Copy of Direct Legal Advice on handling $10 for Settling a Trust

[Ralph]

Following the great discussion on this earlier I decided to track down what happened to the settlement of the first trust we ever put together. As when this was done we were given no advice of significance of a settled sum and identification of it.

Below is correspondance direct between my lawyer, myself (Trustee) and financial advisor. The Trust type is a Discretionary Trust.

My confusion reigns supreme....................



From: Trustee
To: Financial Advisor


………”One thing I have found out is that the validity of the Trust (should we ever go to court) is heavily tested on the identification of the original settled sum for the Trust. In this case ########## lawyers acted as the Settlor for the Trust.

We need to identify where the initial settled sum is. It is normally
handled in one of two ways, either the sum (in our case $10), is stapled to the original of the Trust Deed, or it is deposited as the FIRST entry in the Trust bank account, clearly identifying that it has come from the Settlor.

I note that the bank account didn't have any $10 sums placed in it,
certainly not the first entry. And also that the original of the Trust was kept with yourselves for the first year or two. The Trust deed says that Brett Davies lawyers provided the settled sum to the Trust. However, there is no $10 note pinned to the Trust, nor is there an $10 entry into the original Macquarie bank account. My concern is that the Trust can be proven invalid if we cannot identify the $10.

Could you check your records and perhaps ask Brett Davies Lawyers as to how the $10 was provided.

Thanks,

------------------------------------
From: Financial Advisor
To: Lawyer


We have received the following query from one of our mutual clients – you prepared the Family Trust Deed - $$$$$$$ Family Trust. Could you please advise me, and/or #### directly, of the solution.


regards and thanks for your time

Financial Adviser
Customer Service Manager

-----------------------------------------------------
From: Lawyer
To: Financial Adviser and Trustee

Subject: RE: Client Query on Trust Deed


Have a read of the first page of the deed which talks about the Settled Sum being paid and the Trustee acknowledges the payment.

This is how I have been doing it for 18 years. This is how it is done. Although I have not heard of anyone doing it since the 1970s you are welcome to staple $10 to the deed.

Happy to discuss.

##### Lawyers

-----------------------------------------------
From: Trustee
To: Lawyer
Cc: Financial Advisor
Subject: RE: Client Query on Trust Deed

Thanks very much. Apologies for my ignorance but I'm trying to get clear on this.

If I was taken to court over some claim in relation to the Trust, how do I prove that the Trust was in fact Settled. The Trust Deed ofcourse says that the Settlor provided $10 to the Trustee - who has acknowledged receipt of the settled sum. I've had advice that this is one of the areas first looked at if a Trust was to be challenged.

If we had to prove that the Trust was valid, would a requirement be the proof of the $10 existing, either by a physical $10 pinned to the Trust, OR the Trust bank account showing this $10. Again, proof of this has been cited to me as critical.

Or is your view that there is absolutely no requirement to prove the existence of the $10 in order to prove the validity of the Trust.

Kind Regards,

Trustee
------------------------------------------------------------------
From : Lawyer
To : Trustee

I think that someome is scaring you for no reason.

The evidence of the settled sum and acceptance thereof is in the Deed.

This is correct and acceptable at law.

Happy to discuss.

Lawyer

 

[Ralph]

No replies to this

Perhaps it was too long. However, given it is a direct contradiction to much of the advice in the prior thread surrounding the $10 note , I'd have thought it would have generated some interest?

Cheers,

Ralph

 

[alwayscurious]

No replies to this

Perhaps it was too long. However, given it is a direct contradiction to much of the advice in the prior thread surrounding the $10 note , I'd have thought it would have generated some interest?

Cheers,

Ralph

at 5.5% cash rate - $10 is not going to generate too much interest

I've been reading & watching for a while.

My accountant set up a HDT with corporate trustee.

It had no direct settlor or $10 sum.
It had no appointer either.
Neither did it have Stamp Duty paid.

Reading these posts has confused me. I queried the accountant regarding these three points.

His answers:

1) It had NO settlor.
As a Hybrid between a Unit trust and a Discretionary, the unit part means the Primary unit holder is the settlor.

2) It had no direct appointer
- the primary unit holders are the appointer.

