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Discretionary Trust additional assets wording

Discussion in 'Accounting, Tax & Legal' started by naz, 21st Jan, 2008.

  1. naz

    naz Member

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    Sydney, NSW
    I am curious about the wording of point 6 in the LawCentral Sample Discretionary Trust Deed (p8 of http://lawcentral.com.au/include/DataFile.asp?FileID=290)

    It says:

    “6 What power is there to put more assets into the trust?
    All assets given to the Trustee for the Trust are treated as if the asset was given to the Trustee at the time of the signing of this Deed.”

    What does that mean in practice? What difference would it make if assets were treated as if they were given to the Trustee at the time they are actually given to the Trustee?

    Thanks
     
  2. Nigel Ward

    Nigel Ward Team InvestEd

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    Naz

    That's a really good question and I can't at the moment think of a good reason to include that clause. [There may be a good reason, it just eludes me at present]. Shooting from the hip:

    1) From a stamp duty perspective and CGT perspective there's good reasons why there's initially only a nominal settlement sum of cash. If the trust is created by declaration over substantive dutiable assets then significant stamp duty could apply. Similarly, a CGT disposal event is triggered for an asset which a party declares they hold on trust for others which they formerly beneficially owned.

    2) From an asset protection perspective, perhaps this is trying to avoid any clawback periods for bankruptcy/insolvency. In my view that would not have any effect whatsoever, other than to lull the lay person into a false sense of security.

    Having said the above though, Brett Davies and his crew are skilled and experienced tax lawyers so I'd be surprised if they've put a clause like that in there without deliberate reasons. Was there any commentary in the LawCentral document builder about that clause?

    Can I suggest you email Brett Davies and ask them why it's there. He often answers those sort of questions in the regular LawCentral email updates.

    Sorry I can't be more assistance at this stage. I'll think about it some more though!

    Cheers
    N
     
  3. Rob G.

    Rob G. Well-Known Member

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    Might be something really simple - like not treating subsequent transfers as being held on another or a sub-trust. Might avoid squabbling by beneficiaries where they change over time.

    As Nigel said, revenue & solvency laws would most likely ignore the clause.

    Cheers,

    Rob
     
  4. naz

    naz Member

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    Location:
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    Thanks for the thoughts. There wasn't any commentary about that clause on the website, but as suggested I did email Brett Davies. He said it is standard wording and designed not to cause a resettlement. He said the purpose is to ensure all the rules and protections for the inital assests also apply to assets that come in afterwards.