Tuesday, August 1, 2023

Lost SMSF trust deeds – an (un) kool thing**

View Legal blog - Lost SMSF trust deeds – an (un) kool thing** by Matthew Burgess

As mentioned in recent posts, lost trust deeds can cause significant difficulties for trustees of family trusts.

In the context of SMSFs and other forms of fixed trusts with a narrow range of known beneficiaries (who can be proved via other evidence), a court application for adopting a new trust deed is generally seen as being unlikely to be necessary from a trust law perspective.

However, the federal court decision in Kafataris v DCT [2008] FCA 1454 highlights that even for trusts with an ostensibly narrow range of potential ‘beneficiaries’ care must be taken.

In this case a husband and wife established separate SMSFs appointing themselves as sole members. They declared a property owned by them as property of their respective SMSFs.

In considering who the ‘beneficiaries’ of each SMSF were, it was held that upon construction of the SMSF deeds, the class of beneficiaries was broader than each single member. This was because the trust deed allowed the trustee to pay benefits to the member’s dependants and even relatives (if there were no dependants, as defined under the superannuation legislation) of the member.

As such, the potential class of beneficiaries included 21 different people.

Best practice therefore dictates that each person who can enforce the due administration of the trust should be a party to and sign a deed of variation that seeks to implement a replacement for a lost SMSF trust deed.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Sonic Youth song 'Kool thing'.

View here: