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Vesting of Trusts

Published on 03 Jul 2013 | Took place at City West Receptions, Perth , WA

    Discretionary trusts, and to a lesser extent unit trusts, have become ubiquitous vehicles for building and maintaining wealth within families and privately held groups. Unlike companies, which are perpetual, trusts have a limited life. When a trust comes to the end of its life, its vesting date, if there are not robust plans in place as to how the vesting should occur, controversy, and in some cases, litigation, amongst family members can result. As a result, some forward planning should be given to the vesting of trusts well before vesting date.
    This seminar covered:
  • the operation of trust deeds on vesting, determining where proceeds on vesting should be distributed (including consideration of distributions in-specie and options when charitable groups are named as beneficiaries) and other key legal aspects
  • options for extending the life of a trust, changing the terms of the deed and managing resettlement risks
  • key income tax and stamp duty issues arising on vesting
  • specific vesting issues for offshore trusts with Australian beneficiaries
  • early vesting of dormant and problematic trusts, including offshore trusts which may have been detected by the ATO.
  • Individual sessions

    Vesting of trusts

    Author(s):  John Fickling,  Robert Niemann

    The first part of this paper provides an insight into the legal issues that arise when a trust vests. Key aspects covered include:

    • the intricate operation of trust deeds on vesting, determining where proceeds on vesting should be distributed (including consideration of distributions in-specie and options when charitable groups are named as beneficiaries) and other key legal aspects;
    • options for extending the life of a trust, changing the terms of the deed and managing resettlement risks;
    • options for early vesting of trusts where the trust is no longer wanted.

    The second section considers key stamp duty and income tax aspects arising on the vesting of trusts, including the vesting of trusts by way of distribution of assets in-specie to beneficiaries. The paper considers trust resettlement “war stories” between tax payers and the revenue authorities from reported court cases as well as the serious tax issues which can often arise on the vesting of foreign trusts and distribution of trust proceeds to Australian taxpayers and potential work arounds. Key aspects covered include:

    • key stamp duty issues arising on vesting
    • key income tax issues arising on vesting
    • defending a trust resettlement determination made by the ATO or SRO
    • Australian tax issues arising on the vesting of offshore trusts with Australian beneficiaries.
    Materials from this session: