The One-Day Trust

Earlier posts have looked at various aspects of the mantra ‘read the deed’ – see -

Another reminder to ‘read the deed’

ATO reminder – read the deed

Read the deed - another reminder re invalid distributions

As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers some related practical issues in relation to the read the deed mantra in a ‘vidcast’ at the following link - https://vimeo.com/145349504

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

This case study involves a family trust deed produced by a reputable deed provider – or at least a well-known deed provider, producing a deed in 2009.

This particular deed provider had adopted a ‘schedule’ approach. That is, in the back of the document, they had a schedule. Under that schedule, they listed a number of key things. For example, they had the date of establishment, the trustee, the principal and the beneficiaries.

They then had the vesting date.

A further reminder - this is a well-known provider, with a well-known accounting firm, with a high net wealth client.

The date of establishment of the trust was listed in the schedule as 28 June 2009.

The vesting date was listed as 29 June 2009.

That is they had created a one-day trust.

This trust deed came to us 2015 as the client wanted to do a trust split and we said ‘we need to read the trust instrument’.

Ironically we had trouble getting a copy of the trust instrument.

For some weeks we only had a photocopy of the undated document, however we held firm that we really needed to see the entire document, with the schedule completed. When we finally got the stamped trust deed and completed schedule our entire advice was one sentence – that is ‘do you realise your trust ended over six years ago. What are we going to do about this?’

A Practical Perspective on Resettlements

Earlier posts have looked at various aspects of the Clark decision and trust resettlements – see -

Statement of principles to be (finally) amended (?)

ATO releases draft determination on trust resettlements

As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers some related practical issues in relation to resettlements in a ‘vidcast’ at the following link - https://vimeo.com/145339753

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

If you go back to Clark as a benchmark, that decision followed a whole thread of decisions starting right back to Commercial Nominees, which was a superannuation resettlement case.

There was significant white noise around that decision from the Tax Office’s perspective, because they were arguing that the principles about amending trust instruments out of Commercial Nominees were really only available for superannuation funds. Therefore while, a super fund could amend its deed significantly, that didn't apply to any other form of trust.

Clark, somewhat interestingly, was a case that involved a unit trust. But ultimately the Tax Office following that case was comfortable that the principles, as initially confirmed by the High Court in Commercial Nominees, did in fact apply to any form of trust.

Even though Clark involved a unit trust, there were really quite radical changes to the way in which the trust instrument was crafted. There were changes to the unitholders, the trusteeship, and the way in which the trust instrument actually worked.

Despite all of those changes, the court held that the trust was an ongoing trust and there had been no tax event, that is there had been no resettlement, which would have notionally meant that all of the assets of the trust were disposed of from the original trust and reacquired by the new trust, effectively creating a tax event.

What Clark in theory should allow in any trust splitting arrangement, is permit amendments to whatever trust instrument is involved, to allow whatever is desired to be achieved from a trust splitting perspective.

Spry enforcement proceedings

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Spry enforcement proceedings’ at the following link - https://www.youtube.com/watch?v=6ewuWIpJE3g

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

Stephens is the case about the actual enforcement proceedings of the Spry case and it reinforces just how wide powers of the court are, in terms of making and implementing decisions under the property settlement regime.

In the particular case of Stephens, there were aspects of the judgment that saw transactions that took place after the relationship had broken down, completely ignored and unwound.

What the court also did was unwind transactions that had taken place before the relationship had broken down as well as those which related to third parties. For example, independent trustees and the children of the relationship who had been involved in those transactions were actually forced to comply with orders, that on the face of it just applied to Dr and Mrs Spry.