Trust – In Deed!
There is starting to be a little bit of discussion amongst the leaders of the legal and accounting professions regarding the use of Trusts for client structures.
Trusts have been around in Australia (and most UK-based legislatures) for years and they generally work very well.
The problem comes about when a number of accounting and legal firms start drafting and selling Trust Deeds to their clients when the firms doing the drafting are not really “over” the issues with regard to the drafting.
There are a raft of matters to be considered when drafting a Trust Deed and, unfortunately, many of the sellers of these Deeds do not fully consider the issues before selling them to an un-suspecting client base.
We’ve recently had cause to review some Trust Deeds prepared by some firms for clients (prior to them coming to us). The issues created by these Deeds are absolutely horrendous! Rather than dealing with the matters which they should deal with and consider carefully some pretty fundamental matters like definition of income, they seem to cut and paste very old definitions which are no longer referable or applicable to the legal enviroment in which we now operate.
In some cases, the Deeds are, as a Tax Barrister friend of mine said recently “internally inconsistent”. This makes it impossible to use the Deeds in any effective way.
So, you need to be very careful when ordering your Deeds – they need to be drafted by a lawyer who understands the issues around them (and not only the commercial aspects – the taxation aspects).
One other thing we’ve noted over the past 10 or so years – a number of accounting firms will merely grab a Deed from (usually) an existing client, copy it and attach a new schedule to the back of it in an attempt to create a new Deed. This is not only dangerous, it’s stupid and negligent.
When considering your structure and whether you will use a Trust as part of that, take your time and carefully consider the knowledge and expertise of your advisor with regard to the Trust Deed you end up with – it can create more trouble than you would believe if it’s a poor Deed and your advisor has not been careful in operating the Trust in accordance with the Deed.
A little bit of care at commencement can, quite possibly, save a whole heap of pain and cost down the track.
So, who do you Trust?