A discretionary trust differs from other kinds of trust in that the amount of shares aren’t specified by the settlor. Rather, it is at the discretion of the trustees. Occasionally, issues arise where you need to change the trustee of a discretionary trust. Below, we break down how to do this and how it can affect you.
The trust deed
The trust deed outlines the rules of the trust. Part of the deed outlines how the trust can be altered. To change the trustee, the deed must be altered. It is necessary to follow the procedure as outlined in the deed.
A deed of variation allows you to alter the trust deed. Essentially, this variation allows you to update the necessary section of the trust deed. Therefore, through a deed of variation you may alter the trustee of the discretionary trust.
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Who can I change the trustee to?
You can change the trustee to whoever you want. However, there are different processes depending on if you change it to an individual or a corporation.
Changing the trustee to another person
To change the trustee of a discretionary trust to another person, you need to amend the trust deed through the previously mentioned deed of variation. This generally requires permission by the person who established the original trust. The new trustee is required to sign a Consent to Act form as provided by the Australian Financial Security Authority.
Due to the trustee holding the trust assets, the title of ownership of property may need to be amended to reflect the new trustee.
Changing the trustee to a corporation
If you alter the trustee to become a corporation, the trust will be managed by the corporation’s directors. Therefore, after the old trustee resigns or is removed from their role, the directors must sign a Consent to Act form and notify ASIC of the change. It is a similar process to changing the trustee to an individual. However, requires slightly further work due to numerous directors representing the company.
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Final thoughts
Changing the trustee of a discretionary trust is occasionally required for the benefit of the trust. While the process can seem complicated, it is necessary to ensure that the trust is protected. For further enquiries or advice on the issue, a trusts lawyer may be able to assist.
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