Lost Family Trust Deed – can you replace it?

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Lost Family Trust Deed – can I replace?

Is a lost family trust deed a bad situation? What is worse?

  1. losing your property Title Deeds;lost family trust
  2. Self-Managed Super Fund Deed; or
  3. lost family trust Deed
  • For a few thousand dollars and an advertisement, we can replace your Title Deeds.
  • It is easy to replace an SMSF Deed. Just build a Deed of Confirmation on our law firm’s website. (Unlike Family Trust Deeds there is no ‘resettlement’.) Commercial Nominees 2001 (High Court). Or you can even terminate the SMSF and roll over the benefits into a new one.
  • However, a lost family trust deed is almost impossible to replace. A bank won’t even open a bank account without citing the ORIGINAL Trust Deed and ORIGINAL Deeds of Variations. Copies won’t satisfy any Australian bank.

Your accountant can’t prepare tax returns without viewing the Trust Deed. (However, unlike the bank, your accountant may be happy to only cite a copy of the Deed). Your accountant can’t distribute to any person. This is because the beneficiaries are recorded in the Family Trust Deed – and you lost it. You, legally, can’t do anything. You are stuck.

Children, mistresses, ex-spouses, Centrelink and the ATO have a field day, at your expense. Every decision you make can be challenged. The ATO is particularly vicious: Davis v FCT (2000) 171 ALR 654.

If all of the beneficiaries come together then they can transfer the assets to another Family Trust. (This is still a resettlement for stamp duty and Capital Gains Tax). However, most Family Trusts have over 400,000 beneficiaries. Therefore this is not an option: Re Bowmil Nominees Pty Ltd [2004] NSWSC 161. Also, Family Trusts have open classes of beneficiaries such as grandchildren. When you have another grandchild then you have an additional beneficiary. Therefore, a Deed of Confirmation or Resettlement is not possible.

What the Courts say

Consider Sutton v NRS(J) Pty Ltd [2020] NSWSC 826. It demonstrates how important it is to have the original signed copies of the Deed that set up the Family Trust and all subsequent updates.

Neil loses his trust deed

The facts of Sutton v NRS(J) Pty Ltd are:

  • On 17 August 1972, a family trust (Trust) is established for the benefit of the family of the plaintiff, Neil Sutton (Neil).
  • Strangely the trust was established with a settled sum of $100. (It is usually $10.) And then, more strangely, nothing happens for 30 years.
  • In 2007 Neil suddenly starts to use the Trust. He purchases properties and businesses under the Trust name.
  • Neil and his adviser take a photocopy of the original signed Trust deed.
  • As is often the case the original Trust deed goes missing.
  • Thanks to the latest fad of banks complying with the “know your customer” a bank demands to see the original deed.
  • Neil pleads with the bank. But to no available. The bank freezes the Trust’s bank account. It won’t release the bank account until they cite the original Deed.
  • Desperate Neil goes back to the law firm that originally prepared the Deed. The law firm produces a safe custody packet with documents. One document is a photocopy of the Trust deed. It is identical to the copy Neil already has.
  • Neil now races to the Court seeking an order that the copy is now to be the original Trust deed.

The Court gives Neil a lesson in Latin

Neil argues that a ‘presumption of regularity’ applies under Re Thomson [2015] VSC 370. Re Thomson is about replacing an SMSF deed (rather than the more problematic loss of a Family Trust deed.)

Consider Harris v Knight (1890) 15 PD 170, 179–80, Lindley LJ explains the presumption:

The maxim is Omnia praesumuntur rite esse acta.

  • My Latin is rusty but I interpret it as: reasonable probability, and of the propriety in point of law of acting on such probability.
  • Or, in other words, an inference may be reasonably drawn. This is when an intention to do some formal act is established. And the evidence is consistent with that intention having been carried in effect in a proper way.
  • This is where the actual observance of all due formalities can only be inferred as a matter of probability.

The maxim is useful when there is no proof one way or the other. But where it is more probable that what was intended to be done was done as it ought to have been done to render it valid; rather than that it was done in some other manner which would defeat the intention proved to exist, and would render what is proved to have been done of no effect.

The Maxim did not need to be used in this case. Parker J stated [17]–[19]:

In Re Thomson the missing trust deed was evidenced only by an unsigned copy, but in the present case there is no particular need to prove by inference that any formality has been complied with. The photocopy Trust Deed is signed and the evidence establishes directly that the parties concerned have always acted on the basis that it sets out the terms of the Presumed Trust.

In my opinion, the evidence makes it overwhelmingly likely that the photocopy Trust Deed is indeed a copy of an original which now cannot be found. This conclusion is supported in particular, by the recent discovery of an identical copy of the Trust Deed in the records of Clayton Utz dated from 1972.

