Tuesday, March 16, 2021

Sometimes** you need to ask: Who are beneficiaries under a trust deed?

Today’s post considers the meaning of ‘beneficiary’, from a tax perspective as confirmed by the Federal Court in the case of Yazbek. 

The decision confirms that a ‘beneficiary’ is not simply a person who, as a matter of fact, has obtained some tangible benefit from the trust, rather a beneficiary is someone who is entitled to enforce the trustee’s obligation to administer the trust according to its terms. 

In other words, anyone named as a potential beneficiary, or a member of a class of beneficiaries (even if not specifically named) will be a beneficiary. 

A comprehensive review of a trust deed should always include an analysis of every variation or resolution of a trustee or other person that may impact on the interpretation of the range of potential beneficiaries. 

Some examples of documents that may impact and the class of potential beneficiaries include: 
  1. resolutions of the trustee to add or remove beneficiaries pursuant to a power in the trust deed;
  2. nominations or decisions of persons nominated in roles such as a principal, appointor or nominator; and
  3. consequential changes triggered by the way in which the trust deed is drafted (for example, beneficiaries who are only potential beneficiaries while other named persons are living).
As usual, please contact me if you would like access to any of the content mentioned in this post. 

** for the trainspotters, ‘Sometimes’ is a song by Depeche Mode. Listen hear (sic):