Trust lost and found: navigating the maze of a missing trust deed
The trust deed for a family trust is an essential trust document. If the original trust deed is lost, misplaced or accidentally destroyed, this can lead to adverse financial and tax consequences.
What is a trust?
In Australia, trusts are legal arrangements used for business and investment reasons. There’s a number of trust structures, each with its own rules, regulations, processes and tax considerations.
What is a trust deed?
A 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.
What happens if a trust deed is lost or destroyed?
In circumstances where the trust deed cannot be located, significant complications can arise for both the trustee and the trust itself. A lost deed will create significant issues for a trust and its trustee. Without ‘clear and convincing’ evidence as to the existence and contents of the original instrument, a trust cannot continue to operate in the absence of the deed.
If you cannot find the original trust deed, can you use a copy?
A copy is not a substitute for the original. Despite potential reliance on a copy as evidence, without the necessary court approval, there remains the inherent risk of facing challenges or investigations from tax authorities regarding decisions and transactions made by the trustee. Additionally, complications may arise if a bank or other institution demands the original or a certified copy of the trust deed.
What are your options?
If you cannot find your original deed, the main options are:
- if a copy can be located or the terms identified – prepare a deed of confirmation to restate the terms of the trust;
- if a copy cannot be located or the terms identified – prepare a deed to adopt new trust terms;
- continue without a trust deed and attempt to administer the trust in accordance with the relevant trust law; and/or
- seek a declaration from a court regarding the validity of the trust.
How we can help
It important that as soon as a trustee is aware that the original trust deed is lost or has been destroyed, they act proactively to remedy the issue and seek appropriate guidance.
Hall & Wilcox can advise on what to do if a trust deed if lost or destroyed, as well as dealing with disputes involving trusts, interpretation of the terms of trusts, advising trustees and beneficiaries.