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After Bamford - What to do by 30 June?

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4/04/2011

Summary

Accountants and other professionals dealing with discretionary trusts have all heard about the High Court decision in Bamford. But now, thinking ahead to June 30, what actually needs to be done?
 

The minimum: check two things

We believe, at a bare minimum, trust deeds should be reviewed for two issues.
 
First, the definition of income should be checked to ensure it is ‘Bamford-friendly’. This means allowing the trustee to determine what ‘income’ is, as well as providing a fallback definition consistent with the Income Tax Assessment Act 1936.
 
Second, a power to stream income should be added if it is not already present. Even though the Government announced in early March that this ability would be confirmed by legislation, the power should be included in the trust deed.
 
We have prepared an economical package of documents for these changes and are working closely with clients’ accountants to review and, where required, vary deeds prior to 30 June.
 

A full review of the trust deed

Sometimes even a minimal review indicates problems with the deed – lack of amendment power, or requirement for consent of a deceased appointor are common. When this happens, we can undertake a more comprehensive review of the deed and set out the trustee’s options.
 

Are the changes a resettlement?

In most cases, we believe that making only the minimum changes mentioned will not amount to a resettlement of the trust property. However, we have seen one deed where the particular beneficiary structure meant that a risk of a resettlement arose. Like all trust issues, each deed needs to be analysed on its terms.
 

How can Fleming Muntz help?

Our accredited business law specialists undertake a lot of work in relation to trusts - especially difficult or defective trusts - and have the experience to advise on and implement any trust transaction. We are pleased to accept referrals both from accountants and other lawyers without interfering with their existing client relationship.

Important fine print

This update is for general information only. It is not a complete guide to the area of law. Competent advice should be obtained before taking any action.

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