Lost Trust Deeds: a common problem

What is a Trust Deed?

A family trust is established by a document called a ‘trust deed’. The trust deed will set out who is the Trustee, the Appointor and the Beneficiaries. The trust deed will also set out the powers of the Trustee, and the entitlement of the beneficiaries to receive income and/or capital of the trust. The original trust deed must be signed by the Settlor (the person who transfers the original trust property to the trust) and the Trustee.

The original signed trust deed is an essential trust document as it validates all decisions and distributions made by the Trustee. The location of the original trust deed should always be known.

I cannot find our original family trust deed. Is this a problem?

Yes, it could be. Below are some examples of problems which could arise:

• The Trustee has purchased property for the trust and has applied for finance. The lender has requested a certified copy of the original trust deed. The Trustee is then under pressure to find the original trust deed, or potentially default on the purchase.  
• A dispute arises between family members. If one family member discovers that the original trust deed has been lost, they may challenge certain decisions and distributions made by the Trustee because there is no document that sets out the powers of the Trustee and how income and capital may be distributed from the trust. Aside from the potential for causing disputes, this could also result in adverse financial and tax consequences for the Trustee and beneficiaries.

If I can't find the original trust deed, can I use a copy?

A copy is not a substitute for the original. If there is sufficient evidence that the copy is identical to the original signed trust deed, then a practical decision may be made to rely on the copy as evidence of the contents of the original. However, in the absence of Court approval, there is always a risk that decisions and transactions undertaken by the Trustee could be challenged, or investigated by the relevant tax authorities. You may also run into difficulties if the original or a certified copy of the trust deed is required, for example, by a bank.

Can I just execute a replacement trust deed?

In some situations, you may be able to execute a replacement trust deed (which, in effect would be a deed to confirm the original terms of the trust).

Specialist legal and accounting advice should be sought before taking any steps to execute a deed to confirm the terms of the original trust. This is because such actions could be regarded as creating a new trust (called a ‘resettlement’ of the trust). This may then trigger liabilities for capital gains tax and stamp duty (for property).

Furthermore, transactions undertaken by the Trustee prior to the execution of the new deed may still be challenged by family members, or investigated by the relevant tax authorities. It is also important to ensure that there is certainty about whether the proposed terms for the replacement trust deed are identical to the original deed.

Should I make an application to the Court?

If the original trust deed has been lost, the only way to have complete certainty that transactions and decisions of the Trustee are valid is to make an application to the Supreme Court in your state or territory. The Court will require sufficient evidence of the terms of the original trust deed. Such applications have been successful where:

• A copy of the original signed trust deed was found [1]
• A copy of an unsigned trust deed was found [2]
• Neither the original trust deed nor a copy could be found, but the solicitor who drafted the trust deed gave evidence to the Court of the terms of the trust [3]
• Neither the original trust deed nor a copy could be found, but the applicants could provide a copy of the schedule to the original trust deed, as well as historical financial and tax records relating to the trust. [4]‍

The costs of such an application will be expensive, particularly if the application is contested. You will need to weigh up these costs against the risks involved with continuing to operate the trust without an original trust deed.  

Take-away Points

• Always know the location of the original, signed trust deed for your family trust. Your solicitor or accountant will usually store such documents on your behalf, free of charge.
• If you are an accountant, ensure that you sight the original or a certified copy of the original trust deed (and any later deeds of amendment) before advising on distributions from the trust, or other trust transactions. Do not assume the terms of the original trust deed are ‘standard’.
• If you have lost the original trust deed, seek advice from an experienced lawyer as soon as possible, regarding your options. Don’t wait until you need to show the trust deed to a bank or authority.

How Sharrock Pitman Legal can assist?

At Sharrock Pitman Legal, we have Accredited Specialists in Wills & Estates and Commercial Law who are experienced in advising clients in relation to complex estate matters involving complicated trust and significant financial arrangements.

If you require assistance in relation to an existing Family Trust or preparing a Family Trust, or assistance with an estate planning more generally, please feel free to contact our Wills and Estates Law team on 1300 205 506 or email sp@sharrockpitman.com.au.

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[1] Sutton v NRS(J) Pty Ltd [2020] NSWSC 826

[2] Re Thomson [2015] VSC 370 and M & L Richardson Pty Limited [2021] NSWSC 105

[3] DR McKendry Nominees P/L 2015 [VSC] 560

[4] Vanta Pty Ltd v Mantovani [2023] VSCA53

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‍The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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