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28 August 2023

It Depends – Family trust change of trustee (part 1 – beneficiaries)

Changing the trustee of your family trust can trigger a range of issues – so many, in fact, that partner Scott Hay-Bartlem has produced a series of six ‘It Depends’ videos to cover the tricks and traps for advisers and their clients.

Changing the trustee of your family trust can trigger a range of issues – so many, in fact, that partner Scott Hay-Bartlem has produced a series of six ‘It Depends’ videos to cover the tricks and traps for advisers and their clients.

In this first video in the series, Scott talks about whether you should change the trustee of your family trust if they are a beneficiary.

Video transcript

Welcome to this edition of It depends, which is part of a series on should I change the trustee of my family trust?

Should I change the trustee of my family trust?

Well, this is our first ‘it depends’. In this edition, I’m going to look at whether your trustee is going to be a beneficiary of the trust.

Is the trustee a beneficiary of my family trust?

So, family trusts will normally have a long list of beneficiaries, and they’ll often be defined by class. For example, if I’m the primary beneficiary, the beneficiaries of my trust will normally include my spouse, children, grandchildren, nephews, nieces, aunts, uncles, people who gave me COVID, people I caught COVID from, other companies and trusts attached to me. So, for anyone to be a beneficiary or anything, they need to come within that class. So, the first question in working out whether we need to change a trustee is whether the trustee is going to be included in that class of beneficiaries.

Is the trustee excluded from being a beneficiary?

So, family trust deeds, as well as saying who is included will also have a list of people who are excluded as beneficiaries. So, the settlor, the person who provides the initial money for the trust, has to be excluded from being a beneficiary and usually their children. Some trust deeds go on to actually exclude the trustee and sometimes any former trustees from being a beneficiary. So, before you change the trustee to someone or something, you should always check to make sure that by making that person or company the trustee you aren’t saying they can no longer benefit from the trust.

What’s the consequence of a trustee being excluded?

So if, for example, my trust deed said the trustee can’t benefit from the trust and I make myself the trustee, that would mean we can no longer distribute to me from the trust and that’s a problem.

Why are trustees often excluded as beneficiaries?

So, there’s a few reasons why trustees are excluded from being beneficiaries and why it’s quite common. In New South Wales, if you change the trustee, there is a stamp duty issue unless trustees and former trustees are excluded. In Queensland, we can have some issues around corporate trustee duty and landholder duty if a corporate trustee is actually a beneficiary. So, it’s a live issue we need to check on. If you’ve got any questions about changing trustees or whether your trustee is a beneficiary included or excluded, please contact a member of our team.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.

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Scott Hay-Bartlem
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