By Stuart O’Neill, Partner
A lost trust deed can be extremely inconvenient for your client.
The deed is the beating heart of the trust relationship – providing a clear indication of the rights, powers and obligations of all concerned parties, and confirming their intention to enter into that relationship.
It becomes almost impossible for a trustee to administer a trust if the deed is lost. Because there is no evidence of its terms, the trustee will usually be unable to carry out routine activities such as:
- opening a bank account;
- obtaining finance;
- dealing with the land titles registry; or
- preparing annual trust distribution minutes for tax purposes.
It is not possible to simply execute a new deed in place of the lost deed. This would likely establish a separate and distinct trust and may even trigger serious income tax and stamp duty implications.
So, what should the client do?
Approach third parties
In the first instance, the trustee should always investigate whether a third party happens to hold a copy of the deed. They might approach their banker, accountant, lawyer, financial adviser, deed provider or even their business partner for a copy.
If the trust holds real property in Queensland, the land titles registry may have a record of the trust deed on title. If it does exist, the document image is downloadable for a small fee.
Another option is to approach the original drafter of the deed to check whether they still hold a copy of the trust deed on file or even a record of when the trust was established. It may be possible to accurately determine the terms of the trust deed by reference to the version in print at the time.
Sometimes, the client will strike luck and a copy will be found.
Make a decision
There are four main options:
- if a copy can be located or the terms identified – prepare a deed of confirmation to restate the terms of the trust;
- if a copy cannot be located or the terms identified – prepare a deed to adopt new trust terms;
- continue without a trust deed and attempt to administer the trust in accordance with the relevant trust law (e.g. Trusts Act 1973 (Qld), Trustee Act 1924 (NSW), Trustee Act 1958 (Vic)); and/or
- seek a declaration from a court regarding the validity and terms of the trust.
With the exception of applying to a court, none of the above options provide particular certainty. For example, there is no guarantee that a financier, the Australian Taxation Office (ATO) or the land titles registry will accept documents produced under first two options. And whilst approaching a court is the safest and most reliable solution, it is likely to be far more expensive than any of the other options.
To make matters worse, some of the above options may not be available or advisable in certain cases – particularly a deed of adoption.
Usually, the trustee must make a practical decision weighing up the context of the trust relationship, the likely incidence of administrative issues and the risks of taking or not taking a particular course of action.
Clearly, a decision that is made by a trustee holding a few passive assets might differ markedly from a trustee administering a large trading trust with multiple family beneficiaries.
How Mills Oakley can help
There many be several other options available to a trustee.
For example, it may be possible to abandon the afflicted trust structure and transition its assets to a new structure with minimal risk and cost.
Mills Oakley can assist the trustee to make appropriate and fully informed decisions given the risks.
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