Trust Deeds. Why knowing where they are and having them reviewed periodically is so crucial.

‍ Trust Deeds….They are a big deal!

‍It’s easy to overlook the importance of a Trust Deed….until one goes missing or you are asked for a copy of it. For many people a Trust Deed is something that sits quietly in the background, rarely needed. But losing it, or not having it reviewed regularly, can cause more implications than you think.

‍With changes to the Anti-Money Laundering legislation that will come into effect from 1 July 2026, having the original or up to date, Trust Deed will be mandatory for any legal or financial transactions of the trust.

‍ Why a Missing Trust Deed Can Be a Problem

‍A Trust Deed is more than just a legal document. It sets out the rules of how the trust operates. Without it, it is unclear who actually has authority to make decisions, how those decisions should be made, and who is entitled to benefit from the trust.

‍Not having the Trust Deed, can create many issues. Banks, legal advisors, accountants and regulators will often require evidence of a trust’s terms such as who the trustees and beneficiaries are, before they will act. If that information can’t be provided, transactions may be delayed or likely refused. With the changes to laws coming soon, it is unlikely that any transaction or changes to a Trust can be done without the original Trust Deed.

‍A Lost Trust Deed has more Problems Thank You Think

‍Knowing the terms of the trust, or how the trust is to operate is important. Without knowing the terms of the Trust, Trustees could very quickly find themselves in breach of the Trust and be at risk of financial and legal penalties for non-compliance by the Trust.

‍Without considering the terms of a Trust Deed, consideration needs to be given to things such as:

‍·         What powers does a Trustee have?

‍·         What evidence is needed to confirm the trust’s terms?

‍·         Who holds responsibility for administering the issue?

‍·         Are there risks in continuing to operate the trust without the trust deed?

‍·         What do third parties require before engaging with the trust?

·         What happens if a trustee or appointor passes away?

·         What are the legal and financial consequences of the Trust being non-compliant?

Whilst you may be able to answer some of the questions above, resolving the issue of a lost Trust Deed is better to be done immediately than later.

Why not having your Trust Deed Reviewed Regularly Can Put You at Risk

Similar to a lost Trust Deed, a Trust Deed that has been sitting at the back of the cupboard for a few years and has not been recently reviewed can cause issues with compliance and taxation penalties. If there have been changes to the way the Trust has been transacting or operating or changes to the Trustee or Beneficiary companies or the way in which the Trust is distributing funds and the Trust Deed has not been updated, there is a risk of penalties for non-compliance and taxation penalties. A Trustee can also be held personally liable for any loss made by the Trust for non-compliance. Recent changes to taxation on Trusts also means that you could be paying more tax on your trust than required.

Why Legal Advice Matters

When a trust deed cannot be located or has not been reviewed recently, it is normal to leave it to be dealt with another day.  However, not having the original Trust Deed or having an outdated Trust Deed can sometimes create further complications down the track, including legal and financial penalties.

Obtaining legal advice quickly can assist with taking remedial steps to resolve the issues and assist in minimising the consequences and penalties to the Trust and the Trustee.

Case Study

Client A and B had a Family Trust. For 5 years, the Trust had been distributing income from the Trust to both Clients A and B equally. Clients A and B came to us for their Estate Planning. The clients explained that they had a family trust and that distributions were being made equally to them. We asked to see their Trust Deed so that we could ensure their Family Trust aligned with their Estate Plan.

Clients A and B could not locate their Trust Deed and asked if it was really necessary. We advised them it is crucial that their Trust Deed aligns with their Estate Plan and without seeing the Deed, we cannot advise what would happen to the trust’s assets upon their passing.

Clients A and B spent a lengthy amount of time trying to locate their Trust Deed. Eventually they were able to find it. Upon reviewing the Trust Deed, we identified that Client A was the sole beneficiary of the Trust. However, Client B was not a beneficiary. This meant that the Trust could not actually distribute the Trust income to Client B, like it had been doing.

Clients A and B were both confused and were of the understanding that as the Trust was a Discretionary Trust, the Trustee had discretion as to who to distribute the income to. We advised the clients that the Trustee of the Discretionary Trust does have discretion as to who the income is distributed, however it can only be distributed to beneficiaries named in the Trust as beneficiaries. Client B was not named as a beneficiary, they were named as the Trustee only.

We advised Clients A & B of the steps they needed to take to remedy the incorrect distribution.

This is a perfect example of why ensuring you know where your Trust Deed is, is so important, along with having your Trust Deed reviewed regularly to ensure the Trust is transacting in accordance with the Trust Terms.

Have you got a Trust Deed?

Understanding the potential legal and financial implications of not having your Trust Deed reviewed regularly is crucial.

If you cannot locate your Trust Deed or have not had it reviewed recently, seeking tailored legal advice on your Trust is crucial to ensure that you are not at risk of non-compliance and that your Trust is operating in accordance with the Trust Terms. If you need assistance with any Trust matters, contact our friendly team today.