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Updating your Trust Deeds? Check the Appointor Clause! – By Angela Harry – Senior Estate Planning Lawyer

It seems that everyone is updating their Trust Deeds lately. The Bamford decision has everyone running to check the distribution clauses in their Deeds and many service providers in this area offer cheap updates for Trust Deeds which are usually available on the internet.

Amongst all of these changes and updates, we have noticed that one of the most important clauses in a Trust Deed is often overlooked. The appointor or principal of a Trust is usually the person who controls the assets of the Trust and can remove or replace trustees and even appoint other people or entities to replace them as the controlling person or entity of the Trust and its assets.

Given that the provisions in the Trust Deed dealing with the appointor or principal are arguably the most important provisions in the Trust Deed, you would think this would be one of the first clauses looked at by professional advisors. Unfortunately, this is not the case and we often find that when we go back to the original Trust Deed and its various amendments through the years, the succession provisions of the appointor or principal have not been altered to suit the circumstances of each particular case.

A classic example is where an older Trust Deed has an ex-spouse as the default appointor in the event of the death or loss of capacity of the original appointor. We had a recent case where the appointor died and his ex-wife of some 20 years previous to his date of death was the default appointor in the original Family Trust Deed. It had never been amended despite the fact that the appointor had divorced his ex-wife and an appropriate settlement was sanctioned by the Family Court many years beforehand. Although it was arguable that the ex-wife’s interest in the Trust was covered by the Family Court property settlement Orders, there were some anxious moments for the second wife and family of the deceased appointor. One can imagine the consequences an ex-spouse (or other person) gaining control of significant assets in a Family Trust some 20 years after divorcing the deceased.

There are many other examples that we have discovered with old Trust Deeds, including accountants and solicitors being nominated as the sole appointor or principal. Sometimes these people had either died, ceased practising or were in jail! It is difficult to explain to a client that the significant assets of their Family Trust are actually subject to the control of someone completely independent from them or their family.

Most Trust Deeds have a succession provision stating that in the event that the appointor dies, his personal representatives or executors will step into his or her shoes as appointor of the Trust. However, this assumes that the appointor has a current Will as at the date of death (or an appropriate Enduring Power of Attorney in the event of loss of capacity). It is amazing how many people don’t have their estate planning up to date and still have old Wills or Powers of Attorney floating around that are way out of date or, even worse, they don’t have any Wills or Powers of Attorney at all! It is often pot luck if someone dies intestate.

It is a relatively simple process to carefully peruse a Trust Deed and any amendments to ascertain what the position is in the event of the death of an appointor. This usually also leads to the clients considering their estate planning and making sure that their Wills and Enduring Powers of Attorney marry up with their Trusts and other business structures.

It is better to be safe than sorry in these matters and raise these issues with your clients to avoid any possible repercussions from family members who may be severely affected by a Trust Deed that is out of date.

Our Wills and Estates team at Attwood Marshall can answer your queries and assist you with this or any other issue you have. Contact an Attwood Marshall Lawyer today on 1800 621 071 or email lbarnes@attwoodmarshall.com.au.

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Angela Harry

Angela Harry

  • Partner
  • Wills and Estates
  • Direct line: 07 5506 8211
  • Mobile: 0423 773 686