Trust document review checklist

One of our previous articles mentioned the need to ‘read the deed’ when key events occur in relation to a trust.

In response to feedback we have received, set out below is a list of the key issues we recommend are considered when a trust deed (and any related documents, such as deeds of variation) are reviewed:

• Has the deed been correctly signed and dated, including with witnesses for any individual signatories?
• Can the original deed be located?
• Is there a trust register with copies of all related documents, including deeds of change of trustee, deeds of variation and trustee resolutions?
• Is there a broad power for the trustee to vary the deed? Is this power subject to any limitations?
• If the trustee is an individual – what happens to the trustee’s role upon their death, incapacity or bankruptcy?
• Is there an appointor and if so, what happens to their role upon their death, incapacity or bankruptcy?
• Is anyone excluded as a beneficiary? If so – who?
• Are there any limitations on income or capital distributions?
• If distributions of income are proposed, do the intended recipients qualify as beneficiaries of the trust?
• Are there valid ‘default’ provisions specifying what happens to income or capital of the trust if the trustee fails to make a determination?
• What is the vesting day of the trust? If the vesting day is less than 80 years from establishment, does the trustee have power to extend it?
• Does the trustee have power to determine whether amounts are to be treated as income or capital?
• Does the trustee have power to carry forward trust losses?
• When is the trustee required to make distributions of income or capital each year?
• Does the trustee have power to make oral decisions in relation to the distribution of income?
• Has a family trust election been made and if so, have any distributions been made to people outside the family group?
• Do any other parties, such as an appointor, need to consent to trust distributions?
• Are there any other key roles, such as a ‘guardian’ and if so, what rights does that person have?

Where an issue is identified with any of the questions above, specialist advice should be obtained in relation to the consequences for the trustee.

For further information, please contact Patrick Ellwood on 0400 503 111 or patrick@cloverlaw.com.au.