Discretionary family trusts aren’t just for the super wealthy. They are a common asset protection and tax-minimisation tool for thousands of Australian families.
They often include a long list of potential beneficiaries. It’s probably fair to say, over the years Trustees have become a bit blasé about strictly observing some of the obligations
imposed on them – with mum and dad running the show, exercising ‘absolute discretion’ steering funds to whoever they liked (including themselves) and excluding other beneficiaries.
Well, the Victorian Court of Appeal has recently given all Trustees a wake-up call about carrying out their duties.
The Court declared that two adult children had been unfairly repeatedly overlooked for distributions from the family trust and that the Trustees (the parents) had failed to properly exercise their discretion.
The Court confirmed a Trustee has to give real and genuine consideration as to
who should benefit, including making inquiries of the beneficiaries’ needs.
How a Trustee goes about this is uncertain. It may mean that the Trustee should be informed of the circumstances of each of the numerous potential beneficiaries.
It might be time to blow the dust off your trust deed and actually review it and
its primary purpose.
Trent Wakerley, Director, Kruger Law, Level 3, Ocean Central, Ocean Street, Maroochydore, 5443 9600, krugerlaw.com.au
This column is part of our Business 2 Business (B2B) series featuring industry leaders sharing their expertise. For more great articles, SUBSCRIBE to our FREE news feed, direct to your inbox daily. All you need to do is enter your name and email below.
