Am I sure who the beneficiaries of my trust are?

Am I sure who the beneficiaries of my trust are?

08 December 2020 Authored by: Scott Hay-Bartlem   |   Topics: Trusts, Tax and revenue, Professional advisers

The recent Victorian decision of Wilstead No.5 Pty Ltd v Smyth [2020] VSC 651 reinforces the importance of checking beneficiary structures in family trust deeds to ensure they are wide enough and include everyone to whom we wish to distribute (and have been distributing).

The Bowen Family Trust was established in 1988 and operated a building business, which Robert Bowen ran very successfully for many years.

The primary beneficiaries were listed as ‘the children of the persons listed in the Schedule’. The Schedule listed Robert Bowen and his wife Venetia Bowen and their children as primary beneficiaries.

The general beneficiaries included the parents of the primary beneficiaries, but excluded the guardian and the appointor, unless specifically included as a primary beneficiary. Robert Bowen was the guardian and the appointor.

All of this together meant that Robert Bowen was not actually a beneficiary of the trust. The trustee had been distributing to him for many years.

Ultimately, the Court rectified the trust deed to include Robert Bowen as a beneficiary as it accepted that was the intention when the trust was established, but this required a formal court application that would have involved several sets of lawyers and considerable cost.

This court case reminds advisers to thoroughly check the beneficiaries listed in family trust deeds to ensure we know who is included and excluded, and that the people to whom we are distributing are in fact beneficiaries.

Every year we deal with situations where distributions have been made outside the beneficiary group. Particular risk areas include new spouses (especially de facto and same sex partners), stepchildren, charities and related trusts and companies.

If you would like any assistance with reviewing trust deeds and beneficiary structures, or dealing with issues, 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.