Tuesday, April 16, 2024

A seven nation army**? - How many resolutions does it take to create a valid appointment?

View Legal blog - A seven nation army**? - How many resolutions does it take to create a valid appointment by Matthew Burgess

Previous posts have looked at various aspects of trust related strategies recommended by accountant Steve Hart, that over time caught the attention of the Tax Office.

Previous posts have also considered various aspects of the mantra ‘read the deed'.

Recently, I was reminded of a decision, which highlights the importance of both of these concepts, namely the decision in Idlecroft Pty Ltd V Commissioner of Taxation [2004] FCA 1087.

The factual matrix in this matter was relatively complex. Arguably, the key aspect related to a purported nomination of a beneficiary.

The relevant clause in the trust instrument gave the principal of the trust the power to nominate beneficiaries by notice in writing to the trustee.

Under the purported written nomination, the principal did sign the document, however it was noted in the instrument that the signature was in his capacity as a director of the trustee company.

The court held that the document failed to satisfy the requirements under the trust deed for the principal to provide the trustee with written notification of the appointment of beneficiary.

In turn, this meant that the subsequent distributions of income to the beneficiary, who was not in fact validly appointed, failed.

Next week’s post will summarise some of the consequences of this failure.

As usual, please make contact 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 White Stripes song '7 Nation Army’.

View here: