So You Have Lost Your Trust Deed …
How often do you get a new client and you ask for a copy of a particular trust deed? It could be a family trust or an SMSF or some other type of deed.
We all think that a photocopy or a scanned copy or an unexecuted copy is OK but we are wrong.
The ONLY thing that is accepted up front is an original executed trust deed. Everything else is just evidence that there may or may not have been a deed executed.
So what do you do if you have lost a deed such as a family trust deed and why did the people in this case have to go to the Supreme Court?
Well, put simply, you have 4 options if you have lost an original trust deed:
The first and cheapest option is to find it. Everyone says they can’t so we need to move on to option numbers 2 to 4.
Another free option is to do nothing. The only problem there is that you are simply putting your head in the sand and as was seen in this matter someone needed to see it in order to access bank accounts so now this wasn’t an option.
Just do a deed of adoption of a new set of rules. That is fine except it is prima facie a resettlement of the trust for both CGT purposes and stamp duty purposes unless you can demonstrate that you have not changed the original deed. Remember that a change to the structure of a discretionary trust is only a resettlement if it is approved by the original deed and if you don’t have it how can you demonstrate that. In this matter as sent to the Supreme Court the trust seems to have millions of dollars in it. If you resettle it by adopting a new deed, what is the cost in terms of CGT (that isn’t then distributed) and stamp duty.
Go to the Supreme Court with all the information you have and have the Supreme Court determine that the deed or governing provisions you have in front of you are the ones for the trust and adopting them is not a resettlement.
In this case that was pretty easy because there was strong evidence of a deed being executed but what if you don’t have the original deed?
SMSFs are not such a major issue because it is not a resettlement to change the deed.
The lesson from this for all accountants is to make sure your clients are totally aware of the potential consequences of losing an original signed deed. I would also suggest that you obtain a receipt from the client every time they take an original deed from your office. The most common thing here in these regards, is that the client says the previous accountant has it and the previous accountant says the client does. Best to have evidence.
Also, make sure that when you buy a trust deed you have it executed correctly. For that matter, I mention that Acis can ensure that they are executed correctly and will also keep copies of the executed deeds for future reference. Still need to go to court but at least you have great evidence.