In these circumstances, the Court should assist those responsible for the administration of the presumed trust by ensuring that they can continue to administer it as if the photocopied Trust Deed were the trust’s constituting document.

The Court wanted to help Neil. It believed in his cause. The Court considered that there were two difficulties in providing declaratory relief in the form sought by Mr Sutton as follows:

  1. The Court noted that declarations are used to determine formally a legal state of affairs. They are not to determine a mere matter of fact.
  1. The Court considered that it was not appropriate to make a declaration which may affect the status of property (that is, the property of the Trust) unless all interested parties have had an opportunity to be heard.

Thus, as an alternative to the declaratory relief sought by Niel, the Court exercised its advice power under s 63 of the Trustee Act 1925 (NSW), to provide advice as follows:

    1. The trustees of the trust settled by Frederick Walter Sutton by Deed of Trust dated 23 October 1972 are justified in administering the trust on the basis that the document annexed to this order and marked “A” is a true copy of that Deed.
    2. The costs of all parties to these proceedings be paid out of the assets of the trust.

Neil wins. The bank must now treat the photocopy as the original.

There are 4 approaches for the lost family trust deed:

1. Family Trusts with no assets

If the Family Trust has no asset then merely wind it up here: https://www.legalconsolidated.com.au/vesting-deed/

If the trust has assets with little value, then build a new Family Trust and transfer the assets into the new Family Trust – you pay stamp duty and Capital Gains Tax on the transfer from one trust to another. This is a ‘resettlement’. For CGT, the trust is treated as having ‘sold’ the assets of the old Family Trust to the ‘new’ Family Trust for market value. However, this is not an issue if you are just holding cash.

Each State has a Trust Act. However, it just ends up causing more problems. For example, there is a duty to act fairly between income and capital beneficiaries and avoid conflicts and restricted powers to sell trust property. This is exactly what you don’t want in a Family Trust.

2. Find the original Trust Deed (or even a copy)

Hunt down the original Trust Deed. Consider these options:

  1. Ex-spouse, parents and children and their accountants
  2. Current and former accountants, financial planners, auditors and law firms
  3. Beneficiaries that may have required a copy of the Trust Deed
  4. Centrelink if you ever needed to provide it with a copy
  5. Australian Tax Office if you ever needed to provide it with a copy
  6. Banks (they normally certify a full copy for their records)
  7. Bank vaults (including those operated by your parents, children, ex-spouse or mistress)
  8. Old tax returns and where you hold valuable documents

Show evidence of these searches. Show that you have suffered pain, and the ATO may reduce your penalties.

3. Get a Court Order

Australia wide our law firm seeks a Court Order stating that a ‘replacement’ Deed is the ‘old’ Deed. The ATO is bound by this. There is no resettlement and you suffer no stamp duty or triggering of Capital Gains Tax. While expensive, it fixes everything.

The evidence required for the Court proceedings often includes:

  1. that the Trust Deed was correctly established (eg. Tax File Number application)
  2. the terms of the lost trust deed (eg. Financials and distribution statements)
  3. the assets in the trust fund (E.g old Balance sheets)
  4. the searches you have undertaken

An unsigned or a signed copy of a Trust Deed makes it a lot easier to get the Court Order.

The Appointor, Trustee and Settlor can all give evidence, if possible.

This is the best, safest, but most expensive option.

4. Get an ATO Private Ruling and seek an exemption from the Stamp Duty Office

We create a new Family Trust Deed and then approach the ATO and Stamp Duty Office to confirm that there is no resettlement. The Deed of Variation is subject to and conditional upon successful sign off by both the ATO and the local transfer duty officer. There is no risk, but potentially no reward either.

Update Bamford streaming PLUS update the rest of the Deed:

 

Or update for Bamford streaming PLUS the Deed PLUS update the Appointor & Trustee:

 

Update the Trustee only:

 

Update the Appointor only:

 

To set up a new Family Trust Deed:

 

Annual Trust Distribution Minutes:

 

To deal with Division 7A (loan or UPE from your company to the Family Trust):

 

Forgive the ‘loan account’ and UPEs (loans from humans to Family Trust):

 

Change the name of your Family Trust:

 

Wind up and vest the Family Trust, when you no longer want it:

 


Telephone us for legal advice on building this document.


Adjunct Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJDFamily Trust Deed Family Discretionary Trust
Legal Consolidated Barristers and Solicitors
National Australian law firm

Toll free: 1800 141 612
Mobile: 0477 796 959
Email: [email protected]
Skype: brettkennethdavies


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