The recent AAT decision in the case of Bendel and Commissioner of Taxation  AATA 3074 is in stark contrast to the ATOs longstanding position that an unpaid present entitlement of a corporate beneficiary constitutes the ‘provision of financial accommodation’ by the company to the distributing trust. […]
All May Not Be Lost
Acis, current as of: 10 December 2014.
The recent anniversary of the Queensland floods prompted us to consider the potential impacts of lost trust documents. While we all understand the importance of trust deeds and the need to keep them safe, accidents and incidents happen.
Several of our clients lost deeds (and many other things!) in the floods and, without a central trust deed registry, they were potentially in hot water (excuse the pun!) because the deeds are the only means of establishing the terms of the trust itself.
Replacing a trust deed
If a loss occurs, the existence and proper operation of a trust may require lost trust deeds to be replaced. In practice, where you can show that the trust has been established, this can be done via:
a) adopting a replacement trust deed; and/or
b) seeking a declaration from a court of the validity and terms of the trust.
In each case, the trustee must be able to show that the trust was validly established and prove the terms of the trust as they existed at the date of establishment. It’s generally recommended that the trustee contact the firm which prepared the trust and obtain a copy of the trust deed.
If that’s not possible, the trustee may obtain a copy of the form of trust deed generally in use at the time by the firm which prepared it. The trustee must then establish, as closely as is possible, the terms of the trust as they existed at its creation.
On the bright side, if your lost trust deed was prepared by Acis – and if we prepared the deed after August 2006 – we have an exact copy in our records. If we prepared it prior to August 2006, we are likely to have all the relevant details and a pro forma deed which would have been used for your trust. If not, we may still be able to provide you with a replacement trust deed.
It’s not without limitations
Unfortunately, that’s not the end of the story. There are limitations as to what can be done to replace a lost deed, and the trustee must be in a position to produce evidence of:
a) the valid creation of a trust; and
b) the original terms of the trust as contained in the original trust deed.
Without these there will always be some question as to whether the replacement truly represents the terms of the trust.
Of course, there are many entities that will ask for a copy of the trust deed to verify its terms, for instance banks and the ATO. Not all of them will accept a replacement trust deed as evidence of the terms of the trust. In each case, the outcome will depend on the unique circumstances of the particular trust.
So, the bottom line is to use Acis to prepare your trust deeds so you can be confident there is a safe, secure copy should the original go missing.
For any queries regarding trust deeds, please contact us.