Thursday, December 9, 2010

Unpaid present entitlement warning

There can be a number of traps in relation to the provisions of a trust deed in the context of the Tax Office’s approach in relation to unpaid present entitlements (UPEs).

Arguably, the most concerning trust deed provision that we have seen in recent times is a clause in the deed of one provider that on a plain reading of the deed seems to automatically cause any UPE to become a loan at call.

Obviously, this provision can have significantly adverse consequences, particularly for those clients wishing to 'quarantine' UPEs that existed as at 16 December 2009.

Until next week.