I’ve lost the trust deed governing my family trust or SMSF – what are my options?
Discretionary trusts and self-managed superannuation funds (SMSF) are often used as wealth management tools for businesses, families and individuals.
Every trust and self-managed superannuation fund has a ‘trust deed.’ The trust deed is a legal document that sets out the rules for establishing and operating your fund. It can include things such as the fund’s objectives, who can be a member and whether benefits can be paid as a lump sum or income stream. The trust deed and the Australian trust laws together form the fund’s governing rules.
Unfortunately however, trust deeds can easily be misplaced and lost. It happens to the best of us and it has happened to me. A few years ago, I misplaced my SMSF trust deed. I’d lost the deed and I felt terrible because I knew the legal repercussions of a missing trust deed. After a great deal of searching I ended up finding my lost trust deed in my “pet insurance” folder – how it got there, I do not know – but what I do know is that the lost trust deed is a common story and unfortunately, it doesn’t always have a happy ending.
A lost trust deed is problematic because administering the trust becomes difficult and uncertain. If you lose a SMSF trust deed, the SMSF’s auditor, for example, will not be able to provide the required auditor’s declaration to the Australian Taxation Office (ATO). If you lose a family trust or unit trust deed, you may no longer be able to determine the beneficiaries and potential beneficiaries of the trust.
If you have lost a trust deed, you have five basic options. I have listed these options in order of the cheapest to most expensive.
1. Find the Deed
Finding the original (and stamped) trust deed is by far the cheapest and most effective option. Look and look again. Search in your files and under your pillow; and remember to check with a range of people such as current and past accountants, lawyers, auditors, relatives, banks, financial planners and the ATO. It has to be somewhere!
2. Find other evidence that the trust exists
You might have a copy of the original deed. This might be evidence that a trust existed and might be sufficient to convince third parties.
3. Take no action
If a trust is about to be wound up anyway, then it might be unnecessary to locate the trust deed. Furthermore, if the trust needs to deal with third parties, such as a bank or the ATO, the third party might be content to believe you have a trust if you can provide old ATO returns, bank account statements or other evidence. There is a risk however that that the third party will not be satisfied to rely on your evidence.
4. Do a deed of confirmation and adopt a new Deed
This is an area in which to tread lightly so as to avoid unintended tax consequences. This is a cheap option if the trust owns no assets, however if the trust owns significant assets, you could end up facing significant stamp duty and CGT liability.
5. Ask a court to confirm the Deed
For most people this isn’t a valid solution. It gets the job done but it is a costly exercise and could set you back anywhere between $9,000 to $20,000 in legal fees.
As the saying goes ‘an ounce of prevention is worth a pound of cure’ so if you currently have a Trust as part of your wealth management structure, take the time now to create an electronic copy (and maybe a spare hard copy) of the Trust deed and make sure your Accountant and/or Lawyer is holding a copy for safekeeping.
Otherwise, if you need help locating a lost deed, or if you would like some advice on the benefits of having a Trust, please give us a call.
For further information, please contact the author.
This article is posted in Adelaide, South Australia by Tri-meridian Corporate & Commercial Law and is intended to be used as a guide only. It is not, and is not intended to be, advice on any specific matter. We do not accept responsibility for any acts or omissions resulting from reliance upon the content of this article. Before acting on the basis of any material in this article, we recommend that you consult your professional adviser.