So, you’ve lost a trust deed; what are your options? Losing a trust deed can create very real tax and commercial issues which are difficult and time-consuming to solve. Without a trust deed, for example, a trustee cannot carry on business without a power contained within the deed, and there may be issues with financing; as a bank will wish to sight a copy of the deed. These are just a few of the numerous complications you may face if you’ve lost a trust deed, so what should you do if you’re in this situation? In this article, we will examine the issues and their solutions if you’re combating the problem of a lost trust deed.
The Issue of a Lost Trust Deed
There are countless issues posed if you’ve lost a trust deed. For example, a lost trust deed means that:
- Trustees may be exposed to a breach of trust claims as there will be no guidance on what can and cannot be done if the trust deed is lost.
- No trust streaming may occur.
- As a trust deed outlines foreign beneficiaries (if there are any), there may be surcharge land tax and duty issues.
- The trust cannot be varied without a trust deed as there will be no outline of variation powers.
- There will be issues changing trustee and appointor.
So, as outlined above, it is in your best interests to securely keep the trust deed safe in the first place to avoid losing it; but let’s say you haven’t or it’s gone missing. Here are some key questions to understand.
Can the Trust still be Managed Properly if the Deed is Lost?
Effectively, a trust cannot be properly managed if the trust deed is lost. The powers provided by the Trustee Act may be in force, but they lend to issues if the trust wants to carry on business or borrow from a third-party lender. Trustees would also not be able to self-contract or act where there is a conflict of interest between the trustee(s) and beneficiaries.
Can the Lost Trust Deed be fixed with a Deed of Restatement?
A Deed of Restatement, if executed to replace the lost trust deed, is likely to trigger a resettlement. Even if there is no resettlement, duty may be triggered as a declaration of trust (which will happen even if the trust is pre-existing).
How ‘Lost’ Is the Deed?
If there is still a copy of the signed and stamped trust deed or a copy of the deed in some form, there may be some solutions still available that do not involve resettlement. If there is no copy but only a template version of the trust deed, or if there is no copy of the deed at all, there will be very real issues triggering a resettlement and duty by entering into a deed of restatement.
It may be worthwhile to seek judicial advice from the Courts if there is sufficient secondary evidence to prove the contents of the lost trust deed. The benefit is that there will be no resettlement; as the court declaration does not alter the legal rights but gives effect to existing rights and the Commissioner of Taxation accepts court approved variations as not constituting a resettlement.
However, judicial advice is a costly solution and there must be a good level of secondary evidence to satisfy the court that the deed did exist and that it is truly lost.
The Truly Lost Trust Deed
If the trust deed is truly lost without a trace, you should consider transferring assets out of the trust. There is a 50% discount on Capital Gains Tax (CGT) and there are small business CGT concessions available alongside small business restructure rollovers. Further, due to the COVID-19 pandemic, you should consider any losses that could minimise the tax costs of transfer.
If you would like help with respect to lost trust deeds, contact our team of experienced lawyers and accountants by submitting an online enquiry, calling us on 1300 QUINNS or alternatively, +61 2 9223 9166 to arrange a teleconference or appointment.