Discretionary Trust News

Variations to Discretionary Trust Deeds

We wanted to remind you that that since the release of TD 2012/21 by the ATO, you can now vary a trust without causing a CGT resettlement, provided that the variation is made in accordance with the Trust Deed.

This means that variations to the definition of income and the insertion of income streaming provisions into older trusts can now be contemplated without risk of resettlement.

As the majority of discretionary trust deeds prior to 2000 did not cater for these areas, we recommend that any discretionary trust deed older than 2000 be reviewed to determine the definition of income applicable and whether the trust can income stream.

To give your client the most flexible trust deed possible, Docscentre Legal can work with you to vary the discretionary trust deed to allow for a broad and flexible definition of income, along with income streaming provisions.

Pre-1995 discretionary trust deeds

Castle Corporate has become aware of an issue effecting pre-1995 discretionary trusts which have an appointed Guardian.

A number of pre-1995 discretionary trusts which have provision for the office of Guardian have been constructed in such a way that upon the death of that appointed Guardian, the trust becomes ’locked down’. The effect of this lockdown is to prevent the trust from:

  • distributing capital to beneficiaries
  • vesting the trust early
  • making distributions of income to beneficiaries who have not previously received a distribution of income, and
  • varying the trust deed.

Thankfully, most of these problems can be avoided if the issue is detected and rectified prior to the death of the appointed Guardian.

If you have a pre-1995 discretionary trust appointing a Guardian, please give Docscentre Legal a call on 1800 799 666 about resolving the above issues before it is too late.