Discretionary / Family Trust -finite life?

[secret squirrel]

I hear ATO ask questions recently of Chan and Naylor about hybrids. What outcome Mr Chan. Did ATO say ok ?

 

[Chan & Naylor]

Hi
I directed this question to one of Chan & Naylor's Directors and this was his response.


Thank you for your question on vesting. As you have pointed out there are various apparent reasons why "no vesting" seems impossible to many.
We attached the problem by asking how can this be achieved and the initial response came back it cannot. We then spent many months going through each reason and slowly completed the task to be able to have a "no vesting" in our trusts. To achieve this we need to ensure three tests/requirements are passed being the trustee and how it is set up, how the trust deed is worded (not just the area dealing with vesting date but in various other places) and thirdly how to connect the trustee and trust to bring it all together.

Once this was completed the lawyers signed off and we included the clause in our trusts. An extract from our lawyers advice is as follows "The PIT has a valid perpetuity period and I am confident of the view that the deed would not be found invalid by any court of Australia."

Naturally a Public Forum is not the appropriate place to review the Intellectual Property which would jeopardise the relationship we have with our Joint Venture Partners to whom we have signed Confidentiality Agreements with. If you want a more detailed response to how this is achieved can I suggest you arrange a specific consultation with one of our consultants .

Regards
Bianca
On behalf of Chan & Naylor
www.chan-naylor.com.au

 

[Mry]

I'm sorry, but I do think a public forum is the best place to discuss these matters. You have made a bold public claim that seems to fly in the face of established trust precedent that has existed for many many years and will not publicly explain why that is. The cynic in me needs assurances that are concrete from independent sources, such as from cases. I am sure that banks are satisfied with your deeds since your clients are able to get finance, and that some lawyers are able to use the to sign off on contracts, but from what I know of the rule against perpetuities, I am still not comfortable. The legislation itself says that where a settlement takes place (forming a trust), it can't last more than 80 years.

It seems quite strange as well that you are signing confidentiality contracts in a way that prevents you from discussing the deed. Your clients have full access to their own trust deed?

It also seems strange that the PIT has been out there for a while now and no one else in the market is selling perpetuity period free deeds. One would have thought that by now some people would have read your deeds and started their own version (aka copy). There are some brilliant trust lawyers in this country and they aren't selling perpetuity period free deeds. If they could, I am certain they would. My Macquarie deeds have vesting limitations (clause 1.16) and they are considered to be on the forefront of developments in the investing world. I understand that you have put a lot of effort into these deeds, but from what I know of human nature, people like to follow the leader. Why aren't they doing that in this instance?

I do respect your accounting practice, I just have questions.

 

[Chan & Naylor]

Hi
Yes you are correct when you state that “ you need a specially drafted deed that does not force the trustee to vest after 80 years."

But in relation to “The trustee needs to be a resident of SA” the drafting of the deed needs to ensure the trust is domiciled in SA which can be achieved in various ways.

Regards
Bianca
on behalf of Chan & Naylor
www.chan-naylor.com.au

 

[peterjohnson64]

Perhaps they set up powers of attorney in South Australia and have the trust settled in South Australia. That way when the trust is settled it is settled under South Australian Law. There is no rule against perpetuities in South Australia. Settle with a mere $10 settlement sum and put it into postage stamps in SA.

This tactic has been used by trust deed promoters in Qld for years to overcome the $200 stamp duty payable in NSW & Vic.

 

[Trogdor]

Once this was completed the lawyers signed off and we included the clause in our trusts.www.chan-naylor.com.au

Would purchasers be able to get a signed legal opinion from your lawyers (being from a reputable firm) to this effect, and addressed to purchasers of your trusts?

 

[Mry]

Perhaps they set up powers of attorney in South Australia and have the trust settled in South Australia.

If that was so, it should be quite easy to state that it is so on this forum.

From what I understood speaking to a solicitor up here, he said the trustee has to be a resident of SA to get the exemption.