Family Trusts extending the "vesting date"

The recent NSW Supreme Court decision of Stein v Sybmore Holdings[1] provides a potentially valuable avenue for trustees and beneficiaries to extend the vesting date of their family trust.

The Facts

The decision in Sybmore Holdings relates to an application to the NSW Supreme Court to amend the terms of a deed of a family trust that was established in 1978. (The application was made under sec 81 of the NSW Trustee Act.) For reasons that are unclear, the trust's vesting date was not the usual 80 years from commencement — which would have been 2058. Instead, the vesting date was nominated as 23 December 2007. This meant that by that date the trust would have to be distributed and the trust wound up.

As the assets of the trust included property with accrued capital gains, any vesting in December 2007 would have included:

  • capital gains tax liability of possibly $690,000; and
  • potential liability for stamp duty of about $620,000 if the properties were transferred to beneficiaries.

The Decision

When a court is deciding whether to amend a trust deed, one of the difficulties is considering how the amendment will affect the interests of potential beneficiaries. In this case, the Court held that the law was broad enough to enable the Court to change the vesting date even though this would alter these beneficial interests.

Although this is a NSW case, it may be relevant in other states whee the law is similar (but not exactly the same), for example:

  • Victoria, see section 63 of the Trustee Act 1958
  • Queensland, see section 95 of the Trusts Act 1973
  • Western Australia, see section 90 of the Trustees Act 1962
  • Tasmania, see section 47 of the Trustee Act 1892

The Implications

The beneficiaries and trustees of trusts with a vesting date of less than the statutory limit of 80 years may wish to consider applying to the Court to extend the vesting date.

More broadly, the decision suggests that the Court may agree to an amendment of a trust if the amendment advances the objectives of the trust and even if the amendment alters beneficial interests.

More information

If you or your clients have a trust deed that has a premature vesting date, then you may wish to consider whether there are any benefits in making a similar application to have the vesting date extended.

Maddocks' Private Client and Tax and Revenue teams can advise you and your clients on all aspects of family trust structures. Please contact Teresa Catalano or Julian Smith with any questions on 03 9288 0555.

[1] [2006] NSWSC 1004