Discretionary trusts: Can you effectively pass on control when you die?

28 March 2018 Topics: Estate planning, Tax and revenue, Trusts

It has never been easier to order a trust deed. However, getting a trust deed that effectively deals with both the tax and estate planning issues can be like finding a unicorn!

The recent decision of Reschke v Reschke [2017] SASC 192, highlights the importance of a well worded trust deed that facilitates the passing of control. In this case:

  1. The trust deed provided that the deceased, during his lifetime, had the power to remove and replace the trustee of the trust. This power transferred to the deceased’s executor upon his death.
  2.  The deceased, in his Will, attempted to transfer the power of appointment to his wife, his accountant and his solicitor jointly, as he did not want his wife, who was his executor, to have sole control of the trust.
  3. The Court held the deceased was only the controller while he was alive and could not transfer this power in his Will. As a result, the wife became the sole controller of the trust.

The deceased died in 2008 and these trust issues were only resolved in 2017.

Achieving a better outcome

If the trust deed in this case had been prepared by Cooper Grace Ward, control would have passed as intended by the deceased under his Will.

Trust deeds prepared by Cooper Grace Ward:

  1.  effectively deal with all trust tax issues;
  2.  provide trustees with maximum flexibility to deal with different income distributions as they arise;
  3.  include safeguard provisions to prevent additional tax being payable on income; and
  4. provide the controllers with the flexibility to effectively pass control of the trust while they are alive or as part of their estate planning.

Cooper Grace Ward provides trust deeds and constitutions to our affiliate, CGW Structures. CGW Structures offers a range of fixed price services including the establishment of trusts, companies and SMSFs.

Cooper Grace Ward can also amend an existing trust deed to ensure that control is effectively passed on to the intended person as part of an estate plan.

If you would like to discuss this case or how we can assist you and your clients further, 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.