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In this edition of ‘It depends’, partner Scott Hay-Bartlem talks about when a trust ends or vests.
Welcome to this edition of It depends, which is ‘when does my trust end or vest?’
In legal terms, a trust vests, that’s its end date when the trust comes to an end. When looking at trust deeds, we’re looking at things like vesting dates perpetuity dates or the date the trust ends.
At the end of your trust, the assets stop being held on trust and end up being owned by some or all of the beneficiaries of your trust. That means you end up with a pretty fundamental change in how that trust operates.
A trust itself, vesting doesn’t trigger tax or duty consequences. But when you actually transfer the assets out of the trust down to the beneficiaries that can trigger tax and duty consequences. Once a trust vests or ends, then some or all the beneficiaries become entitled to the income and capital directly. So rather than having a normal discretionary trust, where you can distribute the income and capital as you choose, certain beneficiaries will be entitled to a particular percentage of the income and capital. So that will often change the tax outcome you expect.
Well, that’s a big it depends. It’ll be set out in the trust deed as I said at the beginning, we’re looking at vesting dates, perpetuity dates or ending dates. Generally, the longest your trust can go is up to 80 years, but some trust deeds actually have a shorter ending date and you’ve got to be very careful about that. If you want to talk about this, it’s a pretty major issue in some trusts, please feel free to give one of us a call. Thanks for watching this edition of It depends.
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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