Widely used trust documents not always correct

Often accountants will order trust documents (superannuation deeds or discretionary/family trusts) from various providers, and the clients will sign these or adopt them without taking legal advice.

These widely used documents are not always correct, and the issues with them tend to be legal issues so they are not appreciated by the accountants.

A common problem with documents that we see include referenced to “legal personal representatives” in discretionary trusts when that term is appropriate to superannuation law. As a result, a discretionary trust deed saying that if the appointor or principal is made bankrupt, then their “legal personal representative” becomes the appointor in their place (and many trust deeds do have this provision), one interpretation is that the trustee in bankruptcy takes the role. That would essentially be the last person that you would want to become the appointor, as they would then have the power to appoint a new trustee.

Another problem that we recently saw came from the incorrect use of capitalised terms in a Superannuation trust deed, which created uncertainty with the operation of the death benefit provisions. Essentially the clause had a different meaning to what was intended. This was a trust deed that was automatically updated by the provider, and put into effect by the various accountants who would not have any idea about the potential issues.

A third issue that we have seen is where the binding nomination forms attached to the deed do not strictly follow the superannuation deed itself. The fund deed has to be followed strictly for the nomination to be binding, but where there is a conflict in its terms this can be impossible.

The lesson – if there is one – is that trust deeds and fund deeds are legal documents, not financial ones. Accountants generally will not be giving any advice in relation to them, and will often be assuming that they are correct, but this is not always the case. They should still be checked by a lawyer.

For advice on trusts and binding nominations contact our commercial Team of Peter Muller, Jessica Murray, and Megan Hanneman – peterm@qbmlaw.com.au