Deed of variation of discretionary trust

Deed of variation of discretionary trust

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This precedent is a template deed of variation of discretionary trust with optional clauses.

A discretionary trust can only be amended in writing by a deed, signed by the trustee and the appointor.

The provisions of the variation of trust clause in the discretionary trust deed should be examined to ensure that the trustee has the power to amend the discretionary trust deed. If this power is subject to conditions, the conditions should be complied with and the background amended to state that the conditions have been satisfied. A trustee cannot exercise a power to vary a trust deed if to do so would cause a conflict between its duty to the beneficiaries and its own interests.

A deed of variation of trust may attract ad valorem rates of stamp duty. Inquiries should be made in this regard prior to execution of the deed especially where beneficiaries (including default beneficiaries) or a class of beneficiaries are inserted or removed from the trust deed or where the variation could amount to a resettlement. See Australian Stamp Duties Law, LexisNexis Butterworths, Australia, 2002, looseleaf, Vol 1 at [23.0120], where the authors discuss the stamp duty position regarding a variation of trust in each state and territory, eg in New South Wales see Revenue Ruling DUT 017.

A deed of variation of trust may attract adverse tax consequences. See the approach of the Australian Taxation Office (ATO) to variations of trust set out in the ATO's published article "Creation of a new trust - Statement of Principles August 2001" which refers to the High Court decision in Commissioner of Taxation v Commercial Nominees of Australia Ltd (2001) 179 ALR 655; 47 ATR 220; [2001] HCA 33; BC200102753]

For a template trust deed, see the precedent “Trust deed”.

This precedent has been authored for Lexis Nexis by Selwyn L Black, Peter D Carroll, Carroll & O’Dea and updated by Jane Garber-Rosenzweig, Gable Lawyers.

This precedent is prepared with the assistance of Specialist Editor Stephen Newman, Executive Counsel, Ponte Earle.