuing alongside a new trust.
The creation of a trust in these circumstances can have significant capital gains tax and duty implications. Where a trust is resettled, and a new trust is created:
