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AJML Accountants Update – Guide on Trust Part 4

Guide on Trust Funds – Part 4

Estate planning

Since the assets of a trust are not owned by any one beneficiary, the beneficiaries cannot deal with those assets or pass them on their descendants by their wills.

However, if careful consideration is given to who is and will be the appointor(s) of the trust, control of the trust may be effectively passed to the next generation.

An obvious way to pass control of the trust to the next generation is for the trust deed to provide that, following the death of the original appointors of the trust, their children will become the appointors. This will mean that, upon their parents’ death, these children will obtain control of the trust (and the trust assets), in the same way that they could obtain other assets directly owned by their parents and passed by will.

A benefit of the assets remaining in the trust, under the control of the children but not directly owned by them, is that should the children (or grandchildren or further descendants) encounter financial difficulty or matrimonial trouble, the assets of the trust should hopefully not be available to creditors or disgruntled ex-spouses for the life of the trust (at least until the assets or funds are distributed to any of those beneficiaries).

In the meantime, if those beneficiaries require funds, assets or anything else from the trust, the trustee still has the discretion to, for example, distribute income or capital to them or make a loan to them.

The Trust Deed

These instructions should be followed in numerical order:

  1. The settlor should give the settled sum to the trustee(s).
  2. The settlor, being a natural person (i.e., ordinarily being an individual, not a company) should sign each copy of the deed where indicated in the presence of an independent adult witness, who should then also sign the deeds.
  3. if the trustee (or trustees) are natural persons (or any of them are), they should then sign each copy of the deed where indicated in the presence of an independent adult witness, who should then also sign the deeds; or
  4. if the trustee is a company (or any of them are, if there is more one trustee), the company will need to resolve to accept appointment as trustee of the trust before executing the deed. Therefore, the resolution of the director or directors of the company accepting the appointment should be signed and dated and, once this is done, the company can then execute the deed according to its constitution (i.e., with the requisite number of directors and/or secretaries signing the deed, accompanied by an imprint of the common seal of the company, if the company has one and is required to execute documents with it).
  5. The trust deed should then be dated where indicated
  6. Each copy of the trust deed should then be stamped at the appropriate stamps office and the requisite stamp duty paid according to the State/Territory in which the trust deed is stamped (if necessary) – this will usually be the “Governing State” of the deed (though it is technically possible for a deed to be stamped in one State despite the trust deed specifying that the Governing State is another State).