Tuesday, May 1, 2018

Can trusts last forever now? **

As set out in an earlier post, and with thanks to the Television Education Network, today’s post considers the above mentioned topic in a ‘vidcast’ at the following link - https://youtu.be/iIjJGoq7L1c

As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –

Following on from an earlier post ((Don’t ask me) why do trusts have vesting dates? **) it is useful to understand that the majority of Australian jurisdictions decided that a life in being plus 21 years was too complicated. Instead, the rule was replaced with a statutory provision which allows up to 80 years as the maximum length of trust in Australia.

As mentioned in an earlier post, there are exceptions to this rule. In relation to discretionary trusts, the highest profile exception is in South Australia where the rule has effectively been abolished.

Another exception is in relation to superannuation funds.

Superannuation funds are simply a form of trust instrument, although a highly regulated form of trust due to the Superannuation Industry Supervision Act which imposes a whole range of specific rules.

In relation to the core of the underlying structure of a superannuation fund however, it is simply a trust structure. Importantly however there is no concept of an ending period. In other words, in theory superannuation funds can last forever.

There are obviously tax issues for self-managed superannuation funds meaning maintaining the structure indefinitely may not be a particularly smart idea. However in the context of trust vesting, superannuation funds are a clear and obvious exception to the vesting rules.

** For trainspotters, ‘Forever now’ is song by legendary Australian band Cold Chisel from 1982, learn more here – https://youtu.be/Hhnp3td-UHU