Tuesday, June 18, 2024

Coming home** by extending trust vesting dates

View Legal blog - Coming home** by extending trust vesting dates by Matthew Burgess

As mentioned in last week’s post, the need to ‘read the deed’ is critical on a number of levels, particularly in relation to the vesting date of a trust.

A previous post also explores when a court may approve the extending of a vesting date for a trust.

The two other main pathways that may assist in this regard are:
  1. using a specific power in the trust deed that allows the vesting date to be extended; and
  2. using the variation power (if it is broad enough).
Whether a general power of variation will be broad enough was considered in the case of Andtrust v Andreatta [2015] NSWSC 38.

Essentially the decision confirms that where a trust deed contains a power to vary the trust, it should be assumed that the power includes the ability to extend the vesting period, subject to the perpetuity period rules.

In particular, it was held:
‘It does not seem to me to be stretching language unduly to say that a trust to distribute or hold income up until a defined date, and upon that date to distribute capital, is “varied” if that defined date is extended. Thus, as a matter of language, it seems to me that the power to vary the trusts set out in the deed should be taken to include a power to vary them by extending the time for which they are to endure.’
In other words, as explored in other View posts, any variation power should generally be construed widely and beneficially, including in relation to the ability to extend a vesting date even if there is no specific power to do so (see cases such as Kearns v Hill (1990) 21 NSWLR 107 and Nisus Pty Ltd [2022] NSWSC 369).

However, where there is not a sufficiently wide power to vary a trust in relation to the vesting date (or indeed no power to vary at all), the conservative view is that court approval is required.

This said, as explored in other View posts, variation of the terms of a trust may be able to be achieved with the unanimous consent of the beneficiaries if all are in being, sui juris and absolutely entitled (see the rule in Saunders v Vautier (1841) 4 Beav 115). In this style of situation it may also be prudent to have the settlor be a party to the variation deed, if they are alive and have capacity.

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** For the trainspotters, the title of today's post is riffed from the Fine Young Cannibals song ‘Johnny come home’.

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