3) No stamp duty paid
-As a unit trust - the initial purchase of units is a cash sum and not stamp dutiable...


Does that make sense to anyone?

I am concerned I may have paid for a deed that is worthless.

Ralph - if my accountant is right - then your settlor / settlement sum is not necessary after all??

 

[redwing]

?

Always curious..is your HDT stamped by the OSR?

I'd post those great questions you asked of your accountant to NickM, CoastyMike, WbThom or one of the other qualified people here..

Let us know the answers??

REDWING

 

[alwayscurious]

no Stamp duty paid on this..

Always curious..is your HDT stamped by the OSR?

I'd post those great questions you asked of your accountant to NickM, CoastyMike, WbThom or one of the other qualified people here..

Let us know the answers??

REDWING

No it has not had stamp duty paid.

However,
There is a clause in section 8. Transfer of Units

8.3 Stamp Duty Paid
Every Instrument of transfer must be duly stamped and left with the Trustee and shall be accompanied by the certificated relating to the Units to be transferred.



It is definitely a trust. It has a section dealing with discretionary beneficiaries.

It also has unit holders

 

[Ralph]

Thanks alwayscurious,

Really not sure, these threads have opened a number of questions on this topic for me which seem to have equally confident responses - but in different directions (my lawyer versus forum opinion)

I have the feeling that the forum takes in a wide number of views and experience which leads me to trust it (although I always get legal/accounting advice before taking action). Direct legal advice is difficult to ignore and in this case it seems to contradict the weight of opinion on the forum.

I remain confused

Would be interesting if some of the responders to the prior thread chipped in I may in fact be interpreting the two bits of advice wrong.

 

[Programmer]

This probably won't help, but as I was very interested in the previous thread I thought I'd mention what Renton says on the settlor:

"The settlor - the individual who legally creates the trust by executing (signing) the trust deed and by feeding in the initial assets of the trust fund (often only a nominal amount of cash sufficient to satisfy a legal fiction)."

Is this what the lawyers are really talking about? That being, the settled sum (the physical cash) is actually just a legal fiction? That is, it's sorta how it was done and then everyone else did it too - no actual legal ruling that this $10 MUST be deposited/stapled etc?

Can't comment re stamp duty and the OSR.

Cheers,

 

[Ralph]

Programmer,

Interesting, I don't have Rentons book, but the $10 being a legal fiction is interesting.

This might be where my Lawyer is coming from - his quote is 'the proof is in the deed' - i.e. the deed says that the $10 was given to the trustee by the settlor, everyone signed that this is the case (Trustee and Settlor), so why do you need the physical evidence.

However, whether he's arguing (1) that the $10 doesn't really need to change hands or (2) we signed that it did, so therefore it did......I'm not sure.

Does Renton look at this forum? Would be interesting to get his view. I've also not heard of anyone citing case history on a Trust being proved to not exist based on the settlement issue.

 

[Programmer]

However, whether he's arguing (1) that the $10 doesn't really need to change hands or (2) we signed that it did, so therefore it did......I'm not sure.

Does Renton look at this forum? Would be interesting to get his view. I've also not heard of anyone citing case history on a Trust being proved to not exist based on the settlement issue.

To be honest I'm not sure of the exact point he is making. I suppose you could email him (not sure about whether he will respond etc) at [email protected] (PS. This email address is publicily available at his books site - http://users.bigpond.net.au/renton/index.htm)

Does he look at this forum? I don't 'believe' he is a member (but can't say that with any certainty), but you never know, he might visit.

 

[Terry_w]

The settled sum is not a legal fiction but a legal fact. Without property a trust cannot exist. The $10 cash is the initial property. And this is added to later. It is done this way as cash is not dutiable property but transfer of other types of property is and attracts stamp duty. The 'legal fiction' bit probably comes from the unnatural nature of the act - A handing over just $10 and asking B to hold it on the the terms of the trust deed - which the settlor may not have even read.

As for evidence that the cash has been handed over the evidence is the signatures on the deed and the wording of the deed itself. If this was ever challenged the parties may be able to give evidence if they are still living. If not the deed will suffice. I know of no legal cases where there has been any attempt to claim a trust is not valid because of the settled sum.