In this Deed of Variation, you are cleaning up who the Trustees are in your Trust. You are changing the Trustees to suit your needs.
1. A Trustee may be dead or retiring: ‘leaving‘
2. A Trustee may decide to remain as a Trustee. The Trustee continues to be a Trustee: ‘remaining‘
3. A Trustee may be coming on as a new Trustee: ‘new‘
Mum and Dad met with their adviser to discuss asset protection. Their adviser explains that there is a risk in being a Trustee of a trust. If the trust goes insolvent then the Trustee or Trustees may be liable for the debts of the trust.
Mum and Dad already follow the ‘mother of substance and man of straw’ asset protection strategy. Mum has all the assets (family home, investment properties) in her name. Dad has no assets in his name. (Commonly, doctors, financial advisers, lawyers, engineers, accountants etc…, as they give advice, rarely have assets in their own name.) So it makes sense to remove Mum as a Trustee of this trust. In that instance:
Mum and Dad operate a Family Trust. It just holds shares. It is, therefore, at no risk of going insolvent. There are no asset protection issues with this trust. Mum and Dad remain the Trustees. Sadly, Dad now dies. Mum is happy to remain as the sole Trustee. In that instance:
Dad is the sole trustee of his Family Trust. He operates a property construction business through the trust. It (like most businesses) has a high risk of going insolvent. If the Family Trust goes insolvent the Trustee may also go bankrupt as well. Trustees often go down with the sinking ship.
Therefore, dad decides to resign as the Trustee of the trust. Instead, he puts a company in as the Trustee. (This is called a ‘corporate trustee’.) In that instance:
Mum and Dad are killed in an aeroplane crash. Their three children now control the Trust as the backup Appointors. The children don’t want to be trustees, themselves. Instead, they form a new company to be the corporate trustee of the family trust. In that instance:
From an asset protection point of view, one Trustee is best. The Trustee is an ‘at risk’ person. What happens if the Family Trust goes insolvent? The Trustee often goes down with the Family Trust.
Further, for added asset protection make the new Trustee of your Discretionary Trust a company. You can build a new company here.
Does your Family Trust own bank accounts, shares and real estate? Transfer these from the old to the new Trustee. For the transfer of land, you need to get the transfer ‘stamped’ before you can lodge it at the titles office. There is generally no stamp duty (State law) or Capital Gains Tax (Federal law). This is when transfer assets from one trustee to another. This is especially if you use our Deed. However, NSW and ACT may apply stamp duty if you are not careful. See here. This on the transfer of real-estate from the old trustee to the new trustee.
Under Section 33(2) Duties Act 2000 (Vic) no stamp duty is charged to a:
But you have to jump some hurdles to get out of the stamp duty. See section 33(3) and s33(5) Duties Act 2000 (Vic). Stamp duty is charged. This is unless the Commissioner of State Revenue of Victoria is satisfied that:
What if you fail on one of the above? What if all three are not satisfied? Then the change of a trustee is chargeable with stamp duty section 33(4) Duties Act 2000 (Vic).
See here NSW transfer (stamp) duty on the change of a Family Trust trustee.
Capital Gains Tax (CGT) is not generally payable in Australia for updating a Family Trust Trustee.
An advantage of Family Trusts over companies is that Family Trusts are mostly unregulated. Companies are over-regulated. You don’t need to lodge your Family Trust or any Deeds of Variation anywhere. However, you do keep in safe custody and with your accountant a complete set of the originals. This for both the Family Trust Deed and all Deeds of Variation.
Have a look at the Sample document and there are many training videos and hints to help you as you build the document.
Telephone us as you build the Deed of Variation to Update Trustees of your Family Trust. We can help you answer the questions to change the Trustees of your Family Trust.
Sometimes a Family Trust Deed is amended via a Minute. That does not work.
Also updating a Trustee of a Family Trust via a Minute does also not work.
This show how important it is to have a legally prepared Deed to update a trustee of a Family Trust.
In Advance Holdings there is a Minute of a ‘Notice of Removal of Trustee’. It is signed by a director of the trustee company. But it was merely a minute. It was not a deed. It is also signed in the director’s personal capacity. Not as a director. The Court declared the Minute to remove Family Trust trustee invalid.
The failed ‘Deed of Retirement and Appointment of Trustee’ minute refers to a previous minute.
The court states that the Minute and previous Minute is ineffective in removeing the Trustee from the Family Trust.
As a general rule, a court enforces an objective intention. This is where the words of an instrument show that intent. However, the court cannot give effect to any intention which is not expressed or plainly implied in the language of the document. Minutes are not Deeds. Minutes merely record what a Deed has done. Minutes sadly produce ‘gratuitous, groundless, fanciful implications’. Seel also Fell v Fell  HCA 55).
Adj Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
National Australian law firm
National: 1800 141 612
Mobile: 0477 796 959
Email: [email protected]