When you first set up your discretionary trust it was for a specific purpose – whether asset protection, tax minimisation or to build a family wealth structure.  However, like a mobile phone, what features were once popular may have gone by the wayside.  It is important to have a modern, up to date discretionary trust deed.  So here are our six key reasons to update your discretionary trust deed:

  1. Get a line of Appointors: The Appointor is the real boss behind the trust and the one that can hire and fire the Trustee.  The Trustee undertakes the day to day operations of the Trust.  Without a line of succession (at least two generations long), problems may arise if the trust is left without an Appointor (for example, if the Appointor dies).
  2. Improved Asset Protection: It is best practice to have a corporate trustee in place (otherwise, individual trustees can be exposed personally to any litigation).  Further, it is also best practice for directors of the corporate trustee to have successor directors in place in the event that they become sick, disabled, die or are litigated against.
  3. Quarantining for bloodline only: Many trust deeds were not originally built for bloodline beneficiaries and protection.  Modernising your trust deed to update for bloodline beneficiaries only can provide additional security to ensure the wealth stays in the family (for example, ensuring your children’s de facto cannot access assets in the trust in the event of separation).
  4. Ease of Use and Administration:Each year the Trustee must prepare detailed trust distribution minutes detailing how income from the Trust is to be distributed amongst beneficiaries.  Failure to distribute all income properly means that there will be 45% tax to pay.  With a modern deed tied into corresponding trust distribution minutes the task is more effective, quicker and less prone to costly tax penalties.
  5. Foreign beneficiaries: Each State has put in place (or is in the process of putting into place) a 2% land tax surcharge on property held in a discretionary trust that does not specifically exclude foreign person beneficiaries.  Updating your discretionary trust deed ensures foreign beneficiaries are specially excluded so that the new land tax surcharge do not apply to property purchases.
  6. New accounting standards: An upgraded trust deed ensures that the upcoming accounting standard changes, which require expensive and comprehensive “financial accounts”, do not apply.

Overall, it is best practice to update your trust deed every 2-3 years to keep up to date with legislative changes.

If you would like to enquire about a quote, please contact us